INREV’s Sustainability Committee was reactivated in April 2014, and next month the fruits of its labours will be seen.
One of its first projects was to revise the sustainability reporting recommendations, with the committee having decided that the guidelines were outdated and focusing solely on environmental measurements and key performance indicators. Crucially, they were not a reflection of current market practices and what the industry should aspire to – which is the integration of an all-encompassing strategy that includes environmental, social and governance aspects (ESG).
Having made this decision the committee reviewed comparable industry standards, such as the GRESB Survey, the EPRA standards and GRI Guidelines and defined areas of overlap, inconsistencies, and elements that were missing.
Additionally, it conducted a survey in early 2015 to investigate investor needs and investor demands with regards to ESG reporting.
The key takeaways were:
- that it should be split 50:50 between quantitative and qualitative information;
- investors want to focus on: strategy and progress reporting; report against objectives (backward looking performance); regulatory compliance; objectives and environmental KPI’s;
- alignment with standards such as GRESB and GRI.
Reporting on KPI’s remains important as what gets measured, gets managed, but by including progress reporting against strategy and objectives, we feel both investors and managers are enabled to enter into a more meaningful dialogue on ESG.
In conclusion reporting must be standardised and efficient, comprising a twofold approach with mandatory requirements summing up to a report including all key aspects; and an advanced set of requirements for fund managers who want to advance their reporting. This would mean the guidelines are applicable for a wide range of market participants, smaller houses or niche fund managers as well as bigger established fund managers.
On this basis the committee drafted the new sustainability reporting guidelines, which are planned to be launched in April 2016.
For easy implementation the committee tested the guidelines and confirmed its feasibility, and the results will be published alongside the guidelines in a best practice example report. A questionnaire to assess compliance with the Guidelines will be provided so that managers can assess their compliance. Overall, the new guidelines will summarise the key aspects of current standards, and reflect real estate investors needs and demands for an ESG report.
The new Sustainability Reporting Guidelines will be integrated into the INREV Reporting Module of the Guidelines, and therefore be part of the INREV compliance framework. Managers will be required to report, based on these guidelines.
The drafting process was conducted in close cooperation with the ANREV Sustainability Committee to reinforce alignment with Asia.
Mathieu Elshout, Investment Director at PGGM and Chair of the INREV Sustainability Committee.