Measuring Up: The Role of ESG Benchmarking

Jessica Pilz, Head of Sustainable Investing, Private Markets at Fiera Capital recently joined a Property Week roundtable to discuss the vital role ESG benchmarking plays in shaping real estate investment decisions. The discussion explored occupier demand, differences between frameworks, and the challenge of high certification costs that risk excluding smaller players from the sustainability transition.

No longer a niche consideration, benchmarking environmental, social and governance (ESG)credentials now plays a core role in real estate investment decisions, driven by increasing stakeholder demand and regulatory pressure.

In 2025, the share of real estate entities with net zero policies in place increased to 81.5%, up from 78.8% in 2024 and 72.4% in2023, according to GRESB (formerly the Global Real Estate Sustainability Benchmark). Implementing these ambitions requires measurable, comparable data to help investors assess risk, identify opportunities and validate the long-term viability of assets.

Several frameworks help investors standardise their ESG assessments, ranging from the UK’s Energy Performance Certificates (EPCs) to more comprehensive frameworks. These include GRESB, the globally recognised benchmark that assesses the ESG performance of portfolios and assets; green building certifications such as BREEAM (Building Research Establishment Environmental Assessment Method), which offers independent verification of a building’s sustainable features; and CRREM(Carbon Risk Real Estate Monitor), which provides open-source tools to help property owners assess the alignment of their assets with global and sectorial decarbonisation targets.

These are widely recognised as playing a key role in driving progress in the industry and in identifying to the customer market what they are getting.
But significant challenges remain, not least the pushback on the sustainability agenda, particularly in North America. Attendees gave a mixed response as to how this was affecting their businesses.

Adam Slimin, technical director, sustainability, climate change and resilience, at Stantec, acknowledged that “the winds have changed at the moment”. He said that while pushbacks filtering down from chief executives and boardrooms have not manifested in businesses saying “we’re not doing this”, he has noticed less commitment to ESG and more questioning of “why do we need to do it?”

Jessica Pilz, Fiera Capital’s head of sustainable investing, private markets, said some of the firm’s investors within Europe were responding in the opposite way, by “doubling down” on ESG. However, she added: “What’s been surprising for me is there’s also been some UK and European clients that have indicated that financial return is the biggest priority right now.”

Kristina Arsenievich, director, European real estate ESG, at Barings Real Estate, said she believed real estate was “quite safe” from the rollback on ESG. “Climate risk, transition, physical risk – they are directly material,” she explained. “We can demonstrate the impact on valuations; we can also demonstrate how enhancing quality and resilience is safeguarding our investors’ capital.”
Caroline Hill, global head of real estate sustainability at BlackRock, agreed. “ESG is so material to what we do that I think the change hasn’t been a pushback,” she said. “What I think it has been is that, as sustainability professionals, we have to be better at explaining why we do what we do and putting everything in the language of value. When you translate sustainability to value, it’s a win-win. There’s no reason to say no. For me, in the last few years, that’s been the shift.”

From a development perspective, panellists stressed the impact customers were having in driving progress in ESG and the use of benchmarking. As Catalyst chief executive Eoin Leonard said: “In the office space, we’ve seen occupiers be the biggest driver – in some cases, they have dragged the landlords into their scheme of vision. In logistics, too, we’ve seen a big shift.”

Flexible approach
SEGRO’s group customer and operations director Paul Dunne said a flexible approach was needed to meet customer demands in different markets. SEGRO uses BREEAM and EPC ratings to shape its mandatory internal policies, setting the “guide rails” for its development teams. But beyond these minimum standards, it gives teams in each market “quite a lot of freedom” to respond to customer demand, according to Dunne.

“The demand from customers in the Netherlands, for example, far exceeds what that minimum benchmarking will look like,” he added. “The teams within the Netherlands will probably do more solar, far more EV [electric vehicle], certainly no gas; they’ll probably go beyond what the benchmarking insists on from our internal guide. You need to allow a certain amount of freedom for market differential.”

Olivia Phillips, director of sustainability (construction and development) at Canary Wharf Group, agreed: “We’ve got an ESG development framework that governs what we do in terms of our benchmarking across our portfolio of buildings. But there does need to be an element of flexibility within that. A life sciences customer, for example, has different needs to a commercial office customer.”

Phillips cited One North Quay, the 23-storey life sciences development in Canary Wharf, where it is applying the NABERS (National Australian Built Environment Rating System) to rate the building’s environmental performance. “There isn’t a NABERS standard specific for life sciences,” she said. “So we’re looking at how we can get consistency across the board but understand that there are elements where we might not be able to hit a certification that we can talk about. We still want an asset to operate in a certain way, to get that benefit and meet the benchmarks that we’re looking at.”

Mark Kerr, head of customer experience at BNP Paribas Real Estate, said ESG accreditations had been “fantastic from a branding point of view” to communicate to the occupier market, but added that there would always be occupiers with requirements that necessitated “digging a bit deeper”.

Ed Green, Grosvenor’s sustainability director, UK property, highlighted the gulf in sentiment between larger and smaller occupiers. Those looking for 20,000 sq ft-plus “probably have their own science-based targets and will only look at a certain quality of stock – they are the driver”, he said. Those looking for closer to 3,000 sq ft will still be paying top rents but “literally couldn’t care less” about ESG benchmarks, he added. In those situations, this is led by the investment developer.

Given its unique position in actively promoting the UK as a global financial centre, the City of London Corporation feels a responsibility to be a thought leader in ESG, influencing local and national government and the investment markets globally.

Peter Wilson, assistant director, development management, at the corporation, said the City’s ground-breaking whole-lifecycle-carbon optioneering guidance, which was officially adopted and launched in 2023, illustrated this. “It is very clear about the optioneering that we would expect a developer to come forward with, which they can articulate back to investors,” he explained.
“It gives certainty about where the planning process will go if you go through these steps. It’s that circular economy – you pay us the money and we will create this framework and a resource to guide you on that journey.

“We’ve got no interest in creating a situation where we cripple redevelopment or retrofit or any other form of development with onerous sustainability quotas. We need probably 1.2msq ft-plus of office space over the next 15 years, from super-prime all the way down to grade-B and grade-C refurbishments.”

According to Wilson, the ESG narrative is also a key part of discussions when its investment team goes to “family offices and private markets in south-east Asia and beyond”. Part of its role is to “articulate why this is something we want to see, and why it’s something they should be considering when they’re making their investment decisions”.

Alternative lenders
This resonated with Helical’s head of sustainability Laura Beaumont. “We’re capital raising now, and because of the lot size, we are looking at alternative lenders,” she said. “Whereas the high street banks will make sure that ESG is being addressed in their loans, these alternative lenders – we’ve met with eight – have not asked a single question about ESG. That may be because we’re delivering a grade-A office, which will inherently be sustainable because it’s what we do, but we’re not being asked to prove it or demonstrate how we’re going to do it, or the climate resilience of that building. Most of those lenders are Asian.”

Pilz agreed that alternative lenders were “not as ESG focused”, adding: “That’s where the education piece comes in.”

Another challenge raised during the discussion was how to provide actionable information on whole funds. Hill said: “I think with benchmarking, you’ve got tools that are asset specific and very well understood like EPCs and BREEAM. Where it gets harder is when you’re looking at the whole fund, and investors want to have a really clear way that they can just understand the green credentials of a fund.

“GRESB is the recognised tool, certainly for our investor base, and is, I think, the most commonly used benchmark in terms of the questions we get asked, and I think it’s been a really important benchmark in driving progress in the real estate industry. I think, more latterly, CRREM and looking at an asset’s CRREM Misalignment Years is another big step forward for our industry.”

Leonard said he was also seeing increased use of GRESB and CRREM: “I think linking the asset-level certifications with things like GRESB is valuable. But increasingly, when we start looking at the operational components, we’re starting to see GRESB rewarding actual delivery– that you’re doing good things, not just good management. Up to now, we’ve got lots of points, lots of benefits for good governance, good management, policies, things like that. It’s now going more towards doing things, jobs to be done.”

Aleksandra Njagulj, DWS Group’s global head of sustainability, real estate, and managing director, agreed that it was vital benchmarking drove operational improvements. “It’s all about performance – and it should be,” she said.

There was also welcome news from Njagulj in her capacity as chair of the GRESB real estate standards committee: she told the room that the ‘five-stars’ system would be changing. “If you look at who is five stars, it’s always offices and multi-let heavy portfolios, and not residential or industrial,” she said. “They’re not the same and it doesn’t make sense to compare the two. That’s going to get fixed.”

Costly business
A final point of concern about benchmarking was raised by Arsenievich, specifically relating to the high costs of ESG certifications.

“GRESB is the most recognised [benchmark] when it comes to investors,” she said. “We have investors who set a due-diligence criteria for a certain number of stars that they expect, but it’s a double-edged sword in the sense that it locks out a large share of the assets that need to transition the most. GRESB is partnered with all of the certifications. There’s a lot of money on the consultancy side being made, and there’s a lot of smaller players who cannot afford to get that certificate. They might be doing the right things.

They can have a great CRREM because that’s free and they can gather the data and do the right stuff, but they can’t package it in such a way, and they can’t afford GRESB and consultants and all that jazz.”