Institutional investors and investment managers need reliable and certified data to fulfill their fiduciary responsibilities. Fortunately, efforts to provide high-quality ESG data on real estate and infrastructure-focused funds are rapidly moving forward. In this informative episode, Dan Winters, Senior Director at GRESB, explains how the framework and theoretical basis to gather both high-quality and far-ranging data is taking shape at his organization.

Listen in as he reveals how GRESB works their assessment results into useful recommendations for major funds.

Key Takeaways

• Institutional investors are increasingly interested in ESG investment strategies
• GRESB provides a framework for evaluating funds based on ESG factors
• Regulators and governments, particularly in the EU, are driving firms to disclose ESG factors

Transcript

Dana Dohse: On this episode of The Decarbonization Race…

Dan Winters: What I really think philosophically GRESB is and ESG is, it’s organizational change, it’s behavior change. It’s about making progress.

Dana Dohse: Host Lincoln Payton is joined by Dan Winters, senior director of market development and strategic initiatives at GRESB.

GRESB is a mission-driven and investor-led organization that provides actionable and transparent ESG data, to inform investment decisions.

In this conversation, Lincoln and Dan discuss how institutions can partake in the growing evolution from random acts of sustainability to true decarbonization efforts. Ready to lead the sustainability pack? This is The Decarbonization Race.

Lincoln Payton: Well, hello everybody. Great to be back again. The Decarbonization Race continues and accelerates. I’m delighted to have with me today, Dan Winters. Dan, welcome.

Dan Winters: Lincoln, thanks for having me. It’s a tremendous pleasure.

Lincoln Payton: Great. First of all, where in the world are you?

Dan Winters: I live in Arlington, Virginia. GRESB is based in Amsterdam. I have been for a long time, the representative here, since 2014, of our efforts.

This year, we’ve been able to expand. We’ve made a significant investment, both into personnel and IT. So, we now have what I affectionately call the GRESB basketball team. Here in America, there’s five of us. So, it’s been a great 2022 so far.

Lincoln Payton: Fantastic. Congratulations. That kind of growth is exciting because it really does give you some capacity. Very briefly, what’s the historical evolution of GRESB?

Dan Winters: So back in 2009, three large pension plans, very sophisticated, got together and they were looking at all of the annual reports that they were receiving from the 2008 results, from their private equity funds.

Some of them were showing up with LEED Platinum, LEED Gold, sometimes, 3M, excellent building sites… as the key holding of the fund. They would have a sustainability story about it.

The pension plans that started GRESB are based in the Netherlands. They think a lot about sustainability, a circular economy. Very, very advanced when it comes to these issues.

So, the question was put on the table. What are all of our fund managers doing when it comes to sustainability? And so in order to tackle that, they commissioned some academics to come up with the original ESG due diligence questionnaire. So, imagine 50 questions bent around things that follow in that ISO 14001 approach.

Does the fund manager have a plan? What are they doing? Is there a feedback loop? Plan, do check, act. That’s what ISO 14001 discipline is meant to do.

And so, the academics came up with a structure. It’s really first and second order material issues that matter to a long term holder, a pension fund, that’s putting hundreds of millions of dollars of capital to work in the hands of these fund managers.

That was the genesis. That was the idea. So the three that got together, APG, PGGM and USS, sent this survey, let’s call it that for the moment, out to all of their fund managers.

And what came back? 200 responses. Great, great set of knowledge for a PhD to write a report: state of sustainability, institutional real estate circa 2010.

The next big idea was, “hey, this is great, let’s do it again. Let’s see in 2011, if we can get more pension funds to join and more fund managers to complete the GRESB assessment.” Off to the races.

So when that happened, 330, the next year, 480, [then] 600. Every year, year on year on year, GRESB has grown.

This year, I’ll give you the scope. I will stand here in a month and be talking about 1,820 funds, portfolios, REITs that participate in the assessment. So you might imagine, there’s a lot of buildings that make that up. I’m sure we’ll talk about that as our time here goes on.

Lincoln Payton: Congratulations. What a terrific growth. Solely real estate focused, is that correct?

Dan Winters: That’s the origin and the angle that it came from. Now I’m glad you brought this up, because in 2015 our pension plans had grown. I think we were about a hundred at that time. We’re getting up to 200 now that subscribe to the data. They’re data takers.

In 2014, a number of them, 10 of them got together. They said, “GRESB, you’ve been quite successful on real estate, helping put a language around ESG that’s tailored to the institutional real estate industry. But we are putting money out the door, in an allocation bucket called real assets, which means real estate plus infrastructure.”

So 10 of them sat down and they said, “All right. Let’s come up with an infrastructure assessment.” So there is another product line, if you will, called GRESB Infrastructure. There’s funds that do the fund assessment, but those funds invest in operating assets. They could be airports, toll roads, pipelines. They’re solar farms and wind farms and things that are pure play.

But we get an awful lot of things that fit the infrastructure bucket that are part of the infrastructure assessment. That was a big advance in GRESB.

Lincoln Payton: When did that take place there?

Dan Winters: The first year that it rolled out was 2016. 2014 was the idea. 2015 was the work. 2016 was when it was rolled out.

I think an important thing about GRESB to note, is that GRESB is governed by institutional investors. So, as the questions in the assessment continue to mature and morph as the metrics are elevated, what we have is, we’ve got a very sophisticated governance structure, where you have some very thoughtful LPs that are continuing to push this industry forward.

Then we have input from, I’m going to call it the participants, the general partners and the REITs, that are also talking a lot about the assessment. That’s how, as we get to 2022, the topics continue to move forward.

Resilience, health and wellbeing, embodied carbon, some of the other things I think we’re going to talk about today. It’s not like you and I are going to get in the back of the room and figure out how this is… We’re by industry, for industry and we receive a lot of feedback from the assessment.

Lincoln Payton: It is a very positive and unique model. What are those subdivisions of information or questions that GRESB looks for from its participants? So when you’re going out asking about this today, which is a very broad and oft-ill defined ESG world that we’re in, what are the areas that you’re looking at and collecting information on?

Dan Winters: It’s important to really be grounded in the levels. We’re a portfolio-level assessment. Further up are the capital markets. So, you might have indices like the Dow Jones Sustainability Index, that little bit further up here.

Our data, because we’re here, does inform certain real estate indices that are out there, their ESG indexes and green indexes. We’re in the middle, and then down here you have the building-level metrics.

So when you’re talking about GRESB, we’re asking questions about fund managers: Blackstone, KKR, Carlisle, AEW. But we’re really asking about the fund. How integrated is ESG into the mindset and the management of the fund manager? So that’s one lens from which to interpret GRESB.

And the more integrated from a decision-making and a policy standpoint, the more action typically happens down the line.

So there are policy questions within GRESB because there’s some main components. There’s a management component. There’s a performance component. And then if you’re a developer, we also have a development component. Those questions are tailored from a portfolio level.

Ultimately, portfolios are comprised of buildings. That gets you down into aggregating building by building by building, up to a portfolio based on metrics.

So, the big metrics are energy, water waste, greenhouse gas emissions, understanding if these buildings in the portfolio are certified to anything. Trust but verify is a well-trodden concept in real estate. So, you’re looking for BREEAM, LEED, Green Star in Australia, those sorts of things.

Then ultimately, best practices, that’s really what GRESB is. Every question in GRESB, there’s 55 or 60 of them, are Boolean.

Here’s an attribute. It’s a management attribute. Does it exist or not? And if it exists, what does good, better, best look like? That’s the idea behind GRESB.

When you get down to those metrics, rolling those things up, what you’re looking for are carbon-neutral portfolios, net-zero buildings. That’s where the industry’s really headed.

Lincoln Payton: Data collection is one of the challenges of our time. It’s particularly a challenge in new nascent areas. The whole ESG world is relatively new. It sounds like it’s been pretty good, a pretty receptive audience, to get people to actually respond to you. The 1,800 plus responses these days, phenomenal. But how easy has it been to get the actual data that backs up those responses? How does that work?

Dan Winters: Well, we would hope it’s easy, but when GRESB came and shone a light on this issue, it became quite obvious that there’s systems and processes in place for financial data.

We’ve needed those since the 1933 and ’34 acts. We’ve got 80 years of working on financial data. But non-financial data, I like to think of ESG and GRESB as a framework for structured non-financial data.

So some of the questions when you’re going through GRESB… I’m thinking of the early years in 2012, ’13, ’14, you’re being asked policy questions. Do you do employee surveys and tenant surveys and things like that? These are asset management best practices.

Then you get to the big question that makes people’s heads just explode. Can you acquire the energy, waterways and GHG emission data for the portfolio?

You’ve got a portfolio of 10 buildings, okay. You’ve got 10 property managers to engage with. Hopefully some, if not all of them, have Energy Star accounts. So, there’s some structure that already exists.

But if you’re not there, then you’re nowhere. You’re looking at this to say, oh my goodness, how do I get this data? I don’t have a structure forming, a software program. So, the industry has really matured around GRESB, over time.

Lincoln Payton: Availability of utility data is one element that I think in the next 10 years, we’re going to see big evolution on, because everybody wants that data to be more available.

You mentioned the infrastructure initiative, which is a few years ago now and has some maturity. What new things are you looking forward to?

Dan Winters: Great. What we’ve been doing is taking the pulse of our members. For the past decade, we’ve been putting this framework out there and the language and really helping evolve the industry.

We’ve got 1,800 in the benchmark. The first time somebody steps forward and participates, they typically get a score that’s not very high. I’ll just say that nicely. Which is zero to a hundred scale.

We’ve all been graded since kindergarten on that scale. When you receive something that maybe starts with a three, a four, a two, a five, they’re like, “Uh-oh, I’m in trouble.”

That’s oftentimes what the first year is all about. Companies and portfolios and firms, they have random acts of sustainability that are happening. But it’s unlikely, unless you’ve done GRESB for a while, that you actually have a thematic program that’s purposeful and meant to advance the firm.

So that’s the first year as a learning experience. The second year is, you go after some low-hanging fruit. Oh, we need some policies. Great. Let’s write those down. Let’s get them in there, because you have to submit those to GRESB. We’re going to review them to give you the thumbs up, sideways or down, based upon some points.

Once that happens, the industry starts to move forward, the companies start to move forward and you know, they’re on their way.

Now, we’re in this circumstance where we’ve got a dozen years. We’ve got some people that are very advanced. Out of Australia, we’ve got carbon-neutral portfolios that are showing up.

Our assessment and the points that are in it haven’t taken that into account. So, we’ve got some great actors out there, right? They’re saying, “Hey, come on GRESB. Come on, look at us. We’re over here.”

Meanwhile, we have a whole cohort over here that’s just trying to figure out, “hey, this ESG thing, what should we do? How do we do it? What’s GRESB?” We got to bring them along as well.

So, where the advances coming are a couple thematics, net zero. So net zero buildings, net zero policies, commitments, targets, net zero performance and being able to disclose it. So, those are moving into the assessment for 2023, [2024] and [2025].

Lincoln Payton: This is great because clearly, sitting in my chair, energy is a big part of our focus at Cleartrace. We’ll come back to that area because I’m very interested in how you see it today and how you see it in the future.

But the other elements, the sustainability and the governance, which I think is where you’re going right now, how do you deal with that?

It’s a question for you. Is it a more qualitative area? How do you manage those? What’s the relative weighting in your thinking, of those different buckets in the ESG world?

Dan Winters: What I really think philosophically, GRESB is and ESG is, it’s organizational change, it’s behavior change. It’s about making progress.

When you talk about governance, our governance is really the governance of sustainability. Is somebody with budget, clout and title around at financial moments of truth? That’s how I like to think about this.

So in real estate that’s, are you part of the investment committee? Is the package that’s showing up in front of the investment committee having things about a property condition assessment report and a phase one environmental? Absolutely. You have to do that.

But wait, what about resilience? What about climate change? What about all the people in Florida right now that are… There’s commercial buildings that are down there. What does that look like? So resilience, climate, totally on the table.

Those are the advances. Our governance is really all about, are these elements being considered, talked about. And are they part of the investment community decision, or do they just kind of get watered out over time?

That’s what we try to get at within GRESB. So you can look and map all of our questions to E, S and G.

There are also areas where we’ll ask something early and then loop back a little bit later. We’re kinda looking for some inconsistencies here. ‘Cause it’s one thing to have a policy, to write it down. It’s another thing to live it.

Lincoln Payton: Very interesting indeed. If we push back from the table, are we seeing an improving trend? Are you seeing basically the industry, particularly the real estate industry, becoming more focused, more disciplined, more committed, and actually getting things done?

Dan Winters: It’s like the product adoption curve, right? So something gets introduced to the market. You’ve got your early adopters. You’ve got your pioneers, the people that always want to have the new cool thing.

So if that was considered GRESB, 2010 to 2015. Then you had the early majority. So that was 2015 to 2020. The pandemic really accelerated.

Now we’re also having climate consequences. A hundred billion dollars, year on year on year, of damages here in the United States for the past five, six years. I think that 2022 is going to continue that.

So the awareness is definitely there, but now it’s the inertia. People ask me often, what does GRESB compete with? And that’s my answer, inertia.

So what we have is, we have a seasoned group of leaders that have been in the benchmark for 10 or more years. Those are the big firms. What’s happened is, they professionalized the ESG role within these firms.

So, now you have a cadre of people that are well-versed and there’s good capacity in the industry to carry these issues forward. It’s being moved into the C-suite.

And so we’ve spent a decade. We’ve got the language down. The issues are there. There’s a lot of awareness. Ultimately, you’ve got leaders and laggards.

There’s a lot of ego in real estate, so people want to be first, right? They want to be the leader. They’re raising capital against others. So we’ve created this, what I like to say, a competitive race to the top.

Lincoln Payton: The Decarbonization Race, I like this competitive race element of what you got going on. So this is a very appropriate topic for our conversation today.

Let’s drill a little bit into the regulatory side of things. I look at the ESG and the reporting world as two big factors.

One is the reputational one, which I think you just alluded to, with those that want to be first, those that want to be the best, those that want to show that they are doing the right things for all their stakeholders, investors, clients, employees, whatever it might be.

The second factor that moves us all along that road is the regulatory side of things. What are you seeing? What are you feeling from your survey base?

Dan Winters: GRESB was started with the idea that it was voluntary. But you would receive a request from a very informed client, coming in through investor relations. You’re like, “Ooh, I think I should pay attention to this.” So, that’s what got us going.

A shift did happen in 2018, where I was observing more and more people that were curious. You were either coming into GRESB, either for compliance or curious. Curious became a little bit more pronounced, where people said, “Hey, this ESG thing is happening. We’re seeing a lot of folks getting some press on it. I think this is important. I think I want to be involved. What is this?”

Now the next phase of that is, let me call it… that’s the carrot side, I’m going to call it the stick side. You’re obligated to report some metrics.

The good news is that, people that have been participating in GRESB have systems of processes and awareness and language, all the way up and down their firm, to be able to be in a good position to respond to these.

The regulations that are being proposed are thoughtful. I think that as a country… let’s just confine this to the United States for a moment, the comments, that we’ve haven’t been able to successfully price carbon unilaterally, consistently.

Certain states are doing things, but by gosh, we’re going to count it. That’s really the big change now.

So when you look at the regulations, it’s Scope 1, Scope 2, being able to report on those. Scope 3 is a sticky wicket. It’s very challenging too, and people have different interpretations.

Australia was looking at it one way. Canada is looking at it a different way. In the US, we have lease structures that kind of govern access to data.

So, it’s one thing for somebody to say, “Yep, I would like this data.” It’s another thing to really be able to wrap your arms around it. But either way, what regulation does is it prompts people to say, “Hey. Okay. We need systems and processes to do this, and let’s do our level best to elevate and be transparent.”

The last thing here is that capital markets work based upon transparency and consistency and a level playing field. So, that’s really what I think this is all about.

Dana Dohse: Let’s talk about Scope 3. Scope 3 emissions include any upstream or downstream activities that are associated with a business’s indirect holdings, supply chain, product life cycle, and operational sources.

In contrast to Scope 1 emissions, Scope 3 emissions are not directly owned by the organization. Notably, Scope 3 emissions are embodied in sources, including purchased goods and products, energy consumption associated with business, travel and other indirect sources that don’t fall under the umbrellas of Scope 1 or 2.

Even so, organizations are still responsible for understanding the sources behind their Scope 3 emissions, notably in their supply chain and may be held accountable for them in the long run.

However, the first wave of regulations focused on carbon disclosures has arrived. There is an SEC rule on climate-focused disclosures and a growing list of local or state laws, like New York’s Local Law 97 and Boston’s BERDO.

These regulations require companies to get a better understanding of their Scope 1 and 2 emissions footprint because they will need to report on them.

For more on your responsibilities and requirements in regards to greenhouse gas emissions, check out the Cleartrace blog linked in the show notes.

Lincoln Payton: I think what you said about Scope 1, 2 and 3 there, very appropriate. We get a lot of feedback, not just from the real estate space, but how senior officers and especially some of the now trained and experienced sustainability crew are committed to Scope 2 and 1, where they can have good information.

And Scope 3 is a quandary for many people because it is vague. It is a little bit nebulous, in terms of how different people interpret and treat it, refine that or drill down on that a little bit.

Are you… the people you’re talking to, are you seeing they’re less willing to actually calculate around Scope 3?

Because a little bit, that’s the feeling we’re getting. Which is, people are saying today, “I take this very seriously. I also take very seriously, the fact that things will be very clear and transparent and correct. But my risk and my comfort with making statements around Scope 3 is significantly less.” Are you feeling that from your groupings as well?

Dan Winters: Oh, absolutely. Right. It’s especially pronounced in the listed side, with the REITs, because you’ve got [Sarbanes-Oxley], you have people that are signing those.

If you’re not sure, then those are the challenges. That’s why people are very concerned about the regulations.

That said, this is a good advance and a good push forward for the industry. So, I’m glad that you brought this up, because I actually wanted to turn a little bit and start asking you a couple questions.

Like, what are you experiencing on the ground? Because we get the, “Oh my gosh. This is a pain, we haven’t needed to do this before. Why should we? How could we? What’s the business case?”

But people, in my view, want to step forward, do best efforts, understand these things and trying to get some competitive advantage out of it. Is that what you’re kind of observing too?

Lincoln Payton: Look Dan, it’s perfectly expressed. I think, as I say, although we are coming from slightly different tangents, it’s the same equation.

You mentioned that engagement curve. There are those that embrace what is coming and want to make it a strong point and an advantage and be first movers.

Cleartrace, as you know, is a high tech, data collecting, carbon and energy footprinting platform that is extremely appropriate to the real estate space. Not exclusively, but it’s extremely appropriate because of this regulatory side that we’re talking about.

In terms of being able to manage footprint through green energy supply and being able to trace and allocate that and hence hit Local Law 97 targets, hit BERDO targets, hit the regulatory targets that are coming to other states in the US soon, we absolutely are seeing those first movers who are looking for the very good publicity, being joined by those who are saying, “Well actually, I’m going to have to do this.”

So there’s that intersection of what we were just talking about. The reputational side and the leaders, but then the regulatory side coming up and overlapping on it and people putting that together.

What do you anticipate that the oft-talked about SEC more omnipotent regulations will ultimately ask for and require?

Dan Winters: So the metrics are I think those key metrics. We want to count carbon. We want to understand energy. We do a really good job counting dollars or kroners or euros, but these other metrics are a little bit more challenging.

People are on the S side, they’re looking for equal pay for equal work and gender equality and those sorts of things.

The E side is pretty clear when it comes to real estate. It’s just still messy to try to elevate the metrics because of lease structures that have been around for 40, 50, 60 years. Or it’s utilities that are not wanting to give you that consumption data, because if you knew it’s like, “whoa, that’s a lot of consumption, I might want to reduce that.” Either way, the pressure is on.

I think the biggest change that has happened in the last year was COP 26. Coming out of that, out of Scotland in November, there’s some good progress that were made by the politicals, but the finance industry, they set the direction very clear, net zero, 2050.

Once that happens and that boulder is thrown in into the pond, now it’s like, okay, people are starting to take action.

The first thing they do is they gather a bunch of data. Where are we? Okay. Now that we know we’re in, that’s probably a one to two year process.

Now it’s like, what are our opportunities to reduce this? We’re paying attention? So we’re in the early innings, I think of that.

But make no mistake, those commitments are there. They’re real. They’ve happened by pension plans. They’ve happened by the big guy banks. They’ve happened by small, medium, large private equity firms, and people are focused.

That’s where we’re all heading for the decade ahead. Hopefully we can get there long before 2050.

Lincoln Payton: You’re again in a very interesting spot there, because when you look at the sophistication of the sector that it makes up your grouping, the PE space, the fund management space, these are guys that are very sophisticated, very aware of the capital markets, very aware of imagery.

Let’s segue that into the stick side of the whole PR situation: greenwashing. Human beings being what they are, there’s always a little bit of spin on everything, from all of us.

To what degree have you come across that? To what degree do you try to address that in the way you structure your work? That people are not trying to get good grades on the test, when in fact they’re not doing the homework.

Dan Winters: So GRESB was set up as a trust-but-verify concept. It’s a closed system. The way that we work is we have a portal. It’s out there on the Web. On April 1st, it opens up and the globe pours in.

We’ve got Japan and Singapore and Australia with the EU. We’ve got folks in South Africa and then the United States, Canada and South America. They’re in that portal, and they are answering these questions.

There are requirements to upload evidence. So, it’s one thing to make claims, feel a little jaded and say, “Oh, this is a check the box exercise,” until you’re confronted with, “Give us a URL. Give us a document,” because we’re going to have people look.

If you upload a policy that says we recycle and print on both sides, that’s a policy. So it is up to the investor to say, “No, no, no. I like the policy that says LEED Gold or higher.” That’s different. So there’s been a maturation.

I think there’s the two sides of the coin. One is the trust-but-verify. People are looking at that. But then it’s also the people that are participating, that want to put their best foot forward.

What we do from a benchmarking standpoint is we give folks results. Those results are peer-benchmarked. So what happens is, when you receive that score and that benchmark report, you might’ve gotten full points on a question.

But you look at your bounty of evidence and it feels weak, compared to your peers. That is what I call a management introspection moment. That’s where people get their results, and are like, “okay. Let’s get this committee back together. How can we advance this?” So it’s a little bit two sides. The trust but verify is good.

On the energy, water and waste data, when you’re entering that into GRESB, we’re not going to run and audit all these buildings. It’s not possible.

We are running scripts in the background, to look for what we call dirty data or messy data. We flash a light that says, “hey, are you sure about this? Are you sure about this? ‘Cause it looks odd, compared to the data that we already have in our system.”

Ultimately what’s happening is, we have people who are participating in the assessment, these sophisticated firms, knowing that their data will ultimately be consumed by their client, their investors.

As a result, the behavior that I observe is couple, 48 hours before the assessment is due, which is July 1st, my email is a disaster because people are commenting saying, “Hey Dan, can we get a little extra time? Oh my goodness. My so and so wants to review this, and we’re not sure. We want to make sure. Legal’s going to look at it and whatnot.” That’s more often what I see.

The last thing on this is that, there are these random acts of sustainability. Everybody wants to put their best foot forward. The me-toos are the ones that I’m most concerned about with the greenwashing, because they are trying to catch up to the leaders. We all want to be part of that. But if you haven’t been practicing as long as the others, you’re probably not going to be as good.

So there probably are those moments where somebody in marketing says, “Well, how can we spin this? How can we do that?” The good news is that, when that dynamic happens, that means people are tuned in and turned on, and they are going to move it forward.

Lincoln Payton: Yeah. To what degree are new technologies that are appearing around the space, the ESG space, relevant to what you’re doing? Will they be relevant down the road?

Dan Winters: Consider GRESB as the light that shines on the problem. What we don’t do is we don’t consult. We don’t want to GRESBify the world. What we do want to do is say, “Okay. We’ve got some institutional investors. These are the first and second order material issues to them. What does good, better, best look like?”

To the extent that there’s proptech solutions, awesome. To the extent that the portfolio carbon accounting is required and it needs to be really granular, with a lineage and traceable and auditable trail, great.

That would be not good; that would be best. So, we will reward that with more points. Those are the behavioral economics behind GRESB.

Ultimately, this gives a lot of breathing room for new technologies to emerge, for companies that have developed these solutions to get in there because we do cause this problem, I suppose, if you will.

Solution providers say, “Oh, well, I can help you with this.” It creates the breadth for this to do it.

We firmly believe that markets will solve the problem. Regulation is meant to define the rules and the boundaries of how to maneuver. But ultimately it’s proptech and new technology in the market that will help advance these.

GRESB is the framework and the language that unites the globe, because we’re having a U.S. conversation and we can certainly expand it. Let’s talk about SFDR and other things.

This is very common. Everybody’s in this together. Having a centralized common language is difficult, but we’ve been able to achieve that.

Lincoln Payton: Question for you on a current move. The recent significant legislation in the US, the Inflation Reduction Act, there’s a couple of sections there around energy efficient commercial buildings and tax and incentives and refits. What do you think?

Dan Winters: Oh, I think more. I think that that’ll be super helpful. People have been asking for these things for a long time, just like the EV stations that we’re seeing, the billions of dollars that have been devoted to that.

So shining a light, these are the issues. There’s two ways that you can improve the building stock. One is, you ratchet up the codes. So, new buildings that are showing up have a more rigorous co-regime, or you have to deal with the decisions that were made prior and retrofit.

The only way you can do that is if you have a plan. You can’t just snap your fingers and make it so. It won’t happen by next Tuesday.

Buildings are complicated. You’ve got tenants and they’re in there, they’re doing some things. So knowing when there’s going to be vacancy, that you can go in with a hit team and say, “Oh, well, we did this at this building over here. Here’s the playbook. Here’s what we’re going to do, but we can’t do it until 2024.”

Okay, you have a plan. Having a plan is critical because otherwise, 2024 shows up, your tenant leaves. Now you’re just scrambling to replace that, as opposed to having a retrofit action plan, if you will.

Now there’s some capital that’s available. PACE financing has been around a long time. You have banks. Even the GSEs, like Fannie and Freddie, have opportunities for some lower-rate financing to then improve the building.

So, all of these things are really pulling into play. As the industry has become more sophisticated, with the language and understanding that these issues are important and urgent, you will see this capital being put to work and hopefully more of it over time.

Lincoln Payton: Yes, I look forward to the time where carbon and responsible ESG behavior really translates into another currency and a relative measure of value, in terms of cost of capital in the capital markets. Because as you said, I think the private sector will move faster. The cost of capital as reflected in the capital markets, is really a big lever to moving these factors.

Dan, thank you very much. As always, enjoyed the conversation, the company and the content. Great stuff. Congratulations on the growth of the GRESB platform and your very interesting role.

Dan Winters: Lincoln, thanks for having me. Really appreciate it.

Dana Dohse: Thank you for joining us on The Decarbonization Race. For more resources to help you lead the pack in the most important race of our lifetime, visit Cleartrace.io/podcast.