Two new indices from the U.S. Green Building Council—namely, the Green Building Information Gateway (GBIG), launched last November, and the FTSE NAREIT USGBC U.S. Green Real Estate Index, to be launched this quarter—provide greater understanding, transparency and trackability when it comes to green buildings. NREI spoke with Chris Pyke, Ph.D.—the vice president of research for the USGBC, a member of the United Nations’ intergovernmental panel on climate change and a professor of sustainable urban planning at George Washington University—about these new platforms’ potential to increase investor interest in green properties and ultimately accelerate market transformation. An edited transcript of that interview follows.
NREI: For the uninitiated, just what is Green Building Information Gateway—or GBIG—and what does it offer?
Chris Pyke: GBIG is a global platform to search analyze explore the green dimensions of the built environment. Over the last 10 years we have collected data through the process of LEED certification and other green building certifications and disclosures and we have amassed a pretty sizeable body of project experience with green building that includes new construction commercial interiors existing buildings. and the intent of GBIG is to provide some transparency and context for those green building activities and the ability to learn from those highest-performing projects.
NREI: What’s an example of somebody who would be utilizing GBIG, what they would be looking for and how they would apply it to their work?
Chris Pyke: Say I’m out and about and I see a LEED certification plaque on a building. What I can do is go onto GBIG, enter in that address or the building name and I can find in plain English the things that building has done to be green in terms of energy efficiency, water saving, daylight views, things like that. So the ability to unpack the basis of certification is part of it, but more than just unpack it, I can put it into context: I can find out is that building the best of its kind, is it average or is it, for some reason, below average in comparison to other buildings. So I can provide both transparency and context and if I’m a real estate broker I can use that information. I can perform a search in GBIG if, say, I need to find a green building with daylight and views that is highly energy efficient. That’s the kind of thing I can do. Also if I’m advising a team and building a building I can say what are the characteristics of green buildings that have been delivered in a certain market over the last 12 months, and I can use GBIG to answer that question too.
NREI: What inspired GBIG? What’s made it necessary?
Chris Pyke: I think there are two things. Green building has, from my perspective, always been rooted in a market failure. It’s been rooted in the fact that the absence of information on the issues we care about—energy, water, waste, human health, experience—means that the market cannot efficiently allocate capital, and it can’t efficiently work to recognize and reward those buildings. In that sense, our goal was always to create differentiation and competitive advantage for high-performing real estate. So this tool is the logical extension of that kind of datera that’s at the foundation of green building and this is the data-driven way to achieve that. In a sense, a LEED plaque and a scorecard—those were kind of Version 1.0.
NREI: Just how big is GBIG?
Chris Pyke: At this moment we track about 133,000 green building activities spread across about 80,000 buildings that means we track about 5,800 street places have individual information and about 1,000 different green building strategies like energy efficiency, green roofs and we organize that stuff into about 2,300 collections that include utilities, climate zones, technologies, special reports. So if someone wants to know all the green building activity in a certain market or a metropolitan statistical area, it’s there.
NREI: What’s the response to GBIG been so far from people who are using it?
Chris Pyke: I think that the sense of the response from people has been, “This is the beginning of the tool we’ve been waiting for. We know we want this. We’ve wanted this for a long time.” And actually, I’m of the same mind. This is the tool I’ve wanted for a long time as a professional. That’s mostly the feedback that we get: “This is the tool we’ve been waiting and waiting for.” For most people, much like myself, there’s a sense of, “Okay, now we’re ready to get started.”
This is just the beginning of navigating these data. People have appreciated the ability to get transparency and, for certain folks, they have come to rely on it already as a way to do reporting, particularly if they’re a local government. We frequently get calls from local governments saying, “Hey, this is a good tool for me.” Of course, we also get calls from people saying, “You know, it does all these great things; can it also do…” And that’s great, that’s a good problem to have.
NREI: Tell us about FTSE NAREIT USGBC U.S. Green Real Estate Index that will soon be launching.
Chris Pyke: The ability to organize information allows us to take the next step and turn that information into tools. One group of professionals who need those tools is investors. There has been quite a bit of academic research by folks like Dr. Nils Kok of U.C. Berkeley, who has shown that REITs that have higher proportions of green-certified or -labeled properties have been out-performing their peers in the public markets. And they’ve done deeper work to show that green buildings have some positive financial characteristics like improved occupancy, higher rental rates and, in many circumstances, higher resale values. So there are economic benefits to green buildings that have been documented by economists and in the academic literature. So what we’ve done is taken that academic literature and turned it into a tool—an investable index—by working with the FTSE Group in London and NAREIT here in Washington, D.C. So FTSE and NAREIT have been working together for over a decade and created an investable index that is widely tracked and is used as a benchmark as well as used to create mutual funds and exchange traded funds and other device mechanisms around. So what we did was take the FTSE NAREIT index and classify the REITs in the index based on their holdings of LEED- or Energy Star-certified space.
What we’re doing is bottom-up. We’re taking individual assets and characterizing them based on their LEED certification or their Energy Star label and rolling that up as a fraction of asset value for each REIT. And then, through a recipe that NAREIT created and a set of tools that FTSE maintains, we will be able to provide that [information] to investors in the intervals that they need it. We can work together to put a tool into the hands of investors where, ultimately, we hope that institutional investors and maybe even consumers will be able to have guidance to invest in real estate based on its green properties.
The FTSE NAREIT index is a universe of over 30,000 properties which are owned by over 120 publicly-traded REITs. My understanding is that the original FTSE NAREIT Index tracks about $500 billion worth of REIT assets. We are looking at a slice of that … at the intersection between those 30,000-plus properties and the 15,000-plus LEED-certified properties and the 17,000-plus Energy Star-labeled properties. We’re basically doing the intersection between those groups. The FTSE NAREIT index has been in the marketplace for over a dozen years, I believe. My understanding is that it’s one of the most highly-used indexes that FTSE creates. It’s pretty mature and well used by institutional investors.
NREI: When will the green REIT properties index be launched?
Chris Pyke: We’re almost ready to go for institutional investors. The first folks will be the brokerage community, which will be able to take the weight in the index and turn it into investable products for their customers. At the same time, there will be a trackable version [of the index], which FTSE will release, so that folks can track the performance of the index over time. It’ll come out this quarter, so we’re getting close.