GRESB: Increased ESG practices across the transportation sector
Based on the 2022 GRESB results
Fabio Schweinoster Manfroni, GRESB Analyst, Infrastructure
A greek version of the article is included in RE+D Magazine's #134 quarterly edition, featuring the logistics' sector.
The transportation sector has gained remarkable momentum when it comes to ESG reporting and practices in several markets, according to GRESB data.
Every year GRESB, the global ESG benchmark for real estate and infrastructure investments, provides validated ESG performance data and peer group benchmarks for investors and managers to improve business intelligence, industry engagement and decision-making. The reported ESG data from all funds and assets is compiled into GRESB Benchmark Reports and is actively used by more than 170 institutional and financial investors.
The 2022 infrastructure benchmark results released in October include more than 800 funds and assets with a combined Gross Asset Value (GAV) of USD 1.7 trillion, providing a broad representation of the infrastructure sector globally.
The benchmark covers 35 infrastructure sectors, with the transportation sector1 leading the pack in ESG reporting and representing 27% of the benchmark with more than 180 assets and USD 374.4 million in GAV.
In terms of location, the reported assets for transportation in the 2022 benchmark are spread across EMEA (53%), the Americas (26%), Asia (8%) and Oceania (12%). This is in line with GRESB reporting trends, whereby EMEA and the Americas remain the most represented regions, comprising approximately 80% of all assets reporting to GRESB. This trend can partly be attributed to the size of these markets but also to the relative maturity of ESG reporting compared to more developing markets.
Strong ESG performance
Widespread participation in the GRESB Infrastructure Assessments allows us to capture useful insights into how transportation assets perform in the assessment and within real assets based on their GRESB score. Scores are an overall measure of ESG data disclosure and performance, based on the allocation of 45 ESG issues in the Asset Assessment (13 Environmental, 16 Social and 16 Governance).
Overall, transportation assets are aligned with the benchmark with an average score of 79 points out of 100. This positions the sector as the fourth best performing after Network Utilities (85), Social Infrastructure (83) and Power Generation (81). EMEA remains the most represented region for the sector, with 96 assets and an average score of 78.
Looking at specific transportation subclasses at the asset level, the top performers come from Road and Rail (88) companies and Cold Storage and Logistics (85).
When it comes to infrastructure funds, transportation-focused funds are the third most represented in the benchmark and on average outperform their counterparts with a GRESB score of 90, eight points higher than the average score of 82 in the Infrastructure Fund Benchmark across all participants.
Improved GRESB scores translate into higher coverage of ESG data
The transport sector has the highest reliance on fossil fuels of any infrastructure sector and accounted for a staggering 37% of CO2 emissions from end-use sectors in 2021, according to the IEA2. Despite this statistic, data from the 2022 GRESB benchmark seems to indicate that the industry is moving in the right direction.
On average, coverage of ESG data has gone up across the board by 2% for qualitative metrics such as Policies, Employee and Stakeholder engagement, while quantitative metrics such as Greenhouse Gas (GHG) saw an increase in emissions target setting.
Remarkably, the 2022 benchmark shows that 49% of transport assets have reported a GHG target, with 10% of them reporting a net-zero target.
On the road to sustainability
In short, the 2022 benchmark shows strong traction for transportation-focused infrastructure entities. While differences may occur at the class level due to the diversification present within the sector itself, this group of participants outperforms others at both the asset and fund level, reporting on a greater number of ESG issues such as GHG emissions targets.
High ESG reporting rates will allow managers and investors to make informed decisions and build better ESG integration practices into their investment strategies, enabling the sector to advance even further in terms of ESG transparency and unlock greater adaptivity to meet the demands of financial institutions and upcoming regulatory requirements.
1 As defined by the EDHEC Infrastructure Company Classification Standards (TICCS) classification as “All Companies involved in the provision of transportation infrastructure services,”
2 IEA, Transport Improving the sustainability of passenger and freight transport (2022).