Real estate probably isn’t one of the first industries that comes to mind when thinking about climate change – but it should be. Globally, the built environment is responsible for around 40% of energy-related carbon emissions, so getting to net zero by 2050 (as many countries have committed to do) is a considerable challenge. Despite greater awareness of the impact of climate change, global energy demand in buildings rose 1% from 2017 to 2018, and sector emissions increased by 2%.
While energy use will have fallen in some sectors such as offices in 2020 due to the covid-19 outbreak, in others, such as residential and logistics, it will have increased. Nonetheless, working towards net zero – and continuing to improve sustainability metrics for all types of buildings – makes good commercial and societal sense.
Property owners have been expected to bear part of the financial burden of the covid-19 crisis in terms of deferring and reducing rents. Equally, we expect owners will come under increasing pressure to reduce carbon emissions to help deliver on the 2015 Paris Accord target to limit global warming to “well below” 2˚C. For asset managers, the answer to getting real estate to zero emissions in the coming decades will depend on three Rs: renewables, retrofitting and responsible ownership.