Real estate asset managers set to miss carbon reduction targets

The survey, by environmental, social and governance data intelligence company Deepki, questioned 250 European commercial real estate asset managers in the UK, Germany, France, Spain and Italy.

It found that just 5 per cent of commercial real estate asset managers said that between 81 per cent and 99 per cent of portfolios will achieve the 50 per cent emissions reduction target set for 2030, while fewer than 7 per cent said their portfolios will be net zero by 2050.

A miss is as good as a mile

Things look better for certain portions of the holdings. Forty per cent expect to have reduced carbon emissions in between 41 per cent and 60 per cent of their commercial real estate assets by 2030. 

Almost a quarter (22 per cent) said that between 61 per cent and 80 per cent of their commercial property investments would have halved their carbon emissions in the next eight years. 

The property sector is fully committed to decarbonisation but there are huge barriers and costs to overcome. We need clear, long-term policies, regulation and incentives to support the industry’s efforts.

Melanie Leech, British Property Federation

However, 90 per cent said that less than 20 per cent of their commercial real estate assets would achieve this 50 per cent emissions reduction target by 2030.

Must try harder

Things are not much better for the long-term targets. A quarter of asset managers said they expected that between 61 per cent and 80 per cent of their commercial real estate portfolios would have achieved net zero by 2050. More than a third (35 per cent) said they might achieve between 41 per cent and 60 per cent across their portfolio.

Almost a third (29 per cent) of respondents said that between 21 per cent and 40 per cent of their property portfolios would achieve net zero by 2050. However, 4 per cent said this target would be met by less than 20 per cent of assets. 

Commenting on the findings, Deepki chief executive and co-founder Vincent Bryant said: “We are in the midst of a climate emergency and the real estate sector is responsible for 37 per cent of global CO₂ emissions. 

“The pressure is on commercial real estate managers across Europe to reduce carbon emissions across their portfolios. It is essential that asset managers identify the source of their emissions, and demonstrate that they are taking effective action to meet the 2030 and 2050 targets.” 

Things look even bleaker on a global scale. The real estate sector’s global emissions are worsening. Having dropped in 2020 as a result of the pandemic, emissions from buildings and construction reached an all-time high in 2021: 2 per cent higher than in 2019, according to the UN. 

This is because although the sector has become more energy-efficient, the sector overall has grown and the damage from that growth exceeds the improvements made by owners.

Failing all over the world

New research from Bisnow, a commercial real estate industry news platform, found that almost half of the world’s largest real estate investors have no target to reduce the carbon emissions from their portfolios.

Bisnow analysed the 75 largest institutional investors in real estate – with more than $1.2tn of assets under management – and found that 32 have no overall plan to reduce the amount of carbon they put into the atmosphere. 

Last month, a report from the UN’s Intergovernmental Panel on Climate Change showed that the worst effects of climate change may be avoided if action is taken now. The research cited real estate as a major contributor to emissions, and a sector where urgent action is most needed. 

Despite the greater focus on ESG matters, the report indicates that the activity is all talk and very little concrete action. 

Sector needs better data and government support

A report published in February by the British Property Federation and JLL identified access to data as a major challenge faced by the sector, and referenced by property owners and occupiers as one of the top three challenges to decarbonisation.

A lack of good-quality data makes carbon reduction projects difficult to start, let alone manage and measure.

Uncertainty around policy and regulation and no financial incentives to support retrofitting of buildings are also hindering progress, the report said. The transition to net zero is expensive and property owners will not invest in major energy efficiency upgrades unless they see evidence of a return on investment.

The report revealed that nine out of 10 senior leaders surveyed by the study believe that current government policy will not deliver a net zero property sector by 2050.

BPF chief executive Melanie Leech said: “The property sector is fully committed to decarbonisation but there are huge barriers and costs to overcome. We need clear, long-term policies, regulation and incentives to support the industry’s efforts.  

“We urge the government to adopt the policy recommendations in this report and to work with us to make sure we can deliver a net zero-built environment by 2050.”

Guy Grainger, president of BPF and global head of sustainability services and ESG at JLL, added: “Without clear incentives and regulation from government, we will continue to fall short of targets. 

“The report highlights the insight we can garner when we collaborate, and this collaboration, along with government support, is critical.”