As the commercial real estate industry continues to explore the standards the EU is setting for the sector’s approach to ESG initiatives and goals, decarbonization, and the fight against climate change, the transition to net zero carbon has taken center stage globally. An increasing number of investors and businesses are announcing their commitments to reaching net zero, while countries are being asked to commit to ambitious 2030 emission reduction goals in the hopes that they will achieve net zero by the middle of the century.
To discuss effective pathways for this inevitable transition to net zero carbon, BREEAM USA recently hosted a panel of industry experts who provided their expertise and insights on what these commitments mean for the real estate industry in the US, and how CRREM (Carbon Risk Real Estate Monitor) could serve as a valuable tool on the path to net zero.
Featured panelists included:
Prof. Dr. Sven Bienert, Head of the IRE|BS Competence Center of Sustainable Real Estate at the University of Regensburg and architect of CRREM
Kenneth Lang, Senior Sustainability Consultant for Altus Group
Neil Pegram, VP – ESG Industry Engagement & Development at Measurabl
Derk Welling, Senior Responsible Investment & Governance Specialist at APG Asset Management
Breana Wheeler, Director of Operations – US for BRE Group
Throughout the conversation — which was moderated by Fulya Kocak Gin, Head of ESG Issues at Nareit — a number of critical considerations for effectively and efficiently collecting, qualifying and evaluating data were brought to light.
1. The role data collection plays in the industry’s ability to assess asset value will be key for real estate transitioning to net zero.
“Global investors need to have reliable standards to measure net zero carbon,” shared Derk Welling. “[APG] invests in many real estate entities, and that requires that we collect quality data at asset level, which allows us to see and identify what assets are aligned with net zero.”
“We have a long history of financial data coming at a quarterly rate, and yet our ESG data comes annually,” added Neil Pegram. “I see a lot of our fund managers with sophisticated systems now saying, ‘let’s start reviewing this [ESG data] with our quarterly reporting and let’s parallel it with the financial reports.’ I think that will increase the accountability of landlords and managers.”
2. Verification of data quality will hold the commercial real estate industry more accountable amidst its pursuit of stronger sustainability goals and improved ESG performance.
“One of the things that we do through BREEAM is verify data [that’s collected],” shared Breana Wheeler. “BREEAM’s certification process requires that performance claims are backed up by documentation and verified on site by a licensed assessor. Credits are only rewarded by the assessor when the documentation requirements are met and when the assessor has visited the site and confirms that the documentation and what they see at the site matches. This is the kind of data that can be confidently used to inform an organization’s planning towards net zero or be used with CRREM.”
“There has been heavy activity in terms of national determined contributions — those are commitments or better said statements that countries make to fulfill their commitment according to the Paris-accord they signed off already in 2015: This will eventually lead to more regulation globally,” noted Prof. Sven Bienert. “We will see [two] parts with regards to risk: more physical risk and of course the risk that is attached to transition. Companies might lose their competitive position if they are not in line with the decarbonization and regulatory requirements. CRREM can help you identify properties which are not aligned to Paris-proof decarbonization requirements.”
Moderator Fulya Kocak noted that CRREM is free to download and highlighted how more companies utilizing CRREM outside of the EU has the potential to drive the standard adoption of this resource on a global scale.
3. Once companies start to disclose their evaluation metrics, data evaluation can drive opportunities for increased value for assets among investors and companies around the world.
“I think about debt,” noted Kenneth Lang. “There is so much money that is underlining commercial real estate, and if lenders are going to make CRREM compliance part of their information to be sent to the lender, you will begin to see disclosure become extremely important, more perhaps than at the asset level.”
“[CRREM] can process data from properties where you don’t have full data coverage,” Bienert shared, adding a perspective on how CRREM supports complex data evaluation. “But I think the point is, get started — not everything is perfect now, but executives have to work on the right topics and be clear on the data coverage and challenges they need to address regarding their portfolios. We have the opportunity to just say, ‘Ok, I have data of these five tenants and I do not have full data coverage.’ You can still get a fairly reliable figure and know what you need to work on in the future.”
If you missed the panel, you can watch the full webinar here.
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