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Three critical elements for a successful net zero pathway for real estate

By Sam Carson
24th November 2020

Net Zero has come into focus in 2020 as the key sustainability objective for Commercial Real Estate, even with the backdrop of COVID-19 and related economic uncertainties.

The reason is clear, with the UK’s commitment to Net Zero by 2050, this theory has 30 years to become a reality. The sweeping changes required for the transition to a zero carbon economy will create winners and losers, so developing a plan has become a priority for many. Download Net Zero: The Guide for Commercial Real Estate

The definition of net zero

Before we start, what is our definition of net zero? It is to reduce company and value chain greenhouse gas emissions in line with limiting warming to 1.5 degrees, and to balance any remaining emissions by enhancing carbon sinks which remove carbon dioxide from the atmosphere. For Commercial Real Estate this means shifting to all electric energy,powered by renewable sources, and reducing usage in line with the asset’s share of forecasted green energy

There are three critical elements for a successful net zero pathway

1. Align stakeholders

The discussion of decarbonisation has come a long way, and now with investor pressure, a looming UK target and market momentum, the Net Zero discussion is timely. However, with any major change comes uncertainty and with competing priorities aligning key stakeholders can be challenging.

What many key stakeholders will be looking for is certainty on an uncertain topic.

What many key stakeholders will be looking for is certainty on an uncertain topic. Before embarking upon the overall pathway, it’s worth beginning with scoping the challenges to understand the scope of the issue and how it directly relates to your organisation.

The Carbon Intelligence Net Zero diagnostic, for example, helps organisations to internalise the topic and build internal discussion about why a net zero pathway matters, and how to make the most of it. By investing the time in engaging stakeholders and getting everyone on the same page the project will be more effective. 

 

2. Embrace uncertainty

Net Zero contains a lot of uncertainty that cannot be immediately resolved. Many aspects of the decarbonisation roadmap, particularly when it comes to developments and embodied carbon, are large challenges with unclear solutions. 

A Net Zero Pathway may not resolve these uncertainties, but it will set them out as defined risks which need to be solved. The industry will develop a response to these challenges, so you will in time be able to interpret them as risks and opportunities which can be further managed. 

 

3. Recognise the risks that matter

All portfolios will have different risks associated with the transition to a zero carbon economy. 

One key risk is assets devaluing faster than predicted due to poor energy performance, as they are not attractive to tenants or purchasers who have Net Zero ambitions of their own.  We have already seen a “Brown Penalty” for under-performing buildings buildings with poor EPCs, due to the Minimum Energy Efficiency Standards impact valuations. 

A Net Zero pathway will put these risks into perspective, making it possible to prioritise and focus on the material risks which will have an impact. 

 

Get started

Download Net Zero: The Guide for Commercial Real Estate

 

Contact us

We have thirty years until the UK will be Net Zero. Intelligent organisations will recognise the need to prepare now to maintain their position in the market. Carbon Intelligence works with some of the largest real asset managers on long-term programmes to achieve their sustainability goals, contact us to find out more.