Tackling climate change through real estate
It is no exaggeration to say that climate change is the greatest challenge facing humanity in the 21st century.
In recent years, as momentum for addressing global climate change has grown, various initiatives and frameworks have been put in place in various fields, including finance, industry, and government.
Economically and practically, real estate is the front line and most important tactic in the fight against climate change.
This is because real estate is responsible for 30% of global greenhouse gas emissions from its daily activities, and when combined with travel and transportation (activity between properties) it accounts for over 50% of greenhouse gas emissions. Separately, the construction industry is responsible for around 10% of global greenhouse gas emissions.
According to a report published by the United Nations Environment Programme Finance Initiative (UNEP FI), the value of global real estate involving real estate management companies and institutional investors, who own real estate, is estimated to be approximately 50 trillion dollars (approximately 5000 trillion yen), and various global frameworks have been created to take measures against climate change through these parties.
On the other hand, real estate is the place and means by which people carry out their daily activities, such as living, working, playing, and traveling, and it has been suggested that the main cause of greenhouse gas emissions from real estate is the activities of the people and companies that use the real estate.
In recent years, there has been growing demand from three main groups (stakeholders) in the real estate sector for real estate's role in addressing climate change, such as achieving "carbon net zero (carbon neutral)."
1. Regulators: Global Leaders' Trends in 2020
- Prime Minister Suga, in his policy speech, pledges to "achieve net zero carbon dioxide emissions (carbon neutral) by 2050"
- Michael Bloomberg, in the race for the Democratic presidential nomination, said, "We will make carbon neutrality mandatory for new buildings by 2025." (2020)
- Mayor of London Sadiq Khan: "If re-elected, I will make London carbon neutral by 2030"
- EU to spend $1 trillion to achieve continental carbon neutrality by 2050
In terms of corporate responsibility, addressing climate change has become a global priority
2. Institutional Investors: Leaders of the Financial Markets
- BlackRock CEO Larry Fink: "Climate change is a major driver of change in financial market fundamentals and capital flows."
- UN Net Zero Asset Owners Alliance (a group of global pension funds and insurance companies) pledges to make $4 trillion worth of real estate carbon neutral by 2050
- A group led by large European pension funds/SWFs APG, PGGM, and Norges Bank launched an initiative to create a benchmark for real estate investment portfolios in terms of climate change risk (the same group of investors created GRESB, a benchmark for real estate investment portfolios in terms of ESG, in 2009).
For real estate managers, greenhouse gas emissions will be a deciding factor in raising capital and borrowing from institutional investors.
3. Real estate users/tenants: Requests from companies
- Microsoft to be carbon negative by 2030 (including owned and leased buildings)
- Alphabet (Google's parent company) actively working towards carbon neutrality
Real estate users and tenants are increasingly demanding lower greenhouse gas emissions and carbon neutral policies for the properties they occupy.
(Source: FifthWall.com)
