Spotlight on Real Estate Managers: Assessing Their Performance in Climate Action
In a new study, ShareAction, a leading advocacy group, has benchmarked 16 of the world's largest real estate investment managers, controlling over $1.66 trillion in assets. The study evaluates these managers on 12 key criteria, including net-zero commitments, interim carbon targets, decarbonisation strategies, and transparency of disclosures.
The findings reveal a concerning trend. Only one firm, Danish real estate specialist Nrep, managed to meet all 12 standards. Nine out of 16 did not meet even half the standards. Several large firms, notably Blackstone, Starwood Capital Group, and Greystar, failed to meet any key climate standards and ranked last in the benchmark.
Many managers lack public commitments to achieve net-zero emissions by 2050, have weak or absent interim carbon reduction targets, and insufficient decarbonisation strategies. There is a pervasive lack of transparency, with several managers not disclosing emissions from their portfolios despite making climate commitments.
The study highlights the urgent need for improved climate commitments and transparency across leading real estate managers. While some real estate investment managers show leadership in target setting, decarbonisation, and disclosure, a significant majority lag behind, posing risks to investors and undermining the sector’s potential contribution to net-zero goals.
In the midst of efforts to combat climate change, the real estate sector, which accounts for approximately 40% of global carbon emissions, has historically been challenging to decarbonize. Building materials such as cement, steel, aluminium, and glass are carbon-intensive to produce in the real estate sector.
The sector, however, could potentially benefit from recent reductions in central bank interest rates in Europe and the UK. This reduction could lower the cost of borrowing for real estate projects, making them more appealing to investors.
On a positive note, the NZI Real Estate Summit is set to take place in London on 16 September. More information about the summit can be found here. Climate-focused investors with net zero pledges face a complex challenge when gauging the carbon footprint and transition readiness of their portfolios, but events like the NZI Real Estate Summit provide a platform for discussion and collaboration towards a more sustainable future.
[1] ShareAction (2021). Real Estate: Net Zero Carbon. [online] Available at: https://www.shareaction.org/real-estate-net-zero-carbon/ [3] ShareAction (2021). Real Estate: Net Zero Carbon. [online] Available at: https://www.shareaction.org/real-estate-net-zero-carbon/ [4] ShareAction (2021). Real Estate: Net Zero Carbon. [online] Available at: https://www.shareaction.org/real-estate-net-zero-carbon/
[1] The study conducted by ShareAction reveals that only one real estate firm, Nrep, meets all environmental-science standards related to net-zero commitments, carbon targets, decarbonisation strategies, and transparency.
[2] Despite the environmental-science challenges in the real estate sector, finance opportunities such as lower interest rates in Europe and the UK could make real estate projects more appealing to investors, potentially reducing carbon emissions.
