Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position. Please refer to official GRESB documents for assessment related guidance.
This year, GRESB announced they will align their reporting standards to the World Green Building Council’s (WorldGBC) Net Zero Carbon Buildings Commitment and increase recognition for real estate portfolios that sign the Commitment. Signatories of the Commitment pledge to operate 100% of their portfolio buildings at net zero carbon by 2030.
Your real estate firm can achieve this Commitment if you follow these tips to set achievable and impactful net-zero targets:
Calculate your Carbon Load
First, you will need to conduct a comprehensive GHG inventory of your entire building portfolio to measure progress towards the WorldGBC Commitment’s net-zero goal. The Commitment tracks direct carbon or Scope 1 and 2 emissions of buildings, including the burning of natural gas, electricity use, company vehicle mileage, and any other industrial activities. You do not need to account for Scope 3 emissions in this inventory, such as life cycles of purchased goods, business travel, and investments.
Start Tackling the Low-Hanging Fruit
After calculating the carbon load of your building portfolio, you should first identify low-cost carbon saving opportunities that result in a solid return on investment. These opportunities typically include energy efficiency installations and retrofits of LED lighting, building automation, and high-efficient pumps, motors, and appliances—most of these carbon-cutting actions payback within two to three years.
You can consider commissioning services for new buildings or retro-commissioning services for existing buildings to help identify low-hanging fruit opportunities. Lawrence Berkeley National Laboratory found that the median retro-commissioning project reduces building energy use by 15 percent at a relatively low cost of $0.27 per ft2. Energy-intensive buildings such as hospitals and laboratories usually result in the most cost-effective commissioning and retro-commissioning projects.
Understand and Raise the Capital for Large Projects
Carbon cutting projects of on-site renewable energy generation, electric vehicle fleets, shell inspections, or insulation retrofits require much higher upfront investments compared to the low-hanging fruit. You will need to pursue these projects, however, to achieve net-zero buildings. Collaborate with your finance team to understand your current budget and when you will have enough capital to implement these large-scale projects.
You can solidify net-zero energy targets after identifying the most cost-effective renewable energy or energy efficiency projects in the long-term. To help achieve these targets, consider incorporating them into contracts or the valuation of your properties.
Offset the rest of your carbon load
In many cases, building energy use exceeds on-site renewable energy generation across your portfolio. Net-zero requires offsetting this excess energy use by purchasing green power through renewable energy certificates (RECs). You can purchase RECs, which represent one megawatt-hour of electricity generated by a renewable energy source, from your local utility or an outside renewable energy provider. Buying these RECs enables your firm to meet net-zero requirements while avoiding self-generation renewable energy costs of resource siting, capital financing, human resources, and technical expertise.
REC costs depend on the location of the facility, year generated, and supply and demand of the market traded. 29 US states, plus the District of Columbia and Puerto Rico, have committed to a Renewable Portfolio Standard. These states create a compliance market for RECs where electric companies must produce a certain percentage of electricity from renewable generation. California, for example, committed to 33% renewable by 2020. Prices of RECs in compliance markets vary by region and year. One REC in Ohio cost around $35 in 2011 but dropped to $8 in 2015. In New England, however, the price of one REC increased from $20 in 2011 to $45 in 2015.
The other 21 states that lack Renewable Portfolio Standards have voluntary REC markets. Renewable energy generators in these states usually sell RECs to voluntary buyers at lower prices than generators in compliance markets, because of lower demand.
Select a reasonable timeframe to achieve your net-zero targets
Unless you have unlimited resources and capital, achieving a net-zero building portfolio in less than five years is extremely difficult. The Net Zero Carbon Buildings Commitment of 100 percent net-zero portfolio by 2030 sets a more reasonable target. You can incrementally work and measure progress towards this target each year. Outside of the Commitment, GRESB net-zero goals of 2040 or 2050 satisfy the expectations of many investors because these investors do not anticipate immediate urgent action to tackle climate change over the next decade. These expectations could change based on actions taken by regulatory agencies. California, for example, may revisit its 100% renewable energy goal by 2045 following the many forest fires hitting the state this year. Keep tabs on your investor expectations and the regulatory environment of the market when defining the timeline for net-zero targets.
Allow for Target Flexibility
You can always incrementally fine-tune and reevaluate net-zero targets. GRESB and investors do not penalize companies for changing targets if well-reasoned and explained. Even “strict” net-zero targets such as the Net Zero Carbon Buildings Commitment by 2030 allows for flexibility. You can incrementally set and reconfigure many sub-targets regarding renewable energy generation, company vehicle fleet composition, or energy efficiency to achieve the overall Commitment target.
Can’t achieve the Commitment? Apply net-zero target setting strategies to other ESG practices
The net-zero planning process offers future ESG value creation opportunities to your company even if costs for achieving the Commitment by 2030 exceed your company’s current capacity. For other building resource uses such as waste and water, you can conduct an audit similar to a GHG inventory. Reducing waste usually benefits the bottom line the most through low-hanging fruit options of recycling and source reduction. Meanwhile, retrofitting buildings with low-flow or low-flush faucets, lavatories, and other water appliances will cost-effectively reduce the water footprint of your portfolio. The most impactful net-zero or zero waste goals and targets in GRESB and other reporting standards spend the time to identify the resource reduction strategies and devise a plan to implement the strategies cost-effectively.
This article is written by Goby