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.
For billions across the globe, the record-breaking temperatures observed during the summer of 2023 have previewed the challenges of living in an ever-warming world. The downstream effects of rising temperatures observed this summer add to the already exhaustive evidentiary basis for robust climate action: accelerated depletion of polar ice caps, destructive wildfires across Canada and Greece, widespread ocean acidification, etc. Confronting the reality of anthropogenic climate change requires understanding how carbon emissions are distributed across sectors, abiding by a methodology to account for the source of these emissions, and establishing a “north star” for emission reduction that can obtain widespread buy-in while also being impactful enough to blunt the most deleterious effects of climate change.
The built environment represents approximately 40% of global greenhouse gas (GHG) emissions, including both operational emissions from routine building use and embodied carbon from (most commonly) construction, renovation, and demolition. Additional activities that make up embodied carbon can be understood from a Scope 3 perspective, as displayed in Figure 1 to the left (click the figure to enlarge it).
For building owners, measuring carbon emissions from operational use (made up of Scope 1 and 2) is significantly more straightforward than measuring embodied carbon. Furthermore, the volume and variety of decarbonization interventions for operational emissions can also be deployed more readily. However, due to the dissemination of responsibility that occurs in real estate through the various ownership configurations, emissions reductions across both categories will inherently require a proactive and collaborative approach. For Scope 1 and 2, this will involve exploring clean energy procurement options through the utility provider, as well as ongoing collaboration with tenants to gradually reduce energy use intensity. For Scope 3, this will involve abiding by a methodology for measuring emissions across the value chain, such as the Greenhouse Gas Protocol, and incentivizing suppliers to monitor and disclose the emissions details of products and services being delivered.
With real estate representing the most energy-intensive sector globally and the Greenhouse Gas Protocol framework providing us with a means to understand the sources of emissions within this sector, the question then becomes: Should industry leaders target their actions across their portfolios towards the goal of carbon neutrality or net zero?
While both carbon-neutral and net-zero approaches require active accounting of emissions sources across Scope 1 through 3, net zero requires a larger portion of organizational investment over a longer time span. This is because the focus of a carbon-neutral approach is on achieving a balance of carbon sequestered versus carbon emitted. Sequestration through a carbon-neutral approach usually involves natural or technologically enabled interventions such as tree planting or bioenergy carbon capture, respectively. Therefore, organizations can obtain carbon neutrality by possessing a clear understanding of their emissions and offsetting these emissions to ensure that they are balanced out. The core issue with this approach is that it does not go far enough to deter global temperature rise due to limitations in the accuracy of nature-based offsets and scalability of technologically enabled interventions.
By adopting a net-zero approach, organizations commit to reducing a variety of different forms of emissions to zero by (or ideally before) 2050, in alignment with the Paris Agreement. While carbon offsets can play a role in achieving net zero, significant internal organizational investment to electrify assets will be needed. The decarbonization of electricity grids in the coming decades will play a sizable role in combating climate change but must be aided by fully electrified buildings with efficient systems and appliances.
GRESB is still in the early stages of scoring action on net zero, providing a reasonable barrier to entry for funds that are earlier in their sustainability journey. Organizations of all sizes should feel confident to meet net-zero targets through the increased incentives for energy efficient building systems and appliances provided by the Inflation Reduction Act (IRA).
As a global sustainability consultancy, Longevity Partners has aided dozens of the world’s largest investment management firms to develop pathways to net zero for their portfolios. Clients that have established net-zero targets in the past five years are now finding themselves well positioned to obtain relevant GRESB credits.
This article was written by Alejandro Munoz-McKearney, Senior Sustainability and Energy Analyst at Longevity,
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