The built environment is a major contributor to global carbon emissions, which means real estate investors can make a huge difference to climate change. Kristina Foster, Fund Manager, Real Estate Debt, at Schroders Capital, explains how.
Climate change and its potential costs to mankind made headlines again last week. What was new was the clarity of the message putting changes to the planet’s climate down to the human race.
The findings of the Intergovernmental Panel on Climate Change (IPCC) place climate change firmly on our doorstep, and has demanded a global response. Indeed, the opening line in the report’s assessment of the climate could scarcely be clearer.
“It is unequivocal that human influence has warmed the atmosphere, ocean and land.”
As real estate investors, we are uniquely empowered to make meaningful change. 42% of the UK’s carbon footprint and 38% of all CO2 emissions globally come from the built environment.
However, some investors believe that tackling carbon emissions from real estate will be costly to returns. We believe the opposite is true. Buildings with better efficiency ratings typically attract higher rents, lower running costs and are more appealing to tenants and can lead to overall better returns.
The global commitment
The term “net zero” is becoming a global rallying cry, frequently cited as a necessary step to successfully limit climate change and the devastation it is causing. A host of countries have announced major commitments to cut their carbon emissions, promising to reach net zero in the coming years.
Practically every country has joined the Paris Agreement on climate change, along with companies, cities and financial institutions with the objective of reducing emissions to net zero by mid-century.
Here in the UK, the government has committed to a 68% reduction in carbon emissions by the year 2030 and net zero by 2050. For real estate investors this is a very present consideration.
According to data from the Loan Markets Association, 75% of the current UK building stock is energy inefficient. If the UK government is to hit its target, a significant contribution from the real estate industry is clearly required.