Real estate commits to decarbonisation but lack of knowledge still major barrier

A lack of knowledge around methodology and utilising datasets is holding real estate back on its decarbonisation journey. That was the finding of the Urban Land Institute’s second annual C Change Survey. The survey found that while 93% of respondents said they were now incorporating transition risks into their real estate investment decisions, some 61% said a lack of knowledge regarding the right methodology and datasets presented a key barrier for them. The lack of an industry-wide adoption of carbon pricing was identified as the biggest barrier to implementation, with a lack of buy-in from key stakeholders, a lack of data and data consistency, and a lack of clarity on how financial performance and operational strategies can be influenced by carbon pricing mechanisms also identified as key barriers.   Aleksandra Smith-Kozlowska, director of research for Europe at ULI, said: “This year’s survey results show that the overall business case for decarbonisation is clear, and transition risks are increasingly being incorporated into investment decisions. However, there are some significant barriers to implementation that the industry needs to deal with, and education, improved knowledge of methodologies and credible data are clearly all essential.” Regulation related to minimum energy performance standards continued to be the transition risk that concerned organisations the most, with the cost of decarbonisation and embodied carbon becoming a growing issue. Some 94% said that transition risks had impacted their portfolio strategy in the past year, with just over half (51%) allocating capital expenditure to assets facing transition risks. Some 30% sought to divest themselves of “brown” assets. The ULI said this year’s survey also indicated that transition risks had continued to impact acquisitions, with 53% of respondents saying they had halted an acquisition following a transition risk assessment. This was down, however, from 61% last year. Despite a lack of adoption being highlighted as a barrier, the industry’s rising awareness of carbon pricing as an effective tool for decarbonisation was illustrated in the C Change survey, with an increase of 21% in the number of respondents reporting using a voluntary, internal carbon pricing mechanism. Some 71% of those companies said they were applying a shadow carbon price to evaluate the potential costs of carbon emissions, understand future risks and build the business case for decarbonisation. Just less than one-fifth (18%) said they were using a hybrid model (fee paying and shadow), with 12% using a purely fee-paying model. ULI Europe vice president Sophie Chick said: “The growing adoption of carbon pricing revealed in our annual survey suggests an industry moving in the right direction, but transitioning to fee-based models will be essential to making meaningful progress towards effective decarbonisation measures, and this will entail standardised approaches to pricing and improved data.”  Read the C Change survey in full here.