Only 10% of the listed real estate companies worldwide have set comprehensive targets to achieve net zero greenhouse gas emissions by 2050, according to research by Van Lanschot Kempen. This is despite the real estate sector being the largest contributor to global carbon emissions.
The study found that 60% of listed real estate companies are still researching their commitment to achieving net zero emissions by 2050. Amongst those companies which have taken action, 13% have publicly stated alignment to the Paris Agreement but give no detail on how this will be achieved. 17% have taken an incomplete approach whereby they have publicly stated an aim to achieve carbon neutrality but not for all material greenhouse gas emissions.
Only 10% of companies analysed have committed to becoming net zero by 2050 across all material greenhouse gas emissions and have their targets externally verified.
Van Lanschot Kempen’s Real Assets Team analysed listed real estate companies globally to assess how the sector is progressing towards the Paris Climate Change goals. The analysis represents 92% of the total listed real estate market capitalisation constituting almost $2 trn worth of real estate worldwide. The analysis measured the environmental pathway and involved in-depth analysis of the annual and sustainability reports 2021 of the companies focusing on the steps they need to take to achieve net zero emissions by 2050.
Lars Dijkstra, chief sustainability officer at Van Lanschot Kempen, said: ‘Climate disclosure mandates are irreversibly transforming the whole real estate sector. Regulation and government initiatives have set the ball rolling but investors now have a crucial role in helping the sector meet 2050 net zero targets. Our data and our dialogue with the sector show the real estate industry still has a long way to go. While three quarters of listed real estate companies have some sort of decarbonisation or climate change strategy in place, if you scratch the surface, you will find that many are very light on detail and should become more front-end loaded.’
To measure GHG emissions, the terms Scope 1, 2 and 3 are often used. Scope 1 are the direct emissions of a building (power, heating etc), Scope 2 are the indirect emissions (e.g. the generation of electricity) and Scope 3 are all other indirect emissions including embodied carbon. Scope 3 emissions are important within real estate as it involves the emissions produced to create, maintain and demolish it. While Scope 3 emissions are the dominant source of emission, only 15% of the companies are taking the complete approach of externally verifying all emissions across Scopes 1 to 3.
Egbert Nijmeijer, co-head real assets, added: ‘When assessing the investment case for a company, investors need to be able to evidence the board’s dedication to combatting the climate crisis. The introduction of non-financial compensation metrics is accelerating and it’s likely we will see the number of companies including ESG in their long-term incentive plans and bonus schemes accelerate over the coming years.’
He added: ‘A high number of our engagements with companies are focused on this issue and, in general, companies are receptive. However, successful engagement takes time and some companies are much further ahead on their path to net zero than others.’