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Regulation Is The Only Thing Pushing Real Estate To Tackle Its Enormous Carbon Footprint

An investigation into the carbon reduction policies of the world's 75 largest real estate owners and managers shows that if regulators push the sector to cut emissions faster, it will comply.

But until a harder push comes along, CRE will do only what it is obligated to by law.

Bisnow data shows that where clear regulation is enforced, real estate owners are taking action to reduce their greenhouse gas emissions. Yet more stringent regulations would compel them to cut emissions more deeply and quickly, according to several investors interviewed for this investigation.

“The only way to get everyone to cut 10 years off their target is regulation,” Orchard Street Investment Management Head of Sustainability Lora Brill said. “You have to make holding high-carbon properties unviable or reward holding low-carbon properties.”

Of the 75 largest institutional investors, investment managers and listed companies in the real estate sector, almost half have no decarbonization target for their real estate portfolios. Meanwhile, the majority of investors with concrete emission reduction goals omit roughly 90% of the greenhouse gases they emit, Bisnow’s investigation found.

The final installment of this series focuses on how quickly those 75 institutional investors, REITs and investment managers are looking to decarbonize compared to targets set by regulators. It also analyzes the degree to which carbon offsets are being used to hit net-zero targets — a controversial area given the ongoing debate over whether carbon offsets actually work.

A report last month from the U.N.’s Intergovernmental Panel on Climate Change highlighted that government and city regulations need to become stricter and better aligned with climate targets if global warming is to be reduced and its worst impacts on humanity avoided.

Bisnow’s investigation found a strong correlation between the net-zero carbon target of an organization and the target of the country in which that organization is headquartered. Of the 47 organizations that had a decarbonization target, 20% were cutting emissions faster than needed to hit government net-zero targets while two-thirds were exactly in line with targets.

For many in the industry, that is evidence that although real estate has made great strides in tackling the arduous task of reducing carbon emissions, regulation is ultimately the force driving change.

“There is a lack of clarity on regulation and standards at the moment, which makes it difficult for investors to determine policies,” LGIM Real Assets Head of ESG Shuen Chan said. “A clear definition of what net-zero means would set a global standard and help avoid potential greenwashing.”

Bisnow’s interactive data visualization tool examines individual company targets and how they compare to national targets. Organizations can be sorted by when they plan to decarbonize and other metrics. Each dot can also be clicked to find information on individual investors and managers.

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