APG is hopeful that COP26 will help accelerate the decarbonisation of the built environment, but the world’s second-largest institutional real estate investor will continue to set the pace ahead of governments if the summit disappoints.
Derk Welling, senior responsible investment and governance manager at APG, said he hoped countries would this week “translate their commitments into legislation”; however, if the COP26 is not a success in this regard, institutional investors can take the initiative by reducing energy demand and carbon density of buildings.
“Legislation is for the laggards”, he told IPE Real Assets. “For investors who want to be a little bit more proactive, they still have the opportunity to set the standards.”
COP26 is the first summit to hold a day dedicated to cities, regions and the built environment (on Thursday), and Welling said real estate will play a “key role” in meeting the Paris objectives, with buildings accounting for roughly 40% of global energy demand.
APG is committed to using net-zero pathways through the Carbon Risk Real Estate Monitor (CRREM) tool, which is increasingly being adopted by institutional investors.
“It is science-based [and gives] a very clear direction for what should be the global energy demand or carbon intensity for a building to ensure that global warming will be limited to 1.5 degrees,” Welling said.
“So, even if COP26 would not become a success, we as APG will continue with our journey to set standards which go beyond legislative requirements.”
That said, Welling said a successful COP26 would be very helpful in ensuring a “smooth transition”.
He explained: “A smooth transition will become key for the built environment, because it will have an impact on all the occupants in buildings.
“The transition has to be met in a very short timeframe, and it won’t be efficient at a very high price, and may have a negative impact on specific stakeholder groups.
“And so to ensure we arrive at a smooth transition, action is required today and no time is left.”
He also called on the industry to increase adoption of CRREM for setting net-zero pathways. “We would call for everyone to stick to the CRREM pathways and stop competing with all kinds of different standards in real estate. It’s not helpful,” he said.
“The CRREM pathways set a clear direction per country, property type, and this will be the yardstick we will use going forward. And then probably legislation will follow.”
Vincent van Bijleveld, director of the recently established Global Real Estate Engagement Network (GREEN) and consultancy Finance Ideas, said he hoped to see building-code requirements for new and existing stock.
“Two thirds of countries with most of the growth in building stock still lack mandatory building codes,” he said. “More countries need to pay attention in their NDC [nationally determined contributions] to the built environment, and set or improve their building codes and set mandatory standards for the existing stock.”
Asked about building codes, Welling said: “Our standard we impose on our managers goes beyond legislative requirements – and therefore it’s helpful if the building codes will keep up with standards we have developed or promoted to ensure that the whole sector moves in the same direction.”
Sebastien Roussotte, CEO of real assets sustainability benchmark GRESB, said: “At GRESB, we are watching for a number of things, from country-level progress on GHG emissions compared to national pledges made five years ago, to what level of investment governments are making in renewable energy to help meet their stated ambitions.
“We are also looking to see if governments will address fossil-fuel subsidies and embodied emissions in building codes and what type of continued support they will provide to emerging technologies, like green steel and cement. We are hopeful that COP26 provides the needed momentum for investors to continue driving progress towards a more sustainable world.”
