A newly-launched initiative, created to help property investors develop climate change strategies, is being funded by Dutch pension funds APG and PGGM and Norges Bank Investment Management.
In an announcement, real assets sustainability benchmark GRESB said the initiative will “develop 1.5 and 2-degree decarbonisation pathways for real estate assets by applying global carbon budgets” as identified by the Intergovernmental Panel on Climate Change.
The decarbonisation pathways will be released for public consultation by February 2020.
GRESB said the Institute Real Estate Economics (IIÖ) will carry out the research to help real estate investors and managers “assess, manage and mitigate climate risk and to develop climate scenario-based strategies”.
The initiative builds on the Carbon Risk Real Estate Monitor (CRREM) project, funded by the European Commission, which analysed carbon risk in the European commercial real estate sector earlier this year, it said.
This initiative will expand the CRREM project to include major real estate markets outside the EU, and the residential sector.
Sven Bienert, managing director at IIÖ, said: “Decarbonisation pathways based on a transparent methodology that is aligned with the Paris Agreement offer a tool for understanding and managing transition risks, enabling investors to benchmark assets and derive significant risk indicators.
“The positive industry feedback in the CRREM project confirms this conviction and it seems to be the logical next step to extend the approach we developed for EU commercial real estate to further countries and the residential sector.”
Sander Paul van Tongeren, managing director of GRESB, said property type-specific transition pathways will be an important addition for assessing the environmental, social and governance (ESG) performance of both listed and private real estate investment portfolios.
“The transition pathways enable GRESB to not only assess ESG performance against industry peers, but also against the commitments made in the Paris Climate Agreement.
“For the wider real estate investment industry, the pathways will be an important tool to understand and mitigate the long-term systemic risk associated with the retrofit investments required to transition to a low carbon economy.”