The real estate industry, responsible for 37% of global carbon emissions, has a unique opportunity to proactively address climate change, according to two new publications from the Urban Land Institute’s (ULI) C Change programme.
By collectively developing a voluntary carbon pricing mechanism, the industry can significantly accelerate decarbonisation, foster innovation and potentially mitigate future regulatory risks, according to the reports.
The Accelerating Accountability: The Case for Carbon Pricing report underscores the business case and wider benefits of internal carbon pricing, and highlights best practice through case studies, to demonstrate the potential in taking early action to reduce emissions across the value chain and capitalise on emerging opportunities in the transition to a low-carbon economy.
Meanwhile, the Universal Principles for Carbon Pricing in the Real Estate Sector report has been published jointly by seven leading industry associations including the European Public Real Estate Association (EPRA), the Global Real Estate Engagement Network (GREEN), the Institutional Investors Group on Climate Change (IIGCC), the European Association for Investors in Non-Listed Real Estate Vehicles (INREV), the Royal Institution of Chartered Surveyors (RICS), ULI and the World Business Council for Sustainable Development (WBCSD).
The associations have come together to mobilise their expert members from across the value chain to co-create a comprehensive carbon pricing strategy for the real estate sector, which sets out principles that any built environment organisation can use to implement a voluntary carbon price.
Lisette van Doorn, CEO, ULI Europe, said: “It is time for real action. All initiatives so far, not only from the real estate industry have been insufficient to lower the fossil fuel demand and carbon emissions to help improve the state of the planet.
“We need to seriously level up our action as an industry, and carbon pricing plays an important role to make that happen. To prevent fragmentation on such an important topic, I am very pleased that we’ve been able to partner with six other leading real estate industry organisations and their members from across the value chain to co-create these important principles.”
Accelerating accountability explores how taking immediate action now to incorporate internal carbon pricing can provide the industry with better long-term planning and the opportunity to address stranding risk on buildings ahead of the 55% carbon emissions reduction required by 2030 in the Paris Agreement.
Implementing carbon pricing provides the industry with the opportunity to mobilise private sector capital by closely aligning climate goals with financial and strategic interests, where funds raised can drive innovation such as exploring new technical solutions or sustainable materials, ULI’s Climate C report says.
Carbon pricing can also drive organisational/cultural change, with company decision making viewed through a financial lens on emissions right across the whole organisation and not limited to specialist ESG teams.
Finally, implementing an internal carbon price ahead of potential regulation can also retain the capital allocated within the company/industry for initiatives that accelerate decarbonisation measures.
Tina Paillet, president of the RICS, said: “RICS is delighted to play a central role in developing these groundbreaking principles. According to the United Nations, the built environment produces around 40% of global carbon output. If the built environment is to meet the renewable energy goals set in the Paris Agreement by 2030, then we need to enlarge the use of renewable energy in our industry swiftly.
“These practical recommendations can accelerate the decarbonisation of the built environment by mobilising private capital and ensuring the consistent implementation of carbon pricing. RICS will assist the global built environment to implement these principles alongside our industry task force partners, EPRA, GREEN, IIGCC, INREV, ULI, and WBCSD.”
Mert Ogut, associate, built environment, WBCSD, said: “Any company within the built environment value chain looking to accelerate its sustainable transition should swiftly implement internal carbon pricing and the principles outlined here. Doing so will help extend ‘sustainability’ into departments where it hasn’t been a primary focus, serving as the most effective ‘change agent’ ever employed.”
Vincent van Bijleveld, co-CEO of GREEN, said: “Adopting these principles will enable companies committed to net-zero to make the appropriate investment decisions, align all their staff, and help them reach their ambitious goals.
“Using an internal carbon price is not just valuable for those pursuing net-zero; it’s essential risk management for any real estate investor, given the long-term nature of real estate investments and the likelihood of future regulatory changes on energy intensity and carbon emissions for both existing and new buildings.”
Elise van Herwaarden, ESG Manager, INREV, said: “Carbon pricing is complex due to diverse market conditions and varying operational models. INREV is thrilled to have collaborated with other associations to propose a unified approach that helps the real estate sector manage this challenge.”
Hugh Garnett, investor strategies senior programme manager, real assets, IIGCC, said, “The development of these principles is the culmination of vital collaboration across organisations and industry in the real estate sector. To effectively transition the real estate sector, the entire industry must be aligned and work together on best practice and be prepared for incoming regulatory developments.”
Hassan Sabir, finance & ESG director, EPRA, said: “EPRA is honoured to be part of this taskforce that brings together key real estate organisations to begin the collaborative process of standardising internal carbon pricing, acknowledging that achieving industry alignment, consistent sustainability practices, and greater sector influence requires joint efforts and shared commitment from key stakeholders.”
C Change partners include Catella, Hines, IPUT Real Estate, PIMCO, Redevco, Schroders Capital, and C Change supporters include Longevity Partners, Patrizia, Sonae Sierra and Urban Partners. The C Change programme is supported by 103 Ventures.
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