In a breaking special report by Bisnow Real estate is responsible for 40% of global greenhouse gas emissions, but almost half of the world's largest real estate investors, which own or control more than $1.2 trillion of property, have NO plans to reduce the carbon emissions from their portfolios which is according to real estate's 75 largest institutional investors, listed companies, and investment managers.
The United Nations has said that it is vital that the sector responsible for such a large proportion of emissions reduces its carbon output to limit global warming to 1.5 degrees Celsius or less by 2050 and avoid the worst impacts of climate change. Climate experts believe that the real estate sector needs strong decarbonization targets, and the biggest owners and managers in the sector are instrumental in leading that process.
A report from the United Nations' Intergovernmental Panel on Climate Change last month showed that the worst effects of climate change can be avoided, but only if action is taken right now. The report specifically cited real estate, as a major contributor to emissions, as one of the sectors where urgent action is most needed. The study also revealed that nine out of ten senior leaders in the UK real estate industry don't believe that the industry will hit its 2050 net-zero targets.
Even among the investors that have decarbonization targets, the vast majority don't measure or plan to reduce their emissions from the construction of buildings they develop or finance and don't track or have a plan to reduce emissions from their tenants. Additionally, fewer than half of the organizations reviewed confirmed that their decarbonization plan doesn't involve the use of carbon offsets or that they would only use offsets when the vast majority of emissions had been reduced.
The investigation also revealed that only a handful of the companies that have a target for reducing emissions are planning to hit net-zero faster than they are legally obliged to do so, raising questions about how fast companies are decarbonizing and whether regulators are doing enough to ensure that businesses meet their obligation to help combat the climate crisis.
Sustainability leaders described carbon offsets to Bisnow as a Band-Aid solution as society waits for green energy to reach a point where it can replace the fossil fuels that currently power a huge proportion of buildings globally. Bisnow's interactive data visualization tool analyzes which organizations do and do not have decarbonization targets, which of those targets omit big chunks of emissions, how fast companies are looking to decarbonize, and who is and isn't using offsets to hit targets.
The real estate sector's global emissions are getting worse, not better, according to the U.N. After dropping in 2020 as a result of the pandemic, emissions from buildings and construction reached an all-time high in 2021, 2% higher than in 2019. While buildings were becoming more energy-efficient, the growth in the overall size of the sector was more damaging than the improvements their owners made.
There are complexities and challenges in real estate's push to decarbonize. Real estate companies will need to focus on reducing emissions from construction and tenants, in addition to their own portfolios, and accelerate the decarbonization process to reach net-zero faster than they are legally obliged to do so. The industry needs to reduce its emissions by 90% by 2050, and this requires radical change.
Note: Funding sources are already starting put a lot of pressure on investors and sponsors to make the switch. Based on this report its easy to see how you can 1, be a part of the solution, and 2 get in early and have an advantage.
