A survey of investors in real assets this week contained a worrying figure.
More than half (56 percent) of investors were “unsure or lacking confidence” in their ability to meet their long-term net-zero and sustainability commitments from real assets investments, according to a survey of 500 investors conducted by Aviva Investors.
Overlay this with the fact that only half of the investors surveyed had made such a commitment, and you are left with a bleak outlook for the decarbonization of the built environment, which accounts for 40 percent of global energy- and process-related emissions.
One should not mistake this uncertainty, however, for a lack of ambition or intention. It is instead an acknowledgement of what is within investors’ control and what is beyond it. “Investing is analytical and data-driven,” says Mahesh Roy, a veteran of Macquarie Group who is now a programme director at the IIGCC. “Investors won’t pretend to be confident where the data is lacking.”
As with other areas of sustainability, the lack of actual data is a major source of uncertainty. In real estate, investors such as lenders are often working with emissions estimates derived from a combination of emission factors, asset valuations and sector averages rather than actual figures. It’s very difficult to persuade borrowers to provide environmental data.
Oliver Light, who has spent the last decade advising on real estate and climate at consulting firm Carbon Intelligence, highlights the lack of communication between tenants, landlords and lenders. “How can you decarbonise if landlords are unable to get energy consumption information from tenants?” he asks.
Light points to a couple of country-specific examples where this is addressed. In France, he notes, landlords and tenants are mandated by the government to disclose annual consumption figures which better facilitates collaboration. Australia’s NABERS rating system produces real-world energy performance data. Governments around the world need to follow suit.
The all-too-familiar adage of “what gets measured gets managed” is particularly relevant to real estate. “Real estate needs to get a grip on what its emissions actually are, where they are, what is a sensible timeframe to decarbonise them,” says Chris Cummings, director, sustainable design at Savills Earth, as we reported this month.
Investors that lack certainty should not be interpreted as investors without hope of success. As data improves, expect that certainty to increase.