Property sector facing change with obstacles
The real estate sector is taking the path of decarbonisation, but implementation remains challenging. A recent survey by the Urban Land Institute (ULI) shows that climate-related risks are increasingly being factored into investment decisions. However, there is often a lack of knowledge, data and acceptance to overcome these challenges.
Growing awareness of climate risks is increasing the pressure on the property sector to find solutions. According to the latest C-Change survey, 93 per cent of the investors surveyed take climate-related risks into account in their decisions. This trend reflects the increasing commitment to not only recognising climate policy requirements, but actively integrating them into the corporate strategy.
Lack of data and knowledge
Despite positive developments, there are obstacles to the implementation of decarbonisation measures. According to the survey, 61 per cent of companies lack the in-depth knowledge and qualitative data needed to take the right steps to reduce CO2 emissions. Aleksandra Smith-Kozlowska from ULI emphasises the need for systematic knowledge transfer and better availability of high-quality data.
Transition risks on investment strategies
The survey shows that transition risks are increasingly influencing investors’ strategies. 94 per cent of the companies surveyed report that the risks influence their portfolio decisions. Although 51 per cent make investments in properties with these risks and 30 per cent feel compelled to divest themselves of affected properties. The cost of retrofitting and the risk of asset losses are becoming the focus of attention.
An instrument for risk mitigation
The survey highlights the growing interest in a CO2 tax as a strategic tool for decarbonisation. 21 per cent of companies have voluntarily introduced internal carbon pricing mechanisms in the last 12 months. Around 71 per cent use a shadow price per tonne of CO2 to incorporate potential emissions costs into business planning
Obstacles to the sustainable property industry
Despite the progress made, there are concerns about competitiveness that have so far slowed down the industry-wide introduction of the carbon tax. Critical factors include lack of data consistency, lack of stakeholder support and uncertainty about the impact on financial results and operational strategies.
As measures, the ULI calls for more intensive education and the introduction of clear guidelines. The ULI’s latest publications, including “Accelerating Accountability: The Case for Carbon Pricing” and “Universal Principles for Carbon Pricing in the Real Estate Sector”, are intended to help the industry establish carbon pricing as an integral part of the value chain and thus promote long-term sustainability goals.