Decarbonising the real estate sector: entering the decade of implementation

Date:

Logos

Blog 1 of 3

The impacts of climate change are evident, with the real estate industry one of the largest contributors, accounting for 39% of global carbon emissions1 and 40% of the UK’s total carbon footprint2. The latest Intergovernmental Panel on Climate Change (IPCC) report (AR6) finds that unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming close to 1.5°C or even 2°C will not be possible.3 This urgency was echoed in the conversations surrounding COP26 in Glasgow last year and the imperative to act, at pace and with ambition, has never been clearer.

We are entering what has been named by some as ‘the decade of implementation’ – with legislation and industry-led initiatives transforming the real estate market and fundamental in driving sector decarbonisation. Most notably, the UK government has committed to a 78% reduction in carbon emissions by 20354, ahead of net zero carbon by 20505. We have seen the EU regulation on Sustainable Finance Disclosures (SFDR) come into effect in March 2021 with the purpose of enhancing transparency regarding ESG objectives, standardisation of ESG reporting and the integration of ESG into investment decisions. In 2015, The Financial Stability Board (FSB) established the Task Force on Climate-related Financial Disclosures (TCFD) to develop recommendations for more effective climate-related disclosures to promote informed investment decisions and enhance transparency on climate-related risk. The UK government has since announced that it will be adopting the recommendations of TCFD across the economy by 20256, enabling capital flows that favour the transition to a low carbon and resilient economy.  

It has never been more critical that we tackle the challenge head on, and as investment managers we have a duty to take practical steps to decarbonise and future proof the real estate portfolios under our care. It is evident that some of the biggest challenges lie ahead in decarbonising existing building stock, in the UK, 80% of  properties that will exist in 2050 have already been built7. In England, two thirds of non-domestic Energy Performance Certificates (EPCs) lodged in Q1 2020 were given a C or D rating,8  with only 15% achieving EPC B or higher. Tackling efficiency improvements with considerations for lifecycle carbon, installing on site renewables, gathering quality ESG data, FRI leases and limited control are only a few of the challenges that Mayfair Capital and the industry are navigating.  

As a result, building climate resilience and developing a clear pathway to net zero carbon is a primary focus for our parent company, Swiss Life Asset Managers and for Mayfair Capital. Swiss Life Asset Managers has committed to reduce the carbon intensity of its direct real estate portfolio by 20%, in line with the aims of the Paris Agreement9. The pathway analysis for the UK business is still underway, while we continue to progress our programme of asset and portfolio level net zero actions. By having a clear understanding of our pathway to net zero, we will be able to prioritise effectively, plan carefully, use all the decarbonisation levers available to us and make informed investment decisions. 

The ESG landscape, awareness and appetite has significantly shifted from a ‘nice to have’ consideration and is now a key component of holistic fund management that is also crucial to fund manager selection. It forms an integral part of almost all investment conversations at Mayfair Capital, as will be the case at any responsible real estate investment manager. As we navigate the decade of implementation, collaboration, innovation and knowledge sharing are key. We hope that our series of blogs and white paper encourage discourse within the industry, and initiates collaboration and collective solutions that support advancement of the sector towards net zero carbon.  


For the full Mayfair Capital Net Zero carbon white paper, please select this link.

Christi Vosloo - Head of ESG, UK

 

Image
Logos

Contact

James Lloyd

jlloyd@mayfaircapital.co.uk
+44 20 7291 6664

Sophie Carr

scarr@mayfaircapital.co.uk
+44 20 7291 6696

For all press enquiries, please contact:
KL Communications
Telephone: +44 203 995 6676

Further information

If you would like to find out more about Mayfair Capital please contact James Lloyd, Head of Business Development