Asset owners welcome new Asia property emissions monitor

A new de-carbonisation framework, recently launched in APAC, will be crucial in supporting investors to implement emission reduction targets.

In May, the Carbon Risk Real Estate Monitor (CRREM), released its first Chinese-language version of its guidelines for setting decarbonisation targets, How to Apply the CRREM Pathways for China & Hong Kong, via its website. 

Robert-Jan Foortse, APG’s head of European real estate at APG, which helped initiate CRREM, said wider adoption was a crucial element of helping investors steer the sector to a lower emission future.

“We initiated the CRREM and are big promoters of it. It is a simple and useful tool to capture when an asset will become stranded," he said.

“Spending on either new developments or redevelopments of existing buildings can extend the period before which an asset becomes stranded. In the short-term, yes, you give up some return, but you improve the ability to be a longer-term investor." 

CRREM, an EU-funded research initiative to provide the real estate industry with transparent, science-based decarbonisation pathways aligned with the Paris Climate Goals, has stepped up its work in the region this year.

In January it formed its first APAC partnership with AEC, a sustainability and environmental consulting firm based in Hong Kong.

EMISSIONS ROADMAPS RARE

While pledges to reduce carbon from investor portfolios in Asia are now common, detailed roadmaps to achieving these, including short-terms targets, remain rare.

Part of the problem is that investors lack quantifiable measuring tools to evaluate elements such as the cap-ex costs required for reducing operational emissions,

Sarita Gosrani, director of ESG and responsible investment for bfinance, a consultant with a large number of Asian asset owner clients, told AsianInvestor that wider uptake of CRREM, which includes such tools, would be a vital means to help Asian investors provide transparent road maps to emissions reductions targets.

“A lot of the time [in Asia] you get ambitions and commitments, but detailed quantification is lagging,” she said.

“The cap-ex and retrofitting topic has been so much more prominent in Europe,” she said emphasising the role of wider country specific questions, such as the energy mix, that are still unclear in parts of Asia. “[Asian] investors are starting to take on the lessons learned from Europe but so far it is at a slower pace.”

ASIA’S STRANDED ASSETS

The comments come on the back of recent research from APG and Asia’s leading real estate investors association that details high levels of emissions among the region’s buildings.

41% of Asian real estate assets are currently stranded, according to the 8-month pilot study of 80 buildings across Asia, in 2022, led by APG Asset Management Asia and the Asian Association for Investors in Non-Listed Real Estate Vehicles (ANREV) – meaning they have emissions that currently exceed those required to keep the sector on track to limit global warming to below 1.5 °C, the target set by the 2015 Paris Agreement.

The pilot study, which was published last year, but included projections for 2023, spanned Greater China, Japan, South Korea, Singapore and Australia.

It was supported by a number of APAC’s leading real estate investors, developers, and managers, including Queensland Investment Corporation (QIC), CBRE, ESR, and Macquarie.

40 of the buildings were located in China, where 2029 was the average year in which a building would become stranded, although the report authors emphasised that the data set was too small to make sector or countrywide judgements.

LACK OF BENCHMARKS

The lack of reliable industry energy or carbon benchmarks in APAC was identified as a challenge by the report authors, who observed that “many participants were keen to understand how an asset performed relative to the market as well as the pathway – in that sense CRREM is a valuable step in the right direction”.

Authors also highlighted the usefulness of the CRREM functionality to investors including tools providing asset and portfolio performance graphs and diagrams as well as retrofit cost analysis

The survey found that 50% of the 80 buildings surveyed would be stranded by 2027.

“APG and ANREV would highly recommend the use of third-party audits of energy data to ensure accuracy and reliability of the information provided - preferably through integration with green building rating systems,” the report authors noted.

The ability to collect accurate whole building data as well as influence the energy consumption of tenants was identified as a challenge by participants, but one that could be overcome by ‘green’ lease provisions, good tenant engagement and the installation of metering systems.