Sustainability

How important for you is the environmental performance of a company, property or development you invest in?

How important do you consider environmentally sustainable buildings to be?

An overwhelming majority (98%) of global investors now view environmental performance as important, with 56% describing it as “very important”.

Virtually all investors (99%) also believe environmentally sustainable buildings are important – again, with over half (57%) describing them as “very important”. UK professionals are even more convinced, with 69% saying they are “very important”.

As Paul Clark of AustralianSuper says: “The one issue that will impact us all is climate change and in particular the net zero carbon agenda.”

For APG’s Robert-Jan Foortse too, “climate change is the single biggest issue. We are all well-versed in adapting to market cycles, but this is clearly a much bigger, existential challenge.”

But there are still practical problems to overcome on the road to net zero.

In this section we will look at some of the most topical sustainability issues for real estate:

• When will we reach net zero?
• How big is the challenge?
• The economy and net zero.
• Sustainable offices and EPC requirements.
• Technologies to achieve net zero.

When will we reach net zero?

As chart below shows, on average UK professionals believe it will take slightly longer for their company to reach net zero than they thought a year ago or two years ago – though the average delay is not as great as some commentators predicted. A majority (63%) now expect to achieve net zero by 2035.

Clearly there have been some setbacks. One in five (20%) now don’t believe they will reach net zero by 2040 – a level double that which we found in 2021. Most expect to do so later (although 9% say they won’t get there at all).

Nevertheless, the data shows only a limited shift in expectations over time and suggests the general trend of the path towards net zero is unlikely to change.

However, our respondents mostly think they are doing better than the industry average, as the chart below shows. Only 40% of them believe the industry as a whole is doing enough to achieve net zero by 2040. Nearly one-third (30%) say it is not even doing enough to hit net zero by 2050 – although this is an improvement on last year, when 38% said that 2050 was unrealistic.

When will the real estate industry reach net zero, given what it is currently doing?

Global portfolios

By what year do you expect the real estate assets in your portfolio to achieve net zero emissions?

Global investors expect their portfolios to achieve net zero in a wide range of time frames, with those based in North America and Europe lagging somewhat behind the rest of the world.

By what year do you expect your company to achieve net zero emissions?

We also asked global investors what percentage of their portfolio was already net zero. The answers we received present a more positive picture than some commentators might expect.

What percentage of your real estate assets are currently net zero?

In North America and APAC, the median percentage of net zero assets was 60%. Europe lags a little, at 50%, with the Middle East and Africa further behind at 40%. Our data from South American respondents shows a ‘thick tail’ of non-green portfolios, where 10% or less is net zero. This pulls down the regional median to 50%.

Overall, this data suggests that the dates mooted by investors for achieving net zero in their portfolios are realistic. It also suggests that most investors will likely be close to reaching net zero by the end of the decade – although many may find the final steps to be the hardest ones, as they seek to deal with their most recalcitrant and carbon-intensive assets.

Net zero and the economy

How far have economic headwinds hit the progress of real estate towards net zero? Our findings show that they have delayed the delivery of the net zero strategies of about three-quarters (76%) of global investors. But for most of the investors affected (78%), the delay was slight.

The net zero strategies of UK professionals have been significantly less affected by the economy. However, any delay is obviously bad news for the climate. It may also be bad news for any investors whose green credentials are important for their business.

How much has the current economic climate delayed the delivery of your net zero strategy?