Several pension fund organizations in the Netherlands are backing a new initiative to help real estate investors and managers prepare their investment portfolios for climate change.
The research, carried out by Austria-based Institute for Real Estate Economics (IIÖ), will help investors assess, manage and mitigate climate risk and develop climate scenario–based strategies.
The initiative will be supported by GRESB, the ESG benchmark for real assets, and financially backed by APG, the largest pension delivery organization in the Netherlands, as well as PGGM, a cooperative Dutch pension fund service provider with €238 billion ($263 billion) in assets under management, and Norges Bank Investment Management (NBIM), which manages the Norwegian Government Pension Fund Global.
The initiative will develop 1.5- and 2-degree decarbonization pathways for real estate assets by applying global carbon budgets, extending to 2050. It will comprise annual estimates of building-related carbon emissions and energy performance, aligned with the Paris agreement’s goals to limit global warming to 2 degrees or less.
According to a statement issued by GRESB, the initiative builds on the Carbon Risk Real Estate Monitor (CRREM) project, which analyzed carbon risk in the European commercial real estate sector earlier this year. This initiative will expand the CRREM project to include major real estate markets outside the European Union and the residential sector. The decarbonization pathways developed for each market and sector can be used as a proxy measure for transition risk and help the real estate industry meet the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
“Property type–specific transition pathways will be an important addition for assessing the ESG performance of both listed and private real estate investment portfolios,” said Sander Paul van Tongeren, managing director of GRESB in a statement. “The transition pathways enable GRESB to not only assess ESG performance against industry peers, but also against the commitments made in the Paris Climate Agreement. For the wider real estate investment industry, the pathways will be an important tool to understand and mitigate the long-term systemic risk associated with the retrofit investments required to transition to a low carbon economy.”
The decarbonization pathways will be released for public consultation by February 2020.
