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Towards net zero emissions

Towards net-zero emissions real estate in Asia

The following article first appeared on GRESB Insights

by Song Lin.

Massive wildfires in California, the worst flooding in China since the beginning of this new millennium, and the second most active Atlantic hurricane season on record – this is a snapshot of what a 1 °C warmer world looks like. Such extreme weather events have become more unpredictable in intensity and frequency year after year, and they are expected to become more devastating as the world gets warmer if we do not take immediate actions to drastically reduce greenhouse gas (GHG) emissions.

IPCC’s Special Report on Global Warming of 1.5 °C (SR15) makes it clear that it’s not too late to prevent the worst impacts of climate change, but there is no time to waste. To have a fair chance of limiting global warming to 1.5 °C, we need to halve global by 2030, achieve net zero CO2 emission by 2050, and achieve net zero on all GHG emissions by mid-2060s.

In addition to rapid and deep reductions in gross CO2 emissions (i.e. decarbonisation), pathways outlined in the IPCC Special Report also require ramping up of CO2 removals from the atmosphere. Some GHG emissions are difficult or impossible to be eliminated. For example, despite the impact of the COVID-19 pandemic, aviation and shipping are still expected to be major contributors of CO2 emissions in near future. Meanwhile, non-CO2 GHG emissions, such as refrigerant gases from buildings and methane from agriculture, will continue to contribute to climate change. Removal of these non-CO2 gases is not technologically feasible at the moment. In order to achieve a net zero emissions of all GHGs, the rate of CO2 removals has to exceed the rate of CO2 emissions past 2050 to offset residual non-CO2 emissions.

From a real estate industry perspective, achieving a net zero global target requires drastic transformations in how we design, construct and operate buildings. Currently, buildings consume 32% of global energy supply. With relatively longer life cycles measured in decades, developing zero energy and zero emission new buildings is especially important. Studies show that in order to achieve 80-90% reduction in building energy consumption by 2050, new constructions need to be near-zero energy by 2020. Further investments are also needed to retrofit existing buildings to the same level of energy efficiency.

Since the publication of the Special Report, more than 20 countries have adopted net zero targets. Some of these targets are published in policy documents, while others have been written into laws. With Europe leading the charge towards net zero targets, three Asian countries have made it to the list. Bhutan, which has been carbon neutral since early 1990s, pledged to maintain net zero emissions. Perhaps more meaningful examples come from Singapore and Japan. With much larger economies than Bhutan, both countries aim to reach net zero GHG emissions in the second half of this century. Collectively, however, these net zero targets only cover about 10% of current global GHG emissions. Corporate commitments to net zero emissions to support and supplement governmental actions are critically important.

Initiatives launched by industry associations, such as World Green Building Council’s Net Zero Carbon Buildings Commitments, have garnered meaningful support among developers and real estate investors. Adoption in Asia, however, has been relatively slow, especially in the rapidly growing markets of China, India and Indonesia. To date, there is only one Asian developer signatory from the Philippines.

In Singapore, efforts towards decarbonising real estate industry are mostly led by the public sector. As the national regulator, the Building and Construction Authority (BCA) piloted Southeast Asia’s first Zero Energy Building (ZEB) in 2009, and subsequently introduced Super Low Energy (SLE) and Zero Energy categories for the national Green Mark building certification scheme. Since then, the number of net-zero energy buildings in Singapore have grown to include the newly constructed SDE4 at National University of Singapore and seven retrofitted buildings on Nanyang Technological University’s (NTU) campus. In October 2019, Singaporean utility provider SP Group launched the first net zero emission building in Southeast Asia. Powered entirely by a solar and hydrogen energy system, the zero emission building is disconnected from the national electricity grid and generates zero GHG emissions during its operations.

SDE4 building on NUS Kent Ridge campus

SDE4 building on NUS Kent Ridge campus. Photo: NUS Office of Estate Development https://uci.nus.edu.sg/oed/projects/capital-projects/sde-4/

So far, most net zero energy and carbon building programmes, including World Green Building Council’s Net Zero Carbon Buildings Commitments, focus on eliminating Scope 1 and 2 GHG emissions from the operations. In the construction industry, GHG emissions embodied in the construction materials are important emission sources as well, especially in fast growing Asia markets. The production of many construction materials, such as cement, steel and glass, have traditionally been a carbon intensive process, but some manufacturers are committed to change this.

 

Cement producer Heidelberg Cement and steel producer ThyssenKrupp have both committed to achieve net zero emission in their production by 2050, partially through carbon capture, utilisation and storage (CCUS). Beyond the production of building materials, world’s fifth largest construction company Skanska also committed to net zero emission target throughout its value chain by 2045. Other alternative solutions, such as use of bio-materials, have been piloted in Singapore. In 2017, NTU launched the first large-scale building in Southeast Asia constructed primarily with mass engineered timber.

The Wave at NTU is the first large-scale building in Southeast Asia constructed primarily with mass engineered timber

Image 3 The Wave at NTU is the first large-scale building in Southeast Asia constructed primarily with mass engineered timber. Photo: Wee Teck Hian/TODAY

As a natural extension of setting science-based emission reduction targets, the Science-Based Targets Initiative (SBTi) published a set of recommendations earlier this year to guide corporates in setting meaningful and effective net zero targets. Among other things, SBTi emphasises that corporate net zero targets should include all value chain emissions (Scope 1, 2 and 3). Reductions and eliminations of GHG emission sources within corporate value chain (abatements) should be prioritised over offset measures that either reduce emissions outside corporate value chain (compensation measures) or remove CO2 from atmosphere through bio-sequestration and carbon capture, utilisation and storage technologies (neutralisation measures). Corporate net zero targets should also include separate strategies and targets for abatements, compensations and neutralisations.

With pilot projects proving feasibility of new technologies and clearer guidance from SBTi on corporate net zero target setting, we can expect growing interest in net zero targets among real estate developers and investors. These efforts could be further supported by the growing market of green financing. In Singapore market, green financing in the real estate sector has grown more than seven-fold in the past 3 years. Combined with effective net zero targets, targeted green financing schemes could catalyse a transformation in Asia’s real estate and building markets.

 

Sources:

  1. IPCC, 2018: Summary for Policymakers. In: Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty [Masson-Delmotte, V., P. Zhai, H.-O. Pörtner, D. Roberts, J. Skea, P.R. Shukla, A. Pirani, W. Moufouma-Okia, C. Péan, R. Pidcock, S. Connors, J.B.R. Matthews, Y. Chen, X. Zhou, M.I. Gomis, E. Lonnoy, T. Maycock, M. Tignor, and T. Waterfield (eds.)]. In Press.
  2. Kuramochi, T., Höhne, N., Schaeffer, M., Cantzler, J., Hare, B., Deng, Y., Sterl, S., Hagemann, M., Rocha, M., Yanguas-Parra, P. A., Mir, G.-U.-R., Wong, L., El-Laboudy, T., Wouters, K., Deryng, D., & Blok, K. (2018). Ten key short-term sectoral benchmarks to limit warming to 1.5°C. Climate Policy, 18(3), 287–305. https://doi.org/10.1080/14693062.2017.1397495
  3. Pineda, A. C., Chang, A., & Faria, P. (n.d.). Foundations for Science-Based Net-Zero Target Setting in the Corporate Sector. Retrieved 18 September 2020, from https://sciencebasedtargets.org/net-zero/
paia gresb training partner

Paia the exclusive training partner for GRESB in Asia (ex-Japan)

Paia is pleased to announce that it is the exclusive training partner in Asia (ex-Japan) and a Premier Partner of GRESB, the global standard for sustainability assessment of real estate portfolios and infrastructure assets.

“We are excited about our partnership with Paia. We look forward to tap into Paia’s unparalleled experience in sustainability within the real estate sector in this region.”
– Ruben Langbroek, Head of Asia Pacific, GRESB

GRESB’s Real Estate Assessment is widely recognized as the leading benchmarking initiative in the real estate sector.

GRESB is an industry-driven organization committed to assessing the Environmental, Social and Governance (ESG) performance of real assets around the globe, including real estate portfolios (public, private and direct). On behalf of more than 60 institutional investors, GRESB has assessed more than 1,000 property companies and funds globally.

Participation in the GRESB Real Estate Assessment provides companies and fund managers with an opportunity to both measure sustainability performance and also benchmark their portfolio against industry peers. Thus, they are better able to optimise the position of their portfolio in the face of ever increasing market volatility. Participation is free.

“The GRESB Scorecard made available to all participants – for free – serves as a critical input for companies in assessing their strategy. Through the trainings, we want to help funds and companies in the region become more resilient, and find value-creating opportunities.”
– Carrie Johnson, Director, Paia Consulting

Currently GRESB offers two training programs:
Participant Training, where delegates learn to assess and enhance their current performance, to more efficiently prepare their GRESB response, and to improve the quality of their submission.
Investor & Analyst Training, which focuses on ESG integration in real estate investment decision-making and applying GRESB data and tools to assess and improve portfolio performance.

For more information on GRESB Training, click here

2015 GRESB Masterclass: Sustainability and Best Practices in ESG as a part of the AsiaPac Property Leaders Summit 2015 in Singapore

Paia recently attended the GRESB Masterclass held in Singapore. GRESB, an industry-driven organization committed to assessing the sustainability performance of real estate portfolios (public, private and direct) conducted a Masterclass. GRES, has a pivotal role in transforming the current landscape as more organisations develop a strong business case to incorporate sustainability in their operations. The focus of the discussions was on rapidly changing regulatory climate and expectations in the Asia Pacific property industry.

Green buildings and spaces are seen as a solution to the crowded, unsustainable cities of the previous decades. Despite higher costs, there is a strong business case for retrofitting buildings as they age leading to huge savings. There is a marked interest in renewable energy (solar voltaic panels) and green buildings by investors, owners, tenants, regulators and other stakeholders who are investing in real estate which is capable of sustaining itself in terms of energy and water usage. Environmental, social, and governance (ESG) issues are becoming central to the long-term future of businesses as stakeholders demand more transparency. This becomes imperative as new regulatory developments lead to more stringent laws for energy usage and disclosure. Increased demand for information and transparency on the sustainability performance of property companies and fund managers is also another cause for the drive towards greener spaces. This is also evident as we see a rapid development of standards, benchmarks and certification schemes globally.

Companies such as Keppel Reit Management, one of the largest real estate investment trusts (REITs) listed on the Singapore Exchange, Redwood Group Asia, a specialized logistics warehouse real estate investment firm with a geographic focus on Asia, offices in China and Japan and Capital Land Limited, one of Asia’s largest real estate companies – were present to talk about how sustainability is incorporated into their businesses and new operations. The sustainability leaders from these organisations provided valuable insights into sustainability practices across the global property industry. Capital Land was proud to share insights into their Hangzhou Raffles City project, which is the 1st LEED Gold project in Zejiang at the GRESB Masterclass.

Based on the questions from the audience, which included investors, fund managers and real estate companies, about developing a stronger business case for incorporating sustainability and for green buildings for investors – it seems that sustainability is here to stay at the forefront of business’s agendas.