Accelerating Positive Impact in the Real Estate Sector for a Net Zero Future

Companies around the world are stepping up on their efforts to decarbonise their business, and countries are setting national targets to reach net zero under the Paris Agreement. As APAC’s largest real asset manager powered by the New Economy and the third largest listed real estate investment manager globally, ESR Group Limited (“ESR” or “Group”) places top priority on its transition to become a net zero organisation.

Climate Emergency and the Era of Global Boiling

Recent climate events – extreme heatwaves and devastating floods – are occurring globally and this highlights the urgent need for concerted climate action. Instead of focusing on this urgency, some countries are shifting their focus to address energy security as a result of external headwinds such as
economic recession, supply chain disruptions, and geopolitical tensions. The disparity between the current climate crisis and inadequate actions has resulted in global greenhouse gas (“GHG”) emissions reaching an all-time high this year. This prompted the United Nations to warn that the era of global warming has ended, and the era of global boiling has arrived. To address the catastrophic impacts of climate change, ESR believes that immediate decarbonisation actions must be taken to transit to a net zero future.

Net Zero in the Real Estate Sector

The built environment is responsible for almost 40% of global energy related GHG emissions and the real estate sector could contribute to a positive impact. Achieving net zero depends on a myriad of factors such as the type of asset class, location, and condition of buildings, with a fit for purpose strategy. In developing a decarbonisation strategy, real estate owners and managers should consider their building portfolios, regulatory requirements, and the market availability of low-carbon technologies and solutions.

At a basic level, real estate companies should reduce their Scope 1 and 2 operational GHG emissions, which are normally associated with energy use from direct and indirect sources (e.g., on-site fuels and grid electricity). Specifically for developers and owners, GHG emissions across their value chain such as embodied carbon should also be considered. This includes tackling other forms of Scope 3 GHG emissions throughout the life cycle of a building (i.e., from design, construction, operation to demolition) and addressing tenants’ energy consumption within the portfolio.

After establishing the boundaries and sources of GHG emissions, companies should set realistic targets which are aligned to global standards such as SBTi , WorldGBC or RE100. However, companies must avoid setting underpromise or ambiguous net zero targets with misleading climate claims. Companies’ targets should be supported by robust performance data which are collected through the data management system to facilitate monitoring and reporting.

ESR’s Decarbonisation Approach

As part of its ESG 2030 Roadmap, ESR is on track to develop and announce its net zero commitment and strategy this year. This encompasses a carbon mitigation hierarchy approach which prioritises GHG emissions avoidance through low-carbon design and construction (i.e., minimise embodied carbon) and achieves energy efficiency through the asset enhancement initiatives and optimisation of operations (i.e., reduce operational carbon). These efforts will be complemented with the adoption of on-site renewable energy from sources such as solar or hydrogen to further reduce emissions. As of first half of 2023, close to 100 MW of rooftop solar power capacity has been installed across the Group’s global portfolio with approximately 39% of its assets being awarded with sustainability building certifications and ratings. Additional highlights include ESR leveraging on the rooftop space of its assets to provide renewable energy certificates for its customers. For more information, please refer to ESR’s ESG Report 2022.

Climate change has no boundaries and affects the current and future generations. The real estate sector could play a significant role in combating the climate change. However, fighting this uphill battle is a collective effort that requires everyone’s commitment, collaboration, and concerted actions. In accelerating a positive impact in the real estate sector, ESR will lead the way forward to a climate resilient future.