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Decarbonization: Meeting the retrofitting challenge

Global Real Estate Perspective August 2022

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The drive to decarbonize buildings continues to gather pace, with new corporate net zero carbon (NZC) commitments and government regulations coming in thick and fast:
 

  • The past quarter saw the greatest number of new signatories to the Science Based Targets initiative (SBTi) since its inception. There are now 3,284 companies publicly committed to taking action (1,502 with science-based targets and 1,194 with net zero commitments). This will put further pressure on the real estate industry to deliver NZC buildings.

  • Given that more than 60% of carbon emissions within cities typically comes from buildings, a growing number of city governments recognize that it’s time for action. From New York to Paris and Singapore, many cities are introducing a raft of targets and actions covering new and existing commercial and residential real estate.

This article is part of JLL’s Global Real Estate Perspective

The question around how to fund the energy transition is a big one. According to the IPCC report, the financial flows needed to fund the energy transition are three to six times lower than levels needed by 2030 to limit warming to 1.5 or 2 degrees Celsius. Importantly, government policy and investment will need to clearly signal support for the energy transition. The growth in United Nations Principle Responsible Investor (UNPRI) signatories – now over 3,800 - is an encouraging sign as it represents US$120 trillion in assets under management.

 

However, in our report released in June – Decarbonizing Cities and Real Estate – JLL argues that governments will need to push harder and with real urgency. Additionally, the report recommends that building owners, investors, occupiers and lenders should not wait for regulations to kick in before taking action. Thinking beyond regulations can create a competitive advantage while mitigating the risk of asset stranding. Mandatory regulations are expected to be ramped up during the second half of the decade (2025-2030) as the climate emergency intensifies.