{"id":39099,"date":"2023-10-27T15:19:13","date_gmt":"2023-10-27T19:19:13","guid":{"rendered":"https:\/\/test.greenmoney.com\/2025\/?p=39099"},"modified":"2023-10-30T13:43:54","modified_gmt":"2023-10-30T17:43:54","slug":"the-intersection-of-buildings-energy-and-emissions-reduction","status":"publish","type":"post","link":"https:\/\/test.greenmoney.com\/2025\/the-intersection-of-buildings-energy-and-emissions-reduction\/","title":{"rendered":"The Intersection of Buildings, Energy, and Emissions Reduction"},"content":{"rendered":"
>> Back to November 2023 Issue<\/a><\/div>\n
Above: Japan Real Estate Corporation<\/strong> \u2013 Otemachi Park Building received a 5-star DBJ Green Building Certification to acknowledge that it is best in class for environmental & social awareness.<\/em><\/span><\/i><\/h5>\n

Buildings use energy. Lots of energy. Buildings account for 30-50% of building energy use globally; in the US it\u2019s 39%, more than industry and transportation.\u00a0<\/span><\/em><\/h2>\n
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Figure 1 shows the US building sector energy consumption<\/strong>, courtesy of Sunproject. Source: World Economic Forum. (October 2022). Here\u2019s How We Can Heat, Ventilate, and Cool Buildings More Efficiently. WEF. https:\/\/www.weforum.org\/agenda\/2022\/10\/here-s-how-heat-ventilate-cool-buildings-energy-consumption\/<\/em><\/figcaption><\/figure>\n

Building owners have traditionally focused on improving energy efficiency first because energy bills hit the building\u2019s bottom line. The savings are tangible. In other words, energy use is financially material to both the building owners\u2019 operating expenses and their capital investments. As the cost of solar dropped from $378 MWh (megawatt per hour) in 2000 to $68 MWh in 2019, building owners started to explore onsite energy production. Their focus was still primarily on reducing energy costs. The economics of solar are feasible for some projects, but not all, in particular buildings without much roof space relative to their energy consumption.<\/span><\/p>\n

LEED (Leadership in Energy and Environmental Design) is a green building certification founded in 1998. It originally rewarded building performance and energy efficiency. Fast forward 25 years, there are now LEED Zero certifications for projects which address <\/span>net-zero carbon<\/b>, <\/span>energy<\/b>, <\/span>water<\/b> and <\/span>waste<\/b>. LEEDv4 incorporated added credits for <\/span>renewable energy<\/b> and the first time the certification incorporated <\/span>greenhouse gas emissions<\/b>. In 2023, LEEDv5 now asks building owners about their <\/span>carbon reduction plans<\/b>.<\/span><\/p>\n

In 2000, the CDP (formerly known as the Carbon Disclosure Project) started asking companies to report their greenhouse gas emissions also known as their carbon footprint. Today, over 18,700 companies globally voluntarily report corporate emissions to CDP. Once firms started reporting their emissions, they started looking for ways to reduce them. As more solar and other renewable energy was built to scale into the existing grid, building owners started to seek ways to procure that green energy.<\/span><\/p>\n

Since the Paris Agreement was signed in 2015, building owners, tenants, and investors have expanded their focus from pure cost reduction to emission reduction. The Agreement has 198 signatories to date and was ratified by both the US and China, together the largest contributors to pollution globally. The Agreement was the impetus for the public and private sector to put capital investment to work to limit global warming to 1.5 degrees Celsius above pre-industrial levels to mitigate the worst effects of climate change.<\/span>1<\/sup><\/p>\n

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\"Chart-2-Electricity<\/a>
Source: Roser, M. IRENA 2020. (December 2020). \u201cWhy did renewables become so cheap so fast?\u201d OurWorldinData.org. Licensed under CC-BY. https:\/\/ourworldindata.org\/cheap-renewables-growth Note: The relative price decline associated with each doubling of cumulative experience is the learning rate of a technology.<\/em><\/figcaption><\/figure>\n
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Decarbonization Strategies for REITs<\/h2>\n

As buildings are responsible for 40% of CO2 emissions as the by-product of their energy use and energy source, they are a critical component of the efforts to reduce climate change.<\/span>2<\/sup>And, roughly 80% of the buildings you see today will still be standing in 2050. Building owners need to take action on energy efficiency and renewable energy procurement to reduce their overall emissions.<\/span><\/p>\n

One way that REITs can translate their decarbonization aspirations into action is through science-based targets. Science-based targets are emissions reductions targets that companies are setting to reduce greenhouse gas emissions in their corporate operations and supply chain. There can be a lot of variance in the way companies set climate targets. To create more consistency, the Science-Based Targets Initiative (SBTi) reviews and validates public and private sector targets. SBTi validates targets using models based on the Intergovernmental Panel on Climate Change (IPCC) scenarios and the International Energy Agency. The SBTi is a collaboration between the CDP, the UN Global Compact, World Resources Institute and the World Wide Fund for Nature (WWF \u2013 formerly the World Wildlife Fund).<\/span>3<\/sup><\/p>\n

The guidance aims to establish a global pathway for buildings\u2019 in-use emissions and embodied emissions aligned with 1.5\u00b0C. A company first indicates their commitment SBTi to set either a near-term or long-term target. Near-term targets are 5 to 10 years. Long-term targets that are 10 years or more require the company to set a net-zero target.<\/span>4<\/sup><\/p>\n

Companies then have 24 months to develop their targets using the tools provided by SBTi and submits targets to the SBTi for validation. SBTi is the third-party that reviews a company’s proposed strategy to approve their action plan.<\/span><\/p>\n

What does the SBTi look like in practice?<\/strong> There are few common strategies that REITs pursue when they set emissions reduction targets, including:<\/span><\/p>\n

1)\u00a0 Conduct an energy audit of the property to assess building specific challenges and opportunities.\u00a0<\/span><\/p>\n

2)\u00a0 Make improvements to the energy efficiency of building systems such as lighting, insulation, heating and cooling.\u00a0<\/span><\/p>\n

3)\u00a0 Electrify buildings. One example is to replace gas powered boilers with heat pumps.<\/span><\/p>\n

4)\u00a0 Procure renewable energy either on-site and\/or off-site for a building\u2019s electricity needs.\u00a0<\/span><\/p>\n

5)\u00a0 Include design specifications to reduce energy-intensive materials in retrofits or new construction.<\/span><\/p>\n

Here are how three REITs from the office real estate sector across the globe are tackling their science-based targets:<\/h2>\n
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Gecina \u2013\u00a0<\/strong>France, Diversified Office |\u00a0<\/span> 96\/104 Neuilly uses a wood structure to reduce its emissions by 37% compared to a similar size concrete structure. Additionally, thermal solar panels produce 40% of the hot water needs of the tenants.<\/em><\/figcaption><\/figure>\n

In 2017, <\/span>Gecina<\/b>5,6<\/sup> validated its 1.5\u00b0C aligned Emissions and Reduction Targets with SBTi. The company is targeting 42% emissions reduction in the entire commercial portfolio by 2030. The company\u2019s strategy for reducing carbon across its portfolio includes:\u00a0<\/span><\/p>\n