Real estate
Finding a way to net zero carbon in real estate
3 min read 26 Apr 22
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The need to transform the built environment for the better in the coming decades marks a key responsibility, and opportunity, for real estate investors. Embracing the transition to net zero carbon is imperative, framed by binding environmental targets and growing demand for green assets by occupiers. Net zero carbon buildings are at the heart of this – but there is currently little market standardisation around what this constitutes in practice.
The real estate facts
- The built environment accounts for approximately 40% of global carbon emissions1. A significant portion of this comes from the energy used to operate buildings.
- All new buildings must operate at net zero carbon from 2030 and both new and existing buildings must operate at net zero by 20502.
“Clarity is needed around what whole life net carbon truly means in order to achieve net zero carbon buildings.”
Outlining the parameters
In principal, net zero buildings (or net zero whole life buildings) neutralise greenhouse gas emissions across the duration of their lifespan, from development to ongoing use. This can be achieved by improving energy efficiency and generating, or use of, renewable energy; any remaining emissions that cannot be eliminated during construction or operation may be offset through climate-positive initiatives, so that a building’s net carbon footprint over time equates to zero. Buildings that produce more sustainable energy than the carbon emissions they create can reflect net positive, or net positive operational assets.
Overcoming challenges to achieve net zero
Achieving net zero carbon buildings poses myriad challenges. At a fundamental level, clarity is needed around what whole life net zero truly means. For example, whether a specific level of energy efficiency must be achieved for a building to be net zero operational carbon. Net zero certification schemes, along with active real estate players, will play an important role in pinpointing the required standards.
Owning real estate that reflects net zero carbon, for investors, can help to attract and retain tenants and ultimately drive investment value, with increasing polarisation between green buildings and assets that fall short.
Making a positive contribution
M&G is making headway towards net zero carbon, marked by green building certification across more than a third of our buildings worldwide3. Some assets are ahead of the curve, including the Atsugi Nairiku Logistics Centre in south west Tokyo which provides more sustainable energy than it requires.
The four-storey, multi-let fulfilment centre, developed by M&G in 2017, ticks all the necessary boxes for efficient goods distribution: large floor plates, ramp up access and good access to power. It also represents best in class sustainability standards, reflecting an A rating as part of Japan’s CASBEE green building certification.
Photo credit: M&G Real Estate
Energy saving measures such as LED lighting throughout the building help to minimise energy use and reduce costs for tenants. An expanse of photovoltaic solar roof panels, totalling 13,500 cubic metres, generate electricity equivalent to 1,950 megawatt hours (MWh) per year on average. This feeds into Japan’s electricity grid and provides enough energy to meet the annual needs of approximately 500 households in Japan.
1 Global Alliance for Buildings and Construction, 2018 Global Status Report.
2 World Green Building Council, Whole Life Carbon Vision, as at April 2022.
3 M&G Real Estate, as of February 2021.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast.