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Decarbonisation delays in the real estate sector could cost businesses $2.5tr

Published February 26, 2021

Decarbonisation delays in the real estate sector could cost businesses $2.5tr

The real estate sector could face costs up to $2,500 billion in the next ten years on delayed action on decarbonisation, according to an investor briefing published by ShareAction.

In order to align to the Paris Agreement, all new buildings must already be built as nearly-zero energy buildings (NZEB) by 2030, as well as have net zero operational carbon and a 40% percent reduction in embodied carbon. By 2050, existing buildings must be retrofitted at a rate of 5% annually and have net zero operational carbon, and both existing and new buildings must have net zero embodied carbon.

Delays in achieving these targets could lead to additional costs of $2,500 billion, the briefing estimates.

The EU could potentially introduce regulations to include buildings’ emissions in the EU Emission Trading System (EU ETS), as well as directives for energy performance and sustainable construction materials. The UK’s Future Homes Standard also aims to reduce building sector emissions. Failure to make the necessary investment today in anticipation of such regulation being introduced, could lead to investments becoming loss-making in the future.

The briefing provides guidance for overcoming technical challenges from an investor perspective, suggesting that companies be required to set net zero targets for 2050; provide plausible climate strategies; use life cycle assessments and product declarations (EPD) as foundations for decision making; pursue property labelling in line with best practice standards, such as the EU’s Level(s) guidelines; and disclose their Scope 1, 2 and 3 emissions, alongside TCFD reporting.