The real estate industry, which contributes 37 percent of all global carbon emissions, has an early-stage opportunity to work collectively to develop and implement a voluntary, industry wide carbon pricing mechanism which can significantly accelerate the pace of decarbonisation across the value chain, drive innovation at scale, and potentially mitigate regulatory consequences in the medium term. This is according to two new publications from the Urban Land Institute’s (ULI) C Change programme, launched this week at the C Change Summit in Barcelona.

Accelerating Accountability: The Case for Carbon Pricing underscores the business case and wider benefits of internal carbon pricing, and highlights best practice through case studies, to demonstrate the potential in taking early action to reduce emissions across the value chain and capitalise on emerging opportunities in the transition to a low-carbon economy.

Meanwhile, Universal Principles for Carbon Pricing in the Real Estate Sector has been published jointly by seven leading industry associations including EPRA, GREEN, IIGCC, INREV, RICS, ULI and WBCSD who have come together to mobilise their expert members from across the value chain to co-create a comprehensive carbon pricing strategy for the real estate sector, which sets out principles that any built environment organisation can use to implement a voluntary carbon price.

Lisette van Doorn, CEO, ULI Europe, comments, “It is time for real action. All initiatives so far, not only from the real estate industry have been insufficient to lower the fossil fuel demand and carbon emissions to help improve the state of the planet, as demonstrated by the 2024 state of the climate report: Perilous times on planet Earth published last week. We need to seriously level up our action as an industry, and carbon pricing plays an important role to make that happen. To prevent fragmentation on such an important topic, I am very pleased that we’ve been able to partner with six other leading real estate industry organisations and their members from across the value chain to co-create these important principles.”

Accelerating Accountability explores how taking immediate action now to incorporate internal carbon pricing can provide the industry with better long-term planning and the opportunity to address stranding risk on buildings ahead of the 55 percent carbon emissions reduction required by 2030 in the Paris Agreement. Defining a carbon pricing strategy from within the industry also provides a strong opportunity to take proactive steps ahead of the risk of imposed regulation, such as an emissions trading system (ETS) which is being considered for buildings by the EU and could be operational by 2027.

Implementing carbon pricing provides the industry with the opportunity to mobilise private sector capital by closely aligning climate goals with financial and strategic interests, where funds raised can drive innovation such as exploring new technical solutions or sustainable materials. Carbon pricing can also drive organisational/cultural change, with company decision making viewed through a financial lens on emissions right across the whole organisation and not limited to specialist ESG teams. Finally, implementing an internal carbon price ahead of potential regulation can also retain the capital allocated within the company/industry for initiatives that accelerate decarbonisation measures.  Organisations may mitigate future compliance costs and penalties while addressing their environmental obligations and demonstrate to stakeholders that companies hold themselves accountable for their emissions considering a rise in activism and actions brought against organisations to reduce climate change.

The full report explores how internal carbon pricing works as an accepted tool to tackle emissions and examines the barriers to large scale adoption such as a lack of consensus or price consistency, and the need for the built environment to incorporate embodied carbon, which represents almost one third of emissions from the built environment, into pricing mechanisms. It also includes several case studies demonstrating how some companies have dealt with many of these challenges.

To facilitate the implementation and adoption of a voluntary carbon price, the companion report Universal Principles for Carbon Pricing in the Real Estate Sector which has been published jointly by the seven professional membership associations, provides seven high-level principles encompassing consistent definitions and guidance to measure carbon emissions across the industry, and is based on input from subject matter experts from across the real estate value chain, some of who have already implemented carbon pricing in their own organisations.

The defining characteristics of the principles are that they are voluntary, and are not intended to be a new sustainability related standard/certification or replace external carbon taxes or policies but rather build on or link to existing initiatives; are high-level and indicative, where it is the decision of each individual organisation to determine how each principle applies (or does not apply) based on their business model; they are a first step exploring internal carbon pricing, with the opportunity for more detailed next steps/work based on the initial recommendations; and are provided for educational purposes in order to support greater industry adoption and accelerate decarbonisation efforts.

The seven principles include:

1. Take a whole life carbon approach: measuring both operational and embodied carbon emissions across the full life cycle of the building.
2. Take responsibility for all decisions to spend carbon: covering the responsibilities of individual stakeholder groups who enable either embodied or operational carbon emissions.
3. Where there is no responsibility for a decision to spend carbon, commit to influence and educating stakeholders who do: the influencing role of the remaining stakeholders across the value chain, such as architects, engineers and construction companies, and how shadow carbon pricing can inform decision making.
4. Senior leaders have a key role, all key stakeholders should be engaged: how carbon pricing should be considered a strategic priority by senior leadership from the outset to facilitate its successful adoption.
5. Use a uniform internal price: a uniform monetary amount should be charged across all emissions, both operational and embodied, to reduce complexity and increase efficient implementation.
6. Act now with available data and improve its accuracy over time: commencing the process of setting an internal carbon by using available emissions data on assets/operations.
7. Commit to transparency: the crucial role of disclosing regular and consistent carbon pricing information in relation to the wider industry.

Tina Paillet FRICS, President, RICS, said: “RICS is delighted to play a central role in developing these groundbreaking principles. According to the United Nations, the built environment produces around 40% of global carbon output. If the built environment is to meet the renewable energy goals set in the Paris Agreement by 2030, then we need to enlarge the use of renewable energy in our industry swiftly. These practical recommendations can accelerate the decarbonisation of the built environment by mobilising private capital and ensuring the consistent implementation of carbon pricing. RICS will assist the global built environment to implement these principles alongside our industry task force partners, EPRA, GREEN, IIGCC, INREV, ULI, and WBCSD.”

Mert Ogut, Associate, Built Environment, WBCSD, comments, “Any company within the built environment value chain looking to accelerate its sustainable transition should swiftly implement internal carbon pricing and the principles outlined here. Doing so will help extend ‘sustainability’ into departments where it hasn’t been a primary focus, serving as the most effective ‘change agent’ ever employed.”

Vincent van Bijleveld, Co-CEO of GREEN, comments: “Adopting these principles will enable companies committed to net-zero to make the appropriate investment decisions, align all their staff, and help them reach their ambitious goals. Using an internal carbon price is not just valuable for those pursuing net-zero; it’s essential risk management for any real estate investor, given the long-term nature of real estate investments and the likelihood of future regulatory changes on energy intensity and carbon emissions for both existing and new buildings.”

Elise van Herwaarden​​​​, ESG Manager, INREV, said: “Carbon pricing is complex due to diverse market conditions and varying operational models. INREV is thrilled to have collaborated with other associations to propose a unified approach that helps the real estate sector manage this challenge.”

Hugh Garnett, Investor Strategies Senior Programme Manager – Real Assets, IIGCC, said, “The development of these principles is the culmination of vital collaboration across organisations and industry in the real estate sector. To effectively transition the real estate sector, the entire industry must be aligned and work together on best practice and be prepared for incoming regulatory developments.”

Hassan Sabir, Finance & ESG Director, EPRA, comments: “EPRA is honoured to be part of this taskforce that brings together key real estate organisations to begin the collaborative process of standardising internal carbon pricing, acknowledging that achieving industry alignment, consistent sustainability practices, and greater sector influence requires joint efforts and shared commitment from key stakeholders.”

Universal Principles for Carbon Pricing in the Real Estate Sector has been endorsed.by C40 Cities, CRREM and GRESB.

Contact [email protected] if you’re interested in supporting the development of C Change or would like to find out more.

Accelerating Accountability: The Case for Carbon Pricing and Universal Principles for Carbon Pricing in the Real Estate Sector are both available to download from https://europe.uli.org/research/c-change/.

C Change partners include Catella, Hines, IPUT Real Estate, PIMCO, Redevco, Schroders Capital, and C Change supporters include Longevity Partners, Patrizia, Sonae Sierra and Urban Partners. The C Change programme is supported by 103 Ventures.

The C Change Summit 2024 takes place 17 October at the World Trade Center, Barcelona, Spain.

Ends

For further information, contact [email protected]

Notes to Editors:

C Change is a ULI-led programme to mobilise the European real estate industry to decarbonise. We’re a movement empowering everyone to work together for a sustainable future. We connect the brightest minds from across the value chain. We challenge barriers, share expertise, and champion innovation to move swiftly to accelerate solutions that will transform our industry and protect our planet. C Change means real change.  C Change was formed in late 2021 by a group of leading real estate players that was united in its aim to focus on collaboration to ensure companies large and small have access to practical solutions and education on decarbonisation.

The Urban Land Institute: The Urban Land Institute is a non-profit education and research institute supported by its members. Its mission is to shape the future of the built environment for transformative impact in communities worldwide. Established in 1936, the institute has over 48,000 members worldwide representing all aspects of land use and development disciplines. In Europe ULI has almost 5,500 members across 15 National Council country networks.

EPRA: The European Public Real Estate Association is the voice of the publicly traded European real estate sector. Founded in 1999, EPRA is a not-for-profit association registered in Belgium. With more than 290 members, covering the whole spectrum of the listed real estate industry (companies, investors and their stakeholders), EPRA represents over EUR 840 billion of real estate assets and 95% of the market capitalisation of the FTSE EPRA Nareit Europe Index. EPRA’s mission is to promote, develop and represent the European public real estate sector.

GREEN: GREEN (Global Real Estate Engagement Network) is a non-profit engagement network of global institutional shareholders in the listed and non-listed real estate sector like ABP/APG, CenterSquare, Schroders, MN, Wellington, Bouwinvest, Neuberger Berman, Robeco and many more. These shareholders, both asset owners and indirect real estate managers, aim to steer real estate companies to improve their sustainability performance and reduce their exposure to financial and non-financial climate risks. GREEN currently represents assets under management of approximately € 3 trillion.

INREV: INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for institutional investors and other participants in the growing non-listed real estate vehicles sector.
INREV members deliver €385 billion of stimulus to the real economy of Europe.

INREV has 496 members which include 129 of the largest institutional investors as well as 40 of the 50 largest real estate investment managers, plus banks and advisors across Europe and elsewhere.

The non-profit association is focused on increasing the transparency and accessibility of non-listed vehicles, promoting professionalism and best practice, and sharing knowledge. It is based in Amsterdam, the Netherlands.

IIGCC: IIGCC brings the investment community together to work towards a net zero and climate resilient future. We create change the world needs by unlocking investor action on climate change.

Our work supports investors in generating returns for clients and beneficiaries, which in turn provides financial wellbeing for future generations. We work with our members to address climate risk and ensure they are well positioned to make the most of investment opportunities offered by climate mitigation and adaptation efforts, ensuring that their investments contribute towards a better world for us all to live in.

Our team supports investors to create practical solutions that can make a real difference in tackling climate change – providing guidance and support on investment practices, policies and corporate behaviours that have real impact and deliver change that the world needs. For more information visit www.iigcc.org and @iigccnews

RICS: We are the Royal Institution of Chartered Surveyors (RICS), a leading professional body working in the public interest to advance knowledge, uphold standards, and inspire current and future professionals. Our members help to create and protect built and natural environments that are sustainable, resilient and inclusive for all.

WBCSD: The World Business Council for Sustainable Development (WBCSD) is a global community of over 225 of the world’s leading businesses driving systems transformation for a better world in which 9+ billion people can live well, within planetary boundaries, by mid-century. Together, we transform the systems we work in to limit the impact of the climate crisis, restore nature and tackle inequality.

We accelerate value chain transformation across key sectors and reshape the financial system to reward sustainable leadership and action through a lower cost of capital. Through the exchange of best practices, improving performance, accessing education, forming partnerships, and shaping the policy agenda, we drive progress in businesses and sharpen the accountability of their performance.