It is a well-known statistic that the built environment contributes nearly 40% of the world’s greenhouse gases. What is far less known is how the real estate sector can carry out the change required to meet the net-zero carbon targets set by many countries.

The need for change is becoming painfully clear, said Katie Whipp, head of UK and Ireland at software company Deepki, which has recently launched its ESG data intelligence platform in the UK. The physical consequences of a changing climate are becoming increasingly pronounced.

“This has focused the spotlight on investors and the need to be transparent about how they’re addressing challenges,” she said. “Climate transition is creating new responsibilities. Investors need to revalue portfolios against a reordering of priorities. While this is daunting, it is bringing new opportunities and new sources of value.”

Research from Deepki shows that the real estate sector knows that something must be done. The firm’s survey found that 30% of respondents expect capital value and rental revenues to increase by 31% to 40% if ESG compliance is improved. A further 19% predict an increase of 41% to 50%. The returns from investing in ESG compliance are clearly worth it.

However, the research also highlighted barriers to improving ESG. Seventy-nine per cent of respondents said the main barrier is the complexity and scale of policies required, while 58% highlighted the lack of consistency or reporting across different real estate assets.

“There are many reasons asset owners are held back, including the lack of collaboration about ESG best practice,” Whipp said. “It’s also down to people’s mindset. We all have to step up when it comes to critical decision-making moments within the real estate life cycle and ESG. Owners and investors need to raise the bar and demand more from each other and themselves, which can be uncomfortable but will lead to progress and a sector we can be proud of.”

The first step the sector needs to take to kickstart decarbonisation is to be bold and drive innovation, Whipp said. To move toward net zero, new solutions are needed.

“This will require active participation,” she said. “Businesses can’t sit on the sidelines and wait for others to find the solution. Equally, businesses need to share and collaborate. We need to ensure the industry moves towards decarbonisation, not a pocket of it.”

The second step is to build a complete understanding of an asset or portfolio’s DNA. From here, an owner can identify a list of priorities and targets, such as how long the journey toward net-zero carbon might be. Targets need to be realistic and agreed on by stakeholders.

“Next, property owners need to identify, activate and manage the changes needed to deploy their decarbonisation plan,” Whipp said. “This includes allocating and managing financial resources, creating partnerships and ensuring good governance. Monitoring needs to lead to improvement – companies shouldn’t allow themselves to get comfortable doing the same thing.”

Decarbonisation is a mammoth task, but it can be broken down into manageable actions. Deepki’s research asked respondents to identify the areas where they believe they are making the least progress in terms of ESG performance. While 57% selected reducing water usage, 44% selected reducing energy consumption and 40% selected corporate governance. These findings indicate that the real estate sector knows which areas can be improved.

“Rather than trying to improve all areas at once, businesses must take the time to understand their starting point,” Whipp said. “This means that the correlation between investment and impact will be meaningful.”

To understand a starting point, collecting and understanding the right data is essential, Whipp said. Using a solution such as Deepki’s software will allow a company to create a comprehensive picture of how its portfolio performs in terms of ESG and establish an achievable pathway to decarbonisation.

Effective data collection and use will also promote industrywide collaboration, which is essential for the industry to reduce its collective carbon footprint, Whipp said. Property owners and investors need to share ESG lessons learnt — positive and negative — and move away from value creation for market advantage. This includes understanding the effectiveness of alternative building materials, reuse processes and on-site energy generation.

“Reinvention of the industry will be continuous as we adjust how we live, work and play in alignment with the physical and transitional risks we’re seeing,” Whipp said. “No matter the size of your real estate business, consider the challenge at hand with your response to ‘what kind of business do you want to be?’ This is also a journey of hearts and minds; you need everyone motivated and engaged.”

This article was produced in collaboration between Deepki and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.