Fitch Ratings To Begin Scoring Building And Lodging Sectors On Climate Vulnerability

Factory smokestack

New insight into the commercial real estate sector's carbon emissions is set to be released soon.

Fitch Ratings will begin applying its Climate Vulnerability Scores to the building and lodging sectors, the credit ratings agency announced this week. Fitch said its first reports on the sectors will be released in May and June.

The scores are designed to allow market participants to see the climate vulnerability of major corporations and sectors in which they are invested. Fitch said the sector-level scores will lay the groundwork for it to later provide scores on individual entities.

Fitch also rolled out reports Monday on utilities, oil and gas, and chemicals. It began the Climate.VS reports, as they're called, last year.

The reports provide a sector's overall exposure to risks associated with climate change and efforts to transition. They also examine market-specific factors like policies or technological progress that contribute toward a sector's progress in reducing emissions and keeping the world within 1.8 to 2 degrees Celsius of warming.

The announcement comes on the heels of proposed regulations from the Securities and Exchange Commission that would require major building owners to disclose their indirect emissions, including from contractors, starting in 2024. Though the regulations would not bind owners and developers to any action, experts told Bisnow in March they would likely spur some change in practices.

Environmentally conscious building owners have been working to reduce their Scope 1 and 2 emissions, broadly defined as emissions produced on-site or through the off-site production of electricity and heat.

Some of that progress has come from advanced building management software that incorporates AI and other innovations. Systems like Nantum OS are getting increasing attention from major landlords and investors, including JPMorgan Chase.

But Scope 3 emissions, which include those produced by building materials like concrete and steel, have been a tougher challenge for the building industry. Tackling those emissions will be key to reaching the goals set forth by the UN's Intergovernmental Panel on Climate Change and others, to reach peak emissions by 2025 and net-zero by 2050.

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