The use of digital tools can help to prioritize decarbonization efforts across a commercial real estate portfolio, while simultaneously ensuring alignment with energy performance and policy compliance for long-term sustainability goals.
Decarbonizing real estate portfolios is a complex challenge, especially for organizations committed to ambitious sustainability targets like the UN Net Zero Asset Owner Alliance (NZAOA).
When a global private real estate investment fund needed to identify quick and effective ways to reduce the carbon emissions from 25% of their estate by value by 2025 , while also planning for long-term changes that would enable them to achieve their goal of reducing carbon emissions across their full portfolio , our specialist portfolio decarbonization team provided a clear and actionable decarbonization roadmap ensuring their assets align with global sustainability benchmarks.
Overcoming operational challenges
Our client faced several challenges in decarbonizing their real estate portfolio, especially when it came to balancing ambitious sustainability targets with maintaining continuity of service for their tenants.
One of the main hurdles was identifying how to phase technical upgrades in alignment with their existing lifecycle maintenance plans and commercial leasing strategies. To overcome this, we worked closely with our client and their asset managers to ensure that decarbonization measures could be implemented without causing unnecessary vacancies or disruptions. This careful planning allowed them to not only maintain occupancy levels but also let their properties at premium rental rates, thanks to the improved operational carbon performance.
Another challenge was the variation in energy performance regulations across different countries, which required tailored, asset-specific solutions rather than a one-size-fits-all approach. Furthermore, the lack of comprehensive data on asset valuations and energy performance metrics—especially in the early stages—make it difficult to accurately quantify the financial impact of decarbonization measures. Often, the benefits of decarbonizing are distributed unevenly between landlords and tenants, with different financial and operational implications for each.
To address these challenges, we utilized advanced digital tools and parametric data analysis. By mapping energy performance, adhering to EU Taxonomy requirements, and integrating multi-level assessments, we were able to provide our client with a detailed breakdown of energy cost savings and carbon reduction benefits, assessing the impact on both parties to ensure a balanced approach that minimized disruption and maximized financial returns for our client.
Creating asset-specific decarbonization pathways
The EU’s introduction of the Energy Performance of Buildings Directive (EPBD) has established a standardized framework for energy efficiency across the region, but implementing decarbonization solutions is far from uniform.
Different countries face unique challenges due to varying climatic conditions, the baseline quality of their building assets, and historic approaches to heating and cooling. As a result, each asset requires tailored solutions with different levels of collaboration and investment.
Many decarbonization solutions, when viewed as standalone measures, may not appear to offer a strong financial payback. However, when considered holistically—factoring in increased rental income and enhanced asset value from improved energy performance—they make excellent investment proposals. The improved operational efficiency allows property owners to attract premium tenants and justify higher rents, while simultaneously boosting the overall value of the asset in the long term.
That’s why we’ve developed asset-specific decarbonization pathways that account for the unique geography, regulatory requirements, and market dynamics of each country. This localized approach enables us to craft solutions that not only meet environmental and energy performance standards but also align with the financial and commercial goals of the asset owner, enhancing both sustainability and profitability.
Moving from ambition to action
Decarbonizing real estate portfolios requires a refined approach that balances immediate carbon reduction measures with long-term sustainability goals. By taking a portfolio-wide approach to decarbonization, we’re able to identify assets requiring long-term engagement and initiate the process early, while simultaneously implementing short-term carbon reduction measures for other assets.
This comprehensive strategy, paired with a fully costed, phased decarbonization pathway, allowed our client to move from ambition to action. Engaging leadership at both the portfolio and asset levels ensured that every step of the transition was aligned with our client’s overall goals, enabling a smooth and effective shift toward a low-carbon future.