With sustainability becoming relevant for all industries, there has been climate pressure over real estate investors and property owners diversifying their portfolios to aim for a net-zero carbon real estate index. yment benefits to 3.5 million New Yorkers, representing over 20 years’ worth of benefits paid in just six months.
Many of today’s companies, modern institutions, and organizations, from the government to corporates and non-profit organizations with sustainability-focused strategies, ultimately collaborate with those contributing to the most negligible CO2 emissions. With the real estate and construction sector responsible for around 40 percent of the final energy use, the societal shift towards “net-zero investment” for a better and lower carbon economy only makes sense.
WHAT IS NET-ZERO?
In simplest terms, net-zero refers to the balance between the amount of greenhouse gases being released to the amount removed from the environment. When the net amount cancels out to nil, we reach net-zero emissions. In the real estate sense, net-zero refers to a building that produces as much energy as it consumes. A net-zero home will produce as much electricity on-site as it consumes yearly to make you understand better.
With the current generation seeking the principles of environmentalism and sustainability that enrich our lives and needs while simultaneously celebrating local flora and fauna, real estate faces a new challenge.
The challenge? To fade out the impact of the sprawling mass of grey buildings, multiple smokestacks, and snaking pipes and replace it with its innovative net-zero forms.
Now why it’s a challenge?
This societal transition majorly poses both transition risks and opportunities. The risk includes the transition cost associated with reducing carbon intensity or the risk of losing asset values of not attaining the same. Opportunities include all the benefits that may accrue to owners of assets that may experience an increase in demand and revenue, thus, leading to enhanced value.
This can be further explained in the following short points:
- Internal costs and installations associated with alleviating carbon emissions
- Letting go of inefficient properties powered by polluting energy sources
- Demand for cleaner portfolios
- Increasing pressure to address environmental concerns
With the industry regulatory landscape turning to sustainable practices with keeping environmental health in mind, the World Green Building Council has set the goal for every building to achieve net-zero status by 2050. The UK supported this in its announcement letter for the Committee on Climate Change meeting, 2019, thus, making it the first major economy to set the net-zero climate goal.
Considering the impetus of change, net-zero real estate investment across upstate, NY, and all over open up the following incentives for investors:
- A valuable risk management strategy: Since building resilience is a top priority in a net-zero scheme; investors safeguard themselves against physical property damage, insurance premium repricing, and abandonment of risky locations.
- Improve long-term financial performance due to the highest sustainability certification commanding rental premiums and lower operational costs. Additionally, for property owners, a net-zero building attracts better-paying tenants and higher property values.
- A net-zero building also improves cognitive performance (as per a Harvard study).
While no empirical results can be forecasted as of now, it would be fair to state that net-zero is the future of real estate. For investors looking for an improved portfolio, a competitive edge, and long-term viability, going for net-zero real estate properties strikes the right business and ethical rationale while sufficing the three R’s: Retrofit, Renewable & Responsible-ownership!