CRREM Introduction

CARBON RISK REAL ESTATE MONITOR
CRREM: ASSESS, MANAGE & AVOID CARBON RISK

15.10.2020
This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement no. 785058
This project has received funding from the European
Union’s Horizon 2020 research and innovation
programme under grant agreement no. 785058
CLIMATE RISK
PROPERTY VALUES ARE INCREASINGLY

EXPOSED TO CLIMATE RISK
‘CLIMATE RISK IS INVESTMENT RISK’

(BLACKROCK, 2020)
assess, manage & avoid risk with the Carbon Risk Real Estate Monitor
CRREM pathways CRREM Tool

• Paris-aligned decarbonisation & • Assess the carbon and energy performance of buildings and portfolios
energy reduction pathways • Benchmark against CRREM pathways and peers
• Per country and building type • Derive indicators for risk management, reporting, disclosure
CRREM Introduction Slide 2

15.10.2020 CRREM | CARBON RISK REAL ESTATE MONITOR © CRREM 2020
CLIMATE RISK
CLIMATE RISK =
PHYSICAL RISK + TRANSITION RISK
>6°C global warming

High risks of
PHYSICAL RISK physical and social
disruption
www.gisimmorisknaturgefahren.de
High risks associated with rapid transition

(e.g., energy cost, obsolescence)
1.5°C - 2°C global
warming
TRANSITION RISK
‘STRANDED ASSETS are properties that will be exposed to the risk of early
economic obsolescence due to climate change because they will not meet
future regulatory efficiency standards or market expectations.’ (CRREM, 2019)
Source: TCFD Technical Supplement, 2017
SCIENCE | REGULATION | RISK
Climate science
o
Climate impact and carbon emission budgets/pathways compatible with limiting global warming to x.x C
Paris Agreement
o o
Commitment to limit global warming to 2 C or better 1.5 C
Politics Real Estate Investors

New regulatory requirements: Emission/energy Changed market expectations, ‘Paris-proof’
goals, reporting, (sustainable) finance investments/portfolios
STRANDING RISK | CARBON RISK | TRANSITION RISK
assess, manage & avoid
CARBON RISK REAL ESTATE MONITOR

CRREM Pathways CRREM Tool

CRREM CONSORTIUM
PROJECT PARTNERS
IIÖ Institut für Immobilienökonomie TiasNimbas Business School

Coordinator | Austria Tilburg University | Netherlands
University of Ulster| UK University of Alicante | Spain
GRESB | The ESG Benchmark for Real Assets

CRREM RISK ANALYSIS
CARBON RISK ASSESSMENT & MANAGEMENT BASED ON QUANTITATIVE

PERFORMANCE DATA AND TARGET SETTING
ASSET LEVEL STRANDING DIAGRAM DECARBONISATION PATHWAYS

GHG Intensity Aligned with 1.5oC and 2oC global warming, country- and
[kgCO2e /m²a] building type specific
Decarbonisation
Pathway Stranding
Climate Change
+
(HDD/CDD)
BUILDINGS‘ CARBON PERFORMANCE
Property
Carbon Grid Energy consumption, carbon emission factors, grid
Price Decarbonisation decarbonsation, changed heating and cooling demand,
€€€ normalisation..,
Retrofit
€€€
=
Year CARBON RISK ANALYSIS
2050
Year of stranding, excess emissions, carbon costs, energy
costs, benchmarking

ENERGY TO CO2-EMISSIONS
WHOLE BUILDING ENERGY CO2 CONVERSION FACTORS BUILDING EMISSIONS
Tenant controlled E.g. per kWh

Tenant electricity kWh (pruchased & consumed) 0.475 (kgCO2e)
Landlord controlled
Or 0 (kgCO2e) CO2
Common area (passed on to tenant)
electricity
kWh
Tenant 1
E.g. per kWh Σ All emissions (kgCO2e)
Consumption
Purchase by Tenant 2 0.203 (kgCO2e) Rented area (m²)
Heating energy kWh landlord Consumption
Tenant 3
consumption =
INTENSITY INDICATOR 1 INTENSITY INDICATOR 2
Energy consumption per m² CO2 Emissions per m²
Σ All consumption (kWh) = (kWh/m²) (kgCO2e/m²)
Rented area (m²)
Source: Alstria, 2020
LOW-CARBON STRATEGIES
1. EMISSIONS IN OPERATION 2. BUILT-IN EMISSIONS
- Expand electrification, alternative types - Continuous use of the building

of heating (FW, WP) materials!
- Enabling energy flexibility, eMobility and - In construction, use as little concrete

Load Management and steel as possible!
- Renewable energies on site(production - Simple and robust construction!

and storage)
- Use low carbon (e.g. wood) and recycled
- Reduce energy demands building materials!
- When replacing technology, focus on

efficient and low-tech models

CARBON DASHBOARD
Reducing the company‘s GHG emissions Reducing other emissions Developing carbon sinks
induced emissions solution/target avoided emissions solution/target negative solution/target
emissions
Company vehicles Company policy – Evs only from 2020
Inside operational
Own offices – energy Increasing efficiency, lowering

consumption demands and renewable energy
control
procurement
Energy procurement for Framework contract for 100 % Refurbishing & reusing > 60 % of embedded emissions can be saved by Carbonization of 25-50 % of the carbon that was emitted
shared services in building renewable energy procurement existing buildings reusing main building parts like foundations, concrete during the production of concrete is
Downstream leased buildings
portfolio slabs, columns and facades (this equals to absorbed during the life cycle of
operative emissions of 25-50 years). exposed concrete parts
Tenant energy consumption Renewable energy procurement Refurbishing buildings > -25 % tenant energy consumption by lowering
obtained bay the company energy demands, increasing efficiency and
electrifying buildings
Outside operational control
Pilot projects Low carbon heating systems, Tenant and employee Affordable 100 % renewable energy procurement
renewable energy generation and energy procurement (Mieterstromportal), incetivising renewable
energy flexibility of owned buildings energy
Green Dividend Energy/GHG-efficient refurbishment of existing Green Dividend Contributing to R&D and pilot projects
buildings without economic profit to develop CCS or carbon sinks in
owned buildings
Business travel and Offering best video conference Coworking business – Helps start-ups and small tenants to avoid Joshua Tree Project R&D and pilot projects on conversion of
Employee commuting equipment to minimize travel and beehive.work emissions by energy-efficient office space close farmland to forests; later harvesting
encouraging the use of trains instead to public transport wood for construction materials
of flying; Incentivising public transport
and bicycles for commuting
Buying low-performing and Buying non energy-efficient assets for Buying assets with Reducing GHG from tenant transportation GHG capture Contribution to projects to develop CCS
non refurbished assets refurbishment good access to public (business travel and employee commuting) projects or other carbon sinks via other products
Outside value chain
transport
Selling refurbished Selling well performing & energy efficient

assets buildings to others to operate
GHG reduction projects Contributing to compensation & offsetting

projects (i.e. climate neutral natural gas
procurement
Pilot projects Contributions to decarbonize energy grids

BEST IMPACT: REFURBISH & REUSE
Total building carbon emissions (demolishing & rebuilding)

600
Refurbish & Reuse:
500
60 – 80 % of embedded emissions reusable
→ equals emissions of 25-35 years!
400
kg CO2e/m²
300
Rebuilding
200
100
Total building carbon emissions (refurbishing & reusing)
200
0
2030
2051
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
2065
2066
2067
2068
2069
100
operational carbon footprint Embedded carbon - new building + maintenance
2028
2037
2046
2055
2019
2020
2021
2022
2023
2024
2025
2026
2027
2029
2030
2031
2032
2033
2034
2035
2036
2038
2039
2040
2041
2042
2043
2044
2045
2047
2048
2049
2050
2051
2052
2053
2054
2056
2057
2058
2059
2060
2061
2062
2063
2064
2065
2066
2067
2068
2069
kg CO2e/m²
-100 Reuse
Rebuilding: approx. 1.000 kg CO2e/m² (NGF)
-200
operation (office): approx. 25-50 kg CO2e/m² (NGF)
-300
Emissions from rebuilding equal

-400
Emissions of 25-50 years in opearation!
Saved carbon emissions Embedded carbon - refurbishing + maintenance
operational carbon footprint

CRREM PATHWAYS
CRREM PATHWAYS: DOWNSCALING FROM GLOBAL EMISSIONS TO CARBON INTENSITY PATHWAYS
Global GHG budget and emissions pathway (consistent with a certain

amount of global warming)
Global buildings GHG emission pathway

DOWNSCALING
Global buildings GHG intensity pathway
Country-specific residential GHG intensity pathway
Country-specific CRE GHG intensity pathways

gggggggggggggggggggggggg
Country-specific CRE-subsector GHG intensity pathways

ggggggggggggggggggggggggggggggggggg
Country-specific CRE-subsector energy intensity pathways

CRREM PATHWAYS
CRREM translates long-term policies (COP21) into clear science-based targets
Global carbon emission pathways (CO2e) of 1.5oC and 2oC scenario Evolution of global building stock (2018-2050) and part covered by CRREM
450
50
400
45
350
40
35 300
GHG Emissions (GtCO2 e)
Floor area (bn m²)

30
250
25
200
20
150
15
10 100
5
50
0
2015 2020 2025 2030 2035 2040 2045 2050 0
2°C-scenario (sum 2018-2050: 1,259 GtCO2e) 1.5°C-scenario (sum 2018-2050: 890 GtCO2e)
Covered by CRREM Global building stock Covered by CRREM

CRREM PATHWAYS
Global building sector GHG intensity pathway (1.5oC and 2oC target) Global carbon emissions (2oC target) of all economic sectors and the
building sector
60 30%
50
50 25%
GHG-Intensity (kgCO2 e/m²/year)
40
Share of building sector

GHG Emissions (GtCO2 e)
40 20%
30
30 15%
20
20 10%
10
10 5%
0
2015 2020 2025 2030 2035 2040 2045 2050
0 0%
2°C-scenario 1.5°C-scenario
Global GHG Emissions (2°C target) Global Building Sector GHG Emissions (2°C target) Share of building sector

CRREM PATHWAYS
National Pathways: Convergence of the carbon intensity pathway of Residential and Commercial sector: Decarbonisation pathways of global
the building sector in individual countries to the global pathway buildings sector, UK buildings sector and UK residential and commercial sector
110
60
100
90 50
GHG-Intensity (kgCO2 e/m²)

80
40
GGHG-Intensity (kgCO2e/m²)
70
30
60
50 20
40
10
30
0
20 2015 2020 2025 2030 2035 2040 2045 2050
10 Global buildings UK Buildings UK Residential UK Commercial
0
2015 2020 2025 2030 2035 2040 2045 2050
Global 2°C decarbonisation pathway Denmark France Germany Japan Mexico Poland Singapore

CRREM PATHWAYS
CRREM PATHWAYS: DOWNSSCALING FROM GLOBAL EMISSIONS TO CARBON INTENSITY PATHWAYS
Subsectors of commercial real estate: Decarbonisation and energy reduction pathway for UK
office buildings (2oC target)
90 270
80
225
70
Energy intensity (kWh/m²)

GHG Intensity (kgCO2e/m²)
60 180
50
135
40
30 90
20
45
10
0 0
2018
2019
2023
2024
2025
2030
2031
2032
2036
2037
2038
2039
2043
2044
2045
2049
2050
2020
2021
2022
2026
2027
2028
2029
2033
2034
2035
2040
2041
2042
2046
2047
2048
UK Office GHG Intensity (2°C) UK Office Energy Intensity (2°C)

CRREM TOOL
CARBON RISK ASSESSMENT & MANAGEMENT BASED ON QUANTITATIVE

PERFORMANCE DATA AND TARGET SETTING
CRREM TOOL STRANDING DIAGRAM

DECARBONISATION PATHWAYS
Aligned with 1.5oC and 2oC global warming, country- and
building type specific
+
BUILDING‘S CARBON PERFORMANCE
Energy consumption, carbon emission factors, grid
decarbonsation), changed heating and cooling demand,
normalisation
=
CARBON RISK ANALYSIS
Year of stranding, excess emissions, carbon costs, energy
costs, benchmarking

CRREM TOOL
QUANTITATIVE CARBON PERFORMANCE AND RISK INDICATORS

Year of Stranding, Carbon Value at Risk, Year-to-Year Improvement, Costs of Carbon...
ENERGY CONSUMPTION COSTS OF ENERGY AND CARBON ENERGY REDUCTION PATHWAYS
Energy targets based on country-specific

Based on (optionally) normalised baseline Based on energy and carbon price
sector-wide emission factor reflecting
consumption and projected data considering projections (IEA, EU etc.)
energy mix and evolving grid
changed heating and cooling demand
decarbonisation
CRREM TOOL

EXCESS EMISSIONS PER FLOOR AREA COSTS OF EXCESS EMISSIONS ABOVE TARGET
Analoguous to the NY City model with penalties for each ton of emission
above emission limit (and possibility of trading emission credits)

CRREM TOOL
COSTS OF RETROFITTING TO COMPLY WITH CARBON TARGETS RETROFIT SIMULATION: STRANDING DIAGRAM WITH & WITHOUT RETROFIT
Simulation of investment in energetic retrofit and its effect on carbon risk indicators (based an marginal abatement costs)

CRREM TOOL
CARBON RISK IN REAL ESTATE PORTFOLIOS

CRREM TOOL
CARBON RISK IN REAL ESTATE PORTFOLIOS

CRREM & GRESB
Stepwise integration of CRREM Risk Analysis and GRESB

(1) Download CRREM Risk Assessment Tool pre-filled with data company’s GRESB participation
(2) GRESB participants to receive results of CRREM Risk Analysis within GRESB Portal
&
Property types and input parameters are aligned with GRESB ESG Benchmark:

CRREM & GRESB
Stepwise integration of CRREM Risk Analysis and GRESB
BENCHMARK YOUR ASSET(S) AGAINST YOUR PEERS
70 100%
90%
60
Share of stranded assets in GRESB Benchmark

80%
50
GHG-Intensity (kgCO 2 e/m²)
70%
60%
40
50%
30
40%
20 30%
20%
10
10%
0 0%
Share of stranded assets in GRESB Benchmark (1.5°C target) GRESB average carbon performance
Own asset's carbon performance CRREM 1.5°C decarbonisation pathway

CRREM GLOBAL
Extension of CRREM pathways: www.CRREM.org

INCLUDING RESIDENTIAL BUILDINGS & KEY GLOBAL REAL ESTATE MARKETS
(PUBLICATION OF CRREM GLOBAL PATHWAYS FOR PUBLIC CONSULTATION IN MAY 2020)
CRREM GLOBAL ROLL-OUT
Funded by:

CRREM EIC
European Investor Committee EIC: Institutional investors & corporate partners

CRREM EIC
European Investor Committee EIC: Industry bodies and academics

CRREM | CARBON RISK REAL ESTATE MONITOR
info@crrem.eu WWW.CRREM.EU
Institut für Immobilienökonomie GmbH

Josef-Stei
nbacher-Straße 1
A - 6300 Wörgl


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CARBON RISK REAL ESTATE MONITOR

CRREM: ASSESS, MANAGE & AVOID CARBON RISK

PROPERTY VALUES ARE INCREASINGLY

‘CLIMATE RISK IS INVESTMENT RISK’

CRREM pathways CRREM Tool

CRREM Introduction Slide 2

>6°C global warming

High risks associated with rapid transition

Politics Real Estate Investors

STRANDING RISK | CARBON RISK | TRANSITION RISK

assess, manage & avoid

CARBON RISK REAL ESTATE MONITOR

CRREM Introduction Slide 4

IIÖ Institut für Immobilienökonomie TiasNimbas Business School

University of Ulster| UK University of Alicante | Spain

GRESB | The ESG Benchmark for Real Assets

CRREM Introduction Slide 5

CARBON RISK ASSESSMENT & MANAGEMENT BASED ON QUANTITATIVE

ASSET LEVEL STRANDING DIAGRAM DECARBONISATION PATHWAYS

CRREM Introduction Slide 6

WHOLE BUILDING ENERGY CO2 CONVERSION FACTORS BUILDING EMISSIONS

Tenant controlled E.g. per kWh

1. EMISSIONS IN OPERATION 2. BUILT-IN EMISSIONS

- Expand electrification, alternative types - Continuous use of the building

- Enabling energy flexibility, eMobility and - In construction, use as little concrete

- Renewable energies on site(production - Simple and robust construction!

- When replacing technology, focus on

CRREM Introduction Slide 8

Own offices – energy Increasing efficiency, lowering

Selling refurbished Selling well performing & energy efficient

GHG reduction projects Contributing to compensation & offsetting

Pilot projects Contributions to decarbonize energy grids

CRREM Introduction Slide 9

Total building carbon emissions (demolishing & rebuilding)

Emissions from rebuilding equal

CRREM Introduction Slide 10

CRREM PATHWAYS: DOWNSCALING FROM GLOBAL EMISSIONS TO CARBON INTENSITY PATHWAYS

Global GHG budget and emissions pathway (consistent with a certain

Global buildings GHG emission pathway

Global buildings GHG intensity pathway

Country-specific residential GHG intensity pathway

Country-specific CRE GHG intensity pathways

Country-specific CRE-subsector GHG intensity pathways

Country-specific CRE-subsector energy intensity pathways

CRREM Introduction Slide 11

CRREM PATHWAYS: DOWNSCALING FROM GLOBAL EMISSIONS TO CARBON INTENSITY PATHWAYS

CRREM translates long-term policies (COP21) into clear science-based targets

Floor area (bn m²)

Covered by CRREM Global building stock Covered by CRREM

CRREM Introduction Slide 12

CRREM PATHWAYS: DOWNSCALING FROM GLOBAL EMISSIONS TO CARBON INTENSITY PATHWAYS

CRREM translates long-term policies (COP21) into clear science-based targets

Share of building sector

CRREM Introduction Slide 13

CRREM PATHWAYS: DOWNSCALING FROM GLOBAL EMISSIONS TO CARBON INTENSITY PATHWAYS

CRREM translates long-term policies (COP21) into clear science-based targets

GHG-Intensity (kgCO2 e/m²)

10 Global buildings UK Buildings UK Residential UK Commercial

CRREM Introduction Slide 14

CRREM PATHWAYS: DOWNSSCALING FROM GLOBAL EMISSIONS TO CARBON INTENSITY PATHWAYS

CRREM translates long-term policies (COP21) into clear science-based targets

Energy intensity (kWh/m²)

CRREM Introduction Slide 15

CARBON RISK ASSESSMENT & MANAGEMENT BASED ON QUANTITATIVE