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Environment first, profit second, says Schroders RE head

15th December 2022

Schroders global head of real estate Sophie van Oosterom says the real estate industry needs to put environmental impact before profit, to include carbon in appraisals and to focus on emissions reduction, not accreditation.

In a blistering end of year op-ed, she also argued that real estate investors should not dismiss carbon offsets as a means to reduce environmental impact.

"Profit needs to be considered after environmental impact, and using a clear carbon price as a proxy at least, can address this," she said. "

"Although the industry generally agrees that buying offsets is not the best way to achieve net zero for real estate portfolios, the reasons why this method is generally dismissed are not valid in our view.

"A decent proxy for these implicit costs related to carbon emission embedded in real estate portfolios, can be the price at which voluntary carbon offsets are trading on the market. Our research has concluded that capitalising the implicit carbon costs (at offset pricing) is a very good proxy for the capex that is required to be invested to actually reduce the carbon emissions (landlord-controlled) by c.70%."

Van Oosterom also said: "The focus has been more on data gathering and theoretical energy labels rather than on in-use emission reductions. Of course, reduction cannot be achieved without first measuring, but being awarded full marks or green stars for reporting only, could lull our industry into a false sense of security."

She declared that, since the Paris Agreement of 2015, "very little" had changed and that real estate needed to do much more to achieve both net zero operational carbon by 2030 and net zero embodied carbon by 2050.

However, she also argued that challenge was also an: "opportunity to self-regulate to the right outcome for all stakeholders, incentivise our asset managers beyond short-term profits and in favour of long-term relevance and performance."

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