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Not all net-zero pathways are created equal, says UBS AM

21st June 2024

Net zero pathways can be useful tools for real estate investors and managers, says UBS, however a lack of industry-wide standards means like-for-like comparisons are difficult, says UBS Asset Management. 

A new paper, written by Peer Petersen, head of ESG solutions, global real estate and Olivia Muir, head of sustainability, real estate and private markets at UBS Asset Management, advises: “Building owners and associated stakeholders need to establish the necessary long-term net-zero action plans to protect income streams and value, as well as to manage costs.”

However, UBS notes that real estate managers in most European countries have yet to publish net-zero pathways for their funds. Meanwhile, available pathways vary in their approaches, parameters and solutions.

The investment manager suggests three core questions for interrogating a net zero pathway”

  1. Which types of emissions have been considered in the net-zero pathways?

Are asset owners including Scope 1,2 and 3 emissions (see graphic above)? Tracking the latter is more difficult as it requires cooperation with tenants.

  • Which data has been used to define the baseline?

Every net zero pathway has to start somewhere by identifying initial emissions intensity. Often, especially if Scope 3 emissions are included, this data is not fully available and may depend on estimations.

  • Which future decarbonization measures have been considered in the net-zero pathway?

Net zero pathways also include the application of decarbonization measures for building over time, and estimate the resulting energy consumption and emission savings at the property and portfolio level. 

However, the high-level results in the pathway may not be enough for investors, who ought to: “request detail on the methodology and calculations applied by real estate managers, including at the level of each building,” UBS advises.

Further clarity may be needed regarding the consideration of the effects of procurement of off-site green energy and carbon offsets, the latter of which “should almost always be the last resort”, UBS says in the paper.

It concludes that investors need to scrutinize the details of net zero pathways, until “binding industry-wide standards have been defined for net-zero pathway calculations”.

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