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The journey to net zero

Insight 17 January 2022

The journey to net zero

The 2021 edition of the World Economic Forum’s Global Risk Report has ranked climate change as the biggest long-term threat to global stability requiring immediate action. The journey to Net Zero provides insightful perspectives and best practices on how businesses and stakeholders in the real assets sector can achieve decarbonization.

As published in APREA's Knowledge Brief - volume 6

What is Net Zero?

Carbon Neutral refers to a policy of not increasing carbon emissions and of achieving carbon reduction through offsets. While Net Zero carbon means making changes to reduce carbon emissions to the lowest amount and offsetting as a last resort. As an example, Carbon Neutrality can be achieved by still making use of energy from fossil fuels but offsetting the carbon emissions by purchasing carbon credits, while Net Zero can be achieved by switching from fossil fuels to renewable energy.

Of the two terms, Net Zero has risen to the centre of the response to climate crisis in recent years, and with it, setting Net Zero targets to mitigate the worst effects of the crisis. However, clear guidance is constantly evolving and changing, making it challenging for businesses to know where to start on their journey to Net Zero.

Carbon in the Real Estate Industry

Carbon reduction is a critical issue in the real estate industry; according to United Nations estimates, real estate accounts for 40% of global energy consumption and a third of all carbon emissions. Building-related carbon dioxide (CO2) emissions are predicted to rise to 56% by 2030. With this in mind, real estate plays a vital role in the worldwide push to reduce carbon emissions, given their wide range of operations ranging from land trade to building design and construction.

The question of how the real estate industry is planning to tackle climate change related issues has become impossible to ignore. This makes the industry – from landlords to investors – a critical player in helping tackle the climate crisis.

As both the private and public sectors outline ambitious Net Zero carbon aspirations, how will the real estate industry set and hit its own targets and that of governments over the next decade?

5 Steps to Net Zero

Net Zero strategies need participation from all levels and nearly all members of an organisation. Staff must be equipped with sustainability knowledge, tools, and skills for companies to achieve their targets. This extends to the highest levels of leadership. If there isn’t sufficient buy-in from the board or management team, it is likely to result in underfunded opportunities for training, and no opportunity for staff to participate in learning beyond their day-to-do activities. In this context, strategies cannot survive long-term.

There are many free and accessible resources available that provide information on sustainability, such as those offered by Sanne.

You need to determine the scope of your Net Zero strategy. This means understanding your organisation’s level of ambition, the boundaries of your influence, and the sources of your emissions.

To establish the big picture, conducting a materiality assessment by answering the following 3 questions:

  • What do you want to achieve?
  • Where does your responsibility begin and end?
  • What will need to change to reduce emissions?

Once you have established the scope, you can start collecting data on your carbon footprint. Climate change data is just as important as financial data, so it should be monitored in the same fashion.

How can you increase your data quality?

  • Accurate: A standardised, automated process and system for data collection and management can improve accuracy.
  • Complete: Estimates can be made where there is incomplete data, but to have the most accurate reporting and the clearest picture aim for actual data rather than estimates.
  • Timely: Collecting data on regular intervals to better inform decision-making and quickly identify anomalies.

A carbon footprint is typically calculated through a three-step process:

Identify GHG emissions sources

  • We recommend following the GHG protocol guidance as a best practice to identify your Scope 1, 2 and 3 emissions. Also pinpoint your processes, products, or services that generate direct or indirect emissions.

Collect activity data and choose emission factors

  • Small, medium-size, and many large companies alike calculate Scope 1 emissions based on the amount of commercial fuels (e.g. natural gas, diesel, petrol, and heating oil) they purchase; Scope 2 emissions from metered electricity consumption multiplied by source and supplier-specific emission factors; and Scope 3 emissions from activity data like business travel fuel use, commuting miles, and waste multiplied by published or third-party emission factors.

Roll-up GHG emissions data to corporate level

  • To report on your total emissions, you’ll need to gather and summarize data from multiple facilities. These may be in different countries and business divisions.

You can calculate your carbon footprint manually or via a specialised online ESG platform like Sanne's online platform with built in calculation methodologies, emission factors and aggregation functionality.

Set your policy positions by identifying what is material to your organisation and its stakeholders and the establish the big picture ambitions and commitments. Then develop an action plan to achieve these ambitions and commitments.

How can Sanne help?

Sanne offers access to ESG advisory experts with strong experience in ESG strategy development, regulatory gap analysis, materiality analysis, reporting frameworks, data strategies and data analysis. We have an online ESG reporting platform specifically designed to meet the needs of alternative investment funds.

Reach out to Karlien to find out how Sanne can assist you or your business.

Let's talk...

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Karlien De Bruin Global Head of ESG - South Africa
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