Property Sector Ranks High on Climate Mitigation

Real estate firms are among the best-performing bond issuers on environmental impact mitigation, driven by building standards and certifications in major markets, according to Sustainable Fitch. A new report cited “fairly strong performance” from real estate issuers of labelled debt, with firms scoring well on the environmental component of ESG ratings – which includes corporate disclosure, policies and target-setting – indicating that sustainability is relatively well-embedded. Sustainable Fitch attributed this to local factors, such as building standards and regulation – which have raised operational performance and reduced sector-wide impacts – as well as green and sustainable building certifications. The firm also noted that climate mitigation has been a significant focus of use-of-proceeds from real estate sustainable debt issuances, due to buildings generating 40% of energy-related CO2 emissions. Many real estate green bonds are targeting renewable energy and energy efficiency projects, it added. These trends are expected to accelerate with further regulatory developments, such as the adoption by the European Parliament last week of the revised Energy Performance in Buildings Directive, designed to toughen the policy framework for energy efficiency in buildings across the EU. “The revisions would see the introduction of a tougher Zero Energy Building standard, with which all new buildings would be required to comply by 2030,” said Sustainable Fitch. A separate report from Pi Labs, an early-stage venture capital firm, found that four AI use cases had the potential to cut CO2 emissions from the built environment by the equivalent of the US’ 2022 carbon footprint. Efficiencies derived from the application of AI to generative design, construction rework, and building energy and demolition waste, could reduce carbon emissions by 5.81 gigatonnes (Gt) to 6.46Gt annually, the firm said.

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