Decarbonisation promoted to an investment priority


16 / 08 / 22 - 6 minute read

E, S, and G are three letters that will not save the world, according to The Economist . Instead, the well-known business magazine suggests in its issue of late July to focus solely on emissions, meaning the decarbonization of portfolios. Because the multitude of criteria leads to unclear objectives and a vague prioritisation, for example between ecological and social criteria. The Responsible Investor  has published a comprehensive response to that, while PATRIZIA find that investors follow a rather pragmatic approach.

PATRIZIA’s second investor survey, in which 107 institutional investors participated earlier this year, shows that institutional investors combine a clear focus on decarbonisation with other ESG criteria. Institutional investors are focused on decarbonising their real estate investments. However, they are not limiting their sustainable initiatives to this, but are increasingly taking other criteria into account for their investments.

Investors are progressing with measuring ESG

As of today, 76% of investors surveyed capture and use ESG data for their real estate investments, an increase of 18% compared to last year’s survey. In measuring ESG, investors focus on decarbonisation strategies. Sixty-nine per cent said they plan to measure the energy consumption of their real estate investments within the next five years, 66% (compared to 60% in last year’s survey) will track direct CO2 emissions (Scope 1), 39% (compared to 30% in 2021) indirect CO2 emissions (Scope 2) and 32% (compared to 17% in 2021) CO2 emissions along their value chain (Scope 3) – with 17% stating to already have a decarbonisation roadmap for their portfolio.

Mathieu Elshout, Head of Sustainability & Impact Investing, at PATRIZIA, said: “The level of commitment we see here in this survey among our clients to decarbonise the built environment, which after all accounts for 40% of all greenhouse gas emissions, impresses me. It is encouraging that our investors expect us to take the lead in decarbonising their investments. We at PATRIZIA are already pursuing a clear and robust ESG strategy, with support from our investors, that aims to go beyond the international legally binding 2050 target by achieving net zero carbon across our portfolio by 2040 and a 50% carbon reduction by 2030.”

Reducing emissions

In achieving its Net Zero Carbon strategy, PATRIZIA works closely with its clients and pursues strategies with its discretionary funds to drive decarbonisation. For example, its flagship funds have defined specific strategies and targets for their portfolios to achieve carbon neutrality, individual fund strategies include for example aiming towards zero landlord-controlled operational and embodied carbon emissions by 2030 as well as reducing indirect emissions to zero by 2040. To progress towards net zero, the funds observe ESG criteria and certifications in their investment process, roll out smart meters in their portfolios to reduce energy consumption, define decarbonisation pathways for each asset within the portfolio and use sustainable construction methods for refurbishments.

Sustainability is more than decarbonisation

In addition, the survey results show that investors plan to pay more attention to the social impact of their investments and intend to grow the share of investments that generate environmental and social impact alongside financial returns. According to the survey, 47% expect to measure the social impact of their real estate investments within the next five years, while 23% plan to grow the share of impact investments and 21% are even willing to accept a “financial discount” to generate social and environmental impact.

In view of the challenges posed by climate change, investors are prioritising the decarbonisation of their portfolios. Moreover, they are not only focusing on the ‘E’ but are also paying more and more attention to social criteria in their real estate investments.

In view of the challenges posed by climate change, investors are prioritising the decarbonisation of their portfolios. Moreover, they are not only focusing on the ‘E’ but are also paying more and more attention to social criteria in their real estate investments.

Investors are progressing with measuring ESG

As of today, 76% of investors surveyed capture and use ESG data for their real estate investments, an increase of 18% compared to last year’s survey. In measuring ESG, investors focus on decarbonisation strategies. Sixty-nine per cent said they plan to measure the energy consumption of their real estate investments within the next five years, 66% (compared to 60% in last year’s survey) will track direct CO2 emissions (Scope 1), 39% (compared to 30% in 2021) indirect CO2 emissions (Scope 2) and 32% (compared to 17% in 2021) CO2 emissions along their value chain (Scope 3) – with 17% stating to already have a decarbonisation roadmap for their portfolio.

Mathieu Elshout, Head of Sustainability & Impact Investing, at PATRIZIA, said: “The level of commitment we see here in this survey among our clients to decarbonise the built environment, which after all accounts for 40% of all greenhouse gas emissions, impresses me. It is encouraging that our investors expect us to take the lead in decarbonising their investments. We at PATRIZIA are already pursuing a clear and robust ESG strategy, with support from our investors, that aims to go beyond the international legally binding 2050 target by achieving net zero carbon across our portfolio by 2040 and a 50% carbon reduction by 2030.”

Reducing emissions

In achieving its Net Zero Carbon strategy, PATRIZIA works closely with its clients and pursues strategies with its discretionary funds to drive decarbonisation. For example, its flagship funds have defined specific strategies and targets for their portfolios to achieve carbon neutrality, individual fund strategies include for example aiming towards zero landlord-controlled operational and embodied carbon emissions by 2030 as well as reducing indirect emissions to zero by 2040. To progress towards net zero, the funds observe ESG criteria and certifications in their investment process, roll out smart meters in their portfolios to reduce energy consumption, define decarbonisation pathways for each asset within the portfolio and use sustainable construction methods for refurbishments.

Sustainability is more than decarbonisation

In addition, the survey results show that investors plan to pay more attention to the social impact of their investments and intend to grow the share of investments that generate environmental and social impact alongside financial returns. According to the survey, 47% expect to measure the social impact of their real estate investments within the next five years, while 23% plan to grow the share of impact investments and 21% are even willing to accept a “financial discount” to generate social and environmental impact.

In view of the challenges posed by climate change, investors are prioritising the decarbonisation of their portfolios. Moreover, they are not only focusing on the ‘E’ but are also paying more and more attention to social criteria in their real estate investments.

In view of the challenges posed by climate change, investors are prioritising the decarbonisation of their portfolios. Moreover, they are not only focusing on the ‘E’ but are also paying more and more attention to social criteria in their real estate investments.