OUR NET ZERO CARBON PATHWAY - LaSalle Investment Management

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OUR NET ZERO CARBON PATHWAY

lasalle.com/esgThere is no doubt that commercial real estate isentering a period of transition, one in whichsustainability and commercial performance willbecome synonymous. The sustainability credentials ofassets and funds will be subject to greater scrutiny byregulators, investors and occupiers. Those slow off themark will find it difficult to protect and create value.Philip La PierreChief ExecutiveOfficer for EuropeSustainability sits at the heart of ourinvestment process. Our net zero carbonpathway is the result of a majorcollaborative effort across the business,detailed technical modelling of ourEuropean portfolio and a review of whatnet zero really means for the industrytoday. While the economic effects ofCOVID-19 quite rightly sit at the forefront ofour minds in the short-term, we must notforget that the long-term drivers fordecarbonisation are not going away.As a global business we must be sensitiveto differences in the pace of net zeroregulation across our regions. However, the‘lowest common denominator’ should notdrive our overall position. We expectpositions on net zero to converge in thelong-term - the Paris Agreement gives theclearest possible mandate - and we mustbe well-placed for this transition.So where to start? There are clear firststeps. Data is an immediate priority – weneed to better understand where ourcarbon impact is concentrated and wherewe can have the most cost-effective impact.Enhancing our zero carbon implementationskills through training and education will beimportant. With the industry’s position onnet zero ever evolving we will take an activerole in industry discussions. Finally, the roleof innovation will be critical and we willcontinue to monitor emerging technologiesand how they might support us in ourpathway.Contents3 Our Net Zero Strategy4 LaSalle’s approach tosustainability5 Scope of our strategy6 Developing our strategy7 Integrating NZC throughthe asset lifecycle16 Challenges and solutions17 Early successes18 Communication andGovernanceAppendices19 Appendix A: BBP ClimateCommitment Scope Table21 Appendix B: Key Terms

Our NetZero StrategyOur Net Zero Carbon (NZC) strategyaddresses carbon at all stages of the assetlifecycle. Achieving net zero carbon by 2050requires a holistic view of our activities as areal estate investment manager. The strategywill be truly integrated into the LaSalle way ofworking – starting with our egrate net zero principles into ourinvestment strategy and due diligenceReduce energy consumption by one thirdby 2030 by aligning Energy Use Intensityof our assets with leading net zero carbonbenchmarksInclude carbon stranding risk aspart of our investment decisionmaking processUndertake NZC audits and accessoperational energy data pre-acquisitionSupport suppliers to decarbonise assetmanagement services in line with sciencebased targetsFurther detail on thespecific measures ineach asset lifecycle stageare included on pages 715 of this documentShare operational energy dataand NZC pathway informationwith buyers and support themwith their own NZC due diligenceDevelopmentRefurbishmentUndertake Whole Life Carbon Assessments ofdevelopmentsCut embodied carbon intensity by 50% by 2030Undertake Whole Life Carbon Assessments ofmaterials and equipment procured forrefurbishment and maintenance.Develop an internal carbon price and use tofinance retrofit of standing assetsMinimise carbon through low carbon materialand equipment choicesBuild to NABERS Design for Performance principlesNET ZERO CARBON PATHW AY 3

LaSalle’s approach to sustainabilityWe know real estate has a very importantrole to play in tackling some of the majorsocial and environmental challenges theworld faces today. That’s why we’recommitted to doing the right thing by ourclients, our people and our planet. We haveoutlined in our new European sustainabilityframework a plan to enable us to achievethis ambition.Our sustainability framework ensures ourwork is focused on the four pillars that havethe most material impact on our business:climate change, responsible consumption,rewilding and social value. These themesare addressed at each stage of the asset lifecycle. This framework maps across to theUN Sustainable Development Goals (SDG’s)and our Net Zero Carbon strategy respondsprimarily to the climate change pillar andSDG’s 7, 11 and 13.Sustainability FrameworkClimateChangeResponsibleConsumptionSophie CarruthHead of Sustainability, EuropeRewildingSocialValueWe are a founding signatory to the BBP Climate ChangeCommitment which commits us to delivering Net ZeroCarbon by 2050. The commitment addresses: Operational carbon, critically covering whole buildingperformance including tenant activities Embodied carbon of development, refurbishment andfit-out works The principles of the energy hierarchy to ensure effortis focused first on reducing energy demand andimproving energy efficiencyWe pride ourselveson being an industryleader in ESG bestpracticesWe weave sustainability into ouroperations at every touchpoint acrossour European business. We arecommitted to ESG at a corporate,investment strategy and asset level. Atthe centre of this commitment is ourpledge to deliver net zero carbonbuildings by 2050.NET ZERO CARBON PATHW AY 4

Scope of our strategyOur Net Zero Carbon Pathway focuses onour direct real estate investment in Europetotalling 17.5bn AUMWe have excluded the following investment activity from the scope of thiscommitment. We continue to develop our approach to net zero carbon in allareas of the business: Non-European real estate assets ( 26.5bn): We are in parallel developingour global Net Zero Strategy which captures all of our direct real estateinvestment across the world. Indirect, debt and securities ( 10.6bn AUM): We engage underlyingmanagers through the LaSalle Global Partner Solutions platform toencourage dialogue and ensure that they continue to develop and expandESG protocols and align with NZC principles. The industry rulebook ondecarbonising further financial products is still in development and wecontinue to actively engage with industry to develop best practice. Corporate emissions. These fall under the remit of our parent companyJLL, which has committed to achieve net zero carbon emissions across allJLL-occupied buildings by 2030. These are a relatively small part of ouroverall carbon impact as a business.OUT OF SCOPENon-European investment, indirectinvestment, debt and securities, corporateemissionsIN SCOPEDirect real estateinvestment in EuropeNET ZERO CARBON PATHW AY 5

Developing our strategyOur Net Zero Carbon Pathwayfocuses on our direct realestate investment in Europetotalling 17.5bn AUMLow carbon materials andconstruction methods throughour Sustainable DevelopmentStandardsSupply chain2. We reviewed all relevant net zero definitionsin the markets in which we operate3. We undertook technical modelling of thecost and performance impacts of achievingnet zero across our entire portfolio4. We engaged with senior businessstakeholders to test and refine the strategyand ensure it aligned with strategicobjectivesCarbon emissions1. We undertook interviews across regions andbusiness functions to gather views on netzero carbonResidual electricityconsumption provided vialong-term renewable PPAsEnergyefficiencyApproachOur strategy is data-driven and has beenbuilt through a business-widecollaborative processEmbodiedcarbonsavingsEnergy Use Intensity targets byasset to drive down consumptionand increase on-site generationusing our SustainabilityManagement arbonEngagement with partnersthrough Supplier Code ofConductSupply chaindecarbonisationAny residualemissionswill beaddressedthroughhigh qualityoffsettingwith provenadditionalityOffsetsNet zeroby 2050NET ZERO CARBON PATHW AY 6

Integrating Net Zero Carbon through the asset lifecycleCarbon emissions arise at all stages of anasset’s lifecycle, from the operationalcarbon associated with energy use, to thecorporate emissions of third parties providingasset management services, to the embodiedcarbon emissions of refurbishments anddevelopments.A comprehensive NZC strategy cannotconsider only isolated stages of the assetlifecycle. We have the ability – and aresponsibility – to influence sustainability atall stages.Our strategy takes a holistic view of ouractivities from purchase through to sale.It consists of a range of measures to bettermeasure, monitor, influence and – by 2050 –eliminate emissions from our operations. Themeasures will be truly integrated into theLaSalle way of working – right down to ourinvestment strategy.AcquisitionIn some areas – such as energy use inlandlord areas – we have a greater degreeof influence. These will be the focus of ourstrategy in the immediate term, but we willidentify ways to better quantify and addressemissions more T ZERO CARBON PATHW AY 7

Net Zero Carbon AcquisitionStrategy DetailWe already hold new investments to a high standard of energyperformance. To enhance this we will ensure that our investmentstrategy prioritises net zero readiness and identifies technicalbarriers to net zero before an asset is acquired Net zero audits will be included in the due diligenceprocess for new acquisitions. These will identify anytechnical barriers to net zero performance.We will seek to obtain from the vendor energy usagedata for at least the 12 months directly preceding theacquisition date. This data will be used as a basis forpreparing a costed plan to meet our agreed 2030energy use intensity performance benchmarks asminimum, with all required measures built into assetplans. We will prioritise assets with all-electric heating andhot water as part of our investment strategy.If we acquire assets with fossil fuel heating and hotwater systems, we will include plans to electrify orotherwise decarbonise within the asset business plan.NET ZERO CARBON PATHW AY 8

Net Zero Carbon DevelopmentStrategyDetailEmbodied CarbonToday new developments and forward-funding deals must align withLaSalle’s sustainable development standards. We will drive down theembodied carbon impact of our developments through bettermeasurement, innovative materials and supply chain collaboration We will undertake whole life carbon assessment ofnew developments at the pre-design stage, seeking tointegrate circular economy principles as much aspossible.We will engage with suppliers to provide moregranular data on the materials used in developmentto support whole life carbon assessments.We will set stretching embodied carbon intensitytargets (50% reduction in kgCO2e/m2 against typicalpractice for developments from 2030). We will better measure the proportion of materialsfrom re-used sources and increase it to 50% by 2030.From 2030 buildings will be designed to enable 80% ofmaterials to be re-used at their end of lifeWe will develop an internal carbon price on newdevelopments and create ring-fenced capital for aretrofit fund for the standing portfolio.NET ZERO CARBON PATHW AY 9

Net Zero Carbon DevelopmentStrategyDetailOperationalCarbonWe seek sustainable building certification for all developmentprojects today. We will continue to ensure that our developmentactivity delivers efficient, high quality spaces that are resilient tochanging occupier and investor demands We will ensure new developments are built to ouragreed 2030 energy use intensity performancebenchmarks or equivalent DEC/NABERS rating inoperation.We will use a NABERS Design for Performanceapproach for developments above a threshold size.This will involve setting an ambitious ‘base building’energy performance target at pre-design stage,working across the supply chain to deliver thisperformance and transparently verifying performancepost-occupancy. On-site renewable technologies will be ‘designed-in’to new developments.We will ensure heating and hot water generation isfossil fuel free in all developments by 2030.NET ZERO CARBON PATHW AY 10

Net Zero Carbon OperationStrategyDetailLandlord energyOur long-running Sustainability Management Programme alreadydelivers high sustainability credentials and asset performance. Wewill continue to reduce consumption to align with NZC definitions We will undertake net zero carbon audits of assets torefine cost and performance impacts of measures todeliver net zero performance.We will use our digital transformation programme tosignificantly improve the coverage of meteredenergy data.We have developed whole-building energy useintensity targets for each asset tailored to location,asset class and other contextual factors. These arealigned with CRREM’s 1.5 degree pathway for 2025 and2030, as well as any local country-specific regulationwhere applicable. We have existing water and waste targets by asset.These will be updated to align with our net zero carbongoals.We have completed modelling of the technicalpotential and retrofit costs of all electric heating andcooling and on-site renewables for all of our assetsand will build these measures into asset plans,alongside other energy, water and waste measures.We will prioritise 10-15-year renewable energy powerpurchase agreements (PPA) for residual grid importsby 2025 otherwise 100% green tariff backed electricity.NET ZERO CARBON PATHW AY 11

Net Zero Carbon OperationStrategyDetailTenant energyWhile we have less operational control over the energy use of ourtenants, we can support them in reducing their consumptionthrough green leases, fit-out guides and sustainability forums We will promote green lease clauses that foster acollaborative occupier-landlord relationship,supporting better access to energy data, smartmetering, the procurement of 100% renewableelectricity for occupiers, improved waste and deliveryservices and knowledge sharing and training onsustainability. These must promote mutuallysupportive relationships. We will consider whether green lease clauses are anappropriate mechanism to capture and managetenant embodied carbon impacts from fit-outs.We will tighten occupier fit out requirements byupdating fit out guides. These will provide guidance onlow carbon heating, cooling, lighting systems andsustainable materials.We will ensure sub-metering for the majority oftenant consumption by 2030.NET ZERO CARBON PATHW AY 12

Net Zero Carbon OperationStrategyDetailSupply chainOur asset management guidance already actively promotessustainable practices in our assets. We will strive to better measureand report the emissions from asset management activities and towork with suppliers who are aligned with us in terms of sustainability We will baseline our emissions from our supplychain activities to understand our starting point,including our third-party procured services.We will revise our Supplier Code of Conduct toincentivise suppliers to measure the GHG footprint oftheir operations, verified via third party standards, ormake it a selection requirement in procurementexercises. We will incentivise suppliers to evidence year-on-yearimprovements in carbon intensity or to have carbonneutrality certification/science-based target.NET ZERO CARBON PATHW AY 13

Net Zero Carbon RefurbishmentStrategy DetailOur Sustainable Development Principles promote best practice in relation toconstruction and materials in refurbishments. We will continue to reduce thecarbon impact of our refurbishment activity – prioritising low carbon materials,plant and equipment and pushing our suppliers We will undertake a whole life carbon assessment ofrefurbishment projects, seeking to integrate circulareconomy principles as much as possible.We will work with suppliers to gain access to moredetailed breakdowns of material used inrefurbishments and maintenance for the assessmentof embodied carbon impacts.We will revise our Supplier Code of Conduct toincentivise suppliers to measure the GHG footprint oftheir operations, verified via third party standards, ormake it a selection requirement in procurement exercises. We will also incentivise suppliers to provideEnvironmental Product Declarations for materials,plant and equipment or a product carbon footprintcertified by a third party.We will incentivise suppliers to evidence year-on-yearimprovements in carbon intensity or to have carbonneutrality certification/science-based target.We will develop an internal carbon price onembodied carbon from major refurbishments andcreate ring-fenced capital for a retrofit fund for thestanding portfolio.NET ZERO CARBON PATHW AY 14

Net Zero Carbon DisposalStrategy DetailOur Sustainable Investment Principles already recognise that physical andtransitional climate risks are likely to render some assets ‘stranded’. Wewill dispose of assets in a responsible way, ensuring that the buyer is wellequipped to continue the asset’s pathway to net zero carbon We will investigate ways to include carbon strandingrisk in investment hold/sell criteria in line withindustry best practice. We will provide at least 12 months of operationalenergy data to buyers and share as much informationas possible on each asset’s net zero carbon pathway toensure a smooth transition of energy managementresponsibilities.NET ZERO CARBON PATHW AY 15

Challenges and solutionsWe recognise thatdelivering this strategy willbe a challenge and requireus to reconsider ourapproach to investment,asset management anddevelopment. In developingthe strategy we haveconsidered our approach inresponse to mitigate risk01Accessto dataAspects of our carbon footprint are currently estimated usinga benchmark approach as primary data is not available. Weare increasing the coverage and quality of data to ensurethat carbon impacts can be more robustly assessed.02Engagementof keystakeholdersThe buy in of key stakeholders to the strategy – most notablyoccupiers and investors – will be critical. Engagement withtenants and suppliers is therefore a key feature within thestrategy.03EmbodiedcarbonOur understanding of our embodied carbon impact is morelimited compared to operational carbon. We are still in theearly stages of establishing a baseline and consistentmeasurement to assess construction carbon impacts.04ChangingmarketThe definition of net zero carbon in commercial real estate isundergoing continual evolution. We continue to activelyengage in industry conversations around this topic.05Costs todeliverOur modelling of the European portfolio has identified someasset classes for which the costs of delivering net zero carbonperformance may be commercially challenging. This will feedinto our investment strategy.Lack ofdesign controlWe often forward fund new developments and, in thesecases, have limited control over the projected carbonperformance of the end-product. We are exploring how wecan best influence the embodied and operational carbonwhen following this model.06NET ZERO CARBON PATHW AY 16

Early successesWe have a strong track record indeveloping and managing sustainableproperty. From our exceptionalSustainability ManagementProgramme, to ground-breaking newdevelopments employing innovativematerials and construction method,our recent experience will serve us wellas we mobilise our strategyMAISON BAYARD60 LONDON WALLOur Sustainability Management Programme (SMP)supports our ambition of delivering energy, carbon, waterand waste reductions across our large and diverse Europeanportfolio. It covers 192 assets and 2.2 million m2.Maison Bayard is located on the site of the former RadioRTL headquarters in the ‘golden square’ of Paris. This lowcarbon, hybrid timber design, comprising 8,400m2 will bethe first wooden building in the Paris Business District and iscertified “Bâtiment Bas Carbone”. The project will have alower embodied carbon impact than conventional materialsand the construction materials will be re-usab

Our net zero carbon pathway is the result of a major collaborative effort across the business, detailed technical modelling of our European portfolio and a review of what net zero really means for the industry today. While the economic effects of COVID-19 quite rightly sit at the forefront of

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