From responsibility to opportunity – how commercial real estate companies are tackling climate change and finding opportunities for themselves and their tenants.
Buildings operations account for 28% of CO2 emissions by sector. Recognizing the role they play, real estate management companies are stepping up to tackle climate change. The good news is that reducing emissions can lower operating costs, presenting a significant opportunity for the sector.
Embarking on the journey towards sustainability can be daunting; luckily, resources from industry consortiums can help show the path. Emissions data from their own portfolio and databases containing a wealth of information from other similar buildings help optimize the transition, and financing options provide the funding to make it possible. Compliance requirements and pressure from investors and customers provide additional impetus to start the journey. Certifications and awards help recognize achievements.
Net Zero Emission Buildings
The U.S. Department of Energy (DOE) has developed a National Definition of a Zero Emissions Building
—a building that is highly energy efficient, does not emit greenhouse gases directly from energy use, and is powered solely by clean energy.
National Definition of a Zero Emissions Building – Part 1 Operational Emissions from Energy Use – Part 1 of the Definition sets criteria for determining that a building generates zero emissions from energy use in building operations. By the definition, at a minimum, a zero emissions building must be energy efficient, free of onsite emissions from energy use, and powered solely from clean energy. Future parts of this definition may address emissions from embodied carbon (producing, transporting, installing, and disposing of building materials) and additional considerations.
Industry Resources
Several industry and government organizations provide frameworks, and guidelines to implement sustainable operations and recognize achievements through certifications and awards.
GRESB is an organization that produces internationally recognized benchmarks to track environmental, social and governance (ESG) performance of commercial real estate and infrastructure.
Better Buildings is a US Department of Energy (DOE) initiative that partners with leaders in the public and private sectors to make the nation’s homes, commercial buildings, and industrial plants more energy-efficient by accelerating investment and sharing successful best practices.
U.S. Green Building Council® (USGBC) – provides guidelines for high-performance and sustainable buildings.
Decarbonizing the U.S. Economy by 2050: A National Blueprint for the Buildings Sector | Department of Energy – The U.S. Department of Energy led the development of a Blueprint for decarbonizing U.S. buildings by 2050 to lay out a national strategy for aggressively reducing building greenhouse gas emissions while delivering equity, affordability, and resilience benefits to communities. The vision includes action the federal government can take to meet specific targets for increasing building energy efficiency, accelerating onsite emissions reductions, transforming the grid edge, and minimizing embodied life cycle emissions.
SBTi – Buildings Sector Science-Based Target-Setting Criteria – the science-based decarbonization framework for corporates and financial institutions that own, develop and finance buildings.
Portfolio-Wide Emissions Data and Benchmarking
Collecting portfolio-wide energy use data and computing greenhouse gas emissions provides the foundation needed to develop a data-driven action plan to reduce carbon emissions and improve operations. Tools like the ENERGY STAR Portfolio Manager, compare a building’s energy performance to similar buildings nationwide normalized for weather and operating characteristics. A score of 50 represents median performance. A higher score indicates better performance, while a lower score indicates worse performance. Additionally, measuring energy and carbon intensity can provide valuable insights into a building’s performance.
Emission Reduction Action Pathways
Companies are taking different emission reduction actions to improve building performance by improving energy efficiency and switching from fossil-fuel to electric-powered systems, combined with renewable energy sources.
Energy-efficiency actions such as upgrading insulation, installing high-efficiency HVAC systems, and replacing lighting with LED lighting optimize energy use. Electrification of systems by using heat pumps and electric water heaters where available further reduces emissions.
Energy Efficiency Tips for Buildings
Improving energy efficiency in buildings is a crucial step in reducing Scope 1 and Scope 2 emissions, which include those from building heating and electricity. This underscores the significant role buildings play in emission reduction targets.
Energy efficiency audit: An energy efficiency audit creates an important baseline for a business to identify improvement opportunities. An energy audit will identify potential energy-saving opportunities in buildings and provide the technical and financial information (e.g., upfront costs, ongoing costs, projected energy savings, return on investment, etc.) that decision-makers need to evaluate and approve energy efficiency, electrification, and grid interactivity retrofits.
There are three types of energy audits:
- Level I – Walk-Through Analysis: Focuses on low- and no-cost energy conservation measures and provides a list of higher cost energy conservation measures. Typically, these audits will result in a report about how much energy and money can be saved from specific efficiency opportunities.
- Level II – Energy Survey and Analysis: Includes more detailed energy calculations and financial analysis of proposed energy efficiency measures. You are typically provided with a list of energy conservation/efficiency measures, an estimate of the amount of money and energy that will be saved, and a cost estimate for each.
- Level III – Detailed Analysis of Capital-Intensive Modifications: Expands on the previous levels of effort and is based on a specific subset of energy conservation/efficiency measures to analyze further
⚡ EPA’s ENERGY STAR Portfolio Manager is a free online resource for tracking your property’s energy use. When you use it to benchmark, it will generate a 1-100 ENERGY STAR score rating your property to the national median energy use for similar properties. This will be a useful perspective for you and your auditor
Tools and platforms that combine and automatically analyze the data from energy meters, equipment sensors, and building automation systems, notify staff of the issues causing energy waste in buildings and enable continuous monitoring, proactive maintenance, and implementation of energy conservation measures.
Property managers are installing on-site solar to produce renewable energy or working with utility companies to develop off-site renewable energy projects through power purchase agreements. Purchasing Renewable Energy Certificates (RECs) is another way to access renewable energy.
Financing Options
Energy efficiency upgrades and renewable energy projects require upfront capital investment. Federal, state, and local tax incentives and other financing options help with these capital needs.
A couple of resources for financing are:
Database of State Incentives for Renewables and Efficiency (DSIRE)
A comprehensive database to find city, state, federal, and utility incentives and policies related to energy efficiency and renewables. The database includes financial incentives such as tax incentives, rebates, grants, loans, etc., in addition to policies such as efficiency, construction, and design standards and building energy codes.
Property Assessed Clean Energy (PACE): PACE is a financing structure that helps companies with upfront costs. Under PACE financing, municipal governments provide upfront capital for energy efficiency measures and renewable energy installations. The companies reimburse the municipality over a given period (typically 5-25 years) through adjustments to the company’s property tax.
Certifications and Recognitions
Real-estate management companies can demonstrate their achievements with certifications for the property. Certifications include:
- Energy Star Certification – An ENERGY STAR score of 75 or higher on EPA’s 1 – 100 scale, indicating that it performs better than at least 75 percent of similar buildings nationwide.
- LEED Certification (Certified, Silver, Gold or Platinum) – earned for overall sustainability addressing carbon, energy, water, waste, transportation, materials, health, and indoor environmental quality.
- Green Lease Leaders (Silver, Gold or Platinum) Recognition – Collaborative lease agreements with tenants and improved building performance and energy management best practices.
Building decarbonization requires a comprehensive approach involving fully understanding building operations, through emissions accounting and benchmarking. The data is used to implement reduction action pathways such as energy efficiency, electrification, and renewable energy. By adopting these strategies, building owners and managers reduce their environmental impact, lower operating costs, and provide a better experience for tenants.
