HONG KONG SAR - Media OutReach - 4 November 2021 - The real estate sector has a significant role to play in addressing the implications of climate change following the sobering assessment of climate risk by the UN's Intergovernmental Panel on Climate Change (IPCC) and ahead of the upcoming COP26 summit in Glasgow. In its recently released report titled Climate Risk in Asia Pacific: Real (E)state of Emergency, Cushman & Wakefield looks at the current state of climate risks and these impacts on real estate, market drivers and pathways to meaningful climate action in the region, as well as how property firms can navigate their journeys of lower emissions and climate risk management.
The Sixth Assessment Report (AR6) of the UN's Intergovernmental Panel on Climate Change (IPCC) released in August 2021 highlighted worsening climate change, imploring for more rapid reduction of carbon emissions to avoid potentially catastrophic impacts to the planet. The UN labelled the report a 'code red' and climate experts said it had effectively brought forward the risks that were forecast to arrive in 30 years, to just 10 years.
"What the AR6 has told us is that extreme weather events and accompanying regulation and litigation are going to happen significantly sooner than we had anticipated, and that's a wake-up call," said Rebecca Jinks, Head of Sustainability, Australia at Cushman & Wakefield. "While the report said that global warming of at least 1.5 degrees Celsius is inevitable, if the world moves to rapidly cut emissions and achieve net zero by 2050, this can limit further global warming."
According to the report, the built environment demands around 40% of the world's extracted materials, while waste from demolition and construction represents the largest single waste stream in many countries. Building and construction are responsible for 39% of global carbon emissions, with operational emissions accounting for 28%. The remaining 11% comes from embodied carbon emissions, or upfront carbon that is associated with materials and construction processes throughout the building lifecycle and value chain. Reducing carbon emissions associated with the property industry is therefore crucial throughout the property's life cycle from the initial planning and investment, to building operations, refurbishment and final demolition.
There is further impetus for the property industry in Asia Pacific to act as many of the world's most emissions-intensive economies reside in this region. Governments and the private sector across Asia Pacific are also moving to mitigate the cause and effect of climate change, with the property industry traversing this divide.
The financial and non-financial risks of climate change are also sharply rising which is driving demand for sustainability due diligence and mitigation planning among real estate investors. While new buildings generally perform higher on sustainability metrics, most buildings in Asia Pacific economies are ageing. However, it takes fewer emissions to upgrade existing stock which presents significant overall emissions reduction opportunities.
According to Alton Wong, Co-Head of Sustainability Services Platform, Greater China, Cushman & Wakefield: "The large pension funds are placing pressure on developers and owners to adopt strong ESG principles to attract their investment. Additionally, the government and local authorities in China are encouraging owners and developers to address property sustainability, both from a development perspective and operationally.
Cushman & Wakefield has seen a significant increase in investor and owner enquiries for support on embedding ESG due diligence screening into existing processes to evaluate existing or prospective investments. To address these enquiries, the firm has adopted the following approach to support clients through their journey of climate change related to financial and non-financial risk management:
- Identify and manage: Portfolio ESG Materiality Assessment or asset Climate Change Due Diligence review to identify risk and opportunities.
- Monitor: Regular reporting of ESG scorecard and performance metrics.
- Scenario Analysis: Portfolio and asset level scenario analysis and mitigation planning.
- Manage Risks: Support developing plans to mitigate materiality and scenario analysis associated risks or issues.
- Report & Disclose: Regular and annual reporting of ESG performance metrics, including frameworks such as GRESB and CDP.
Cushman & Wakefield has also committed to industry-leading science-based targets and reaching net zero emissions across its value chain by 2050. They will be focusing their efforts on its corporate offices and operations by committing to reduce absolute scope 1 and 2 market-based GHG emissions 50% by 2030 from a 2019 base year. The firm's science-based targets will not only reduce absolute GHG emissions from its corporate operations, but will also include the facilities it manages on behalf of its clients, some of the world's largest real estate owners and occupiers.
Leading by example, the firm commits to partnering with its clients (representing 70% of its scope 3 value chain emissions) to set their own science-based targets by 2025. Notably, approximately 99% of Cushman & Wakefield's emissions come from facilities it manages on behalf of clients, and the firm is committed to actualizing its vision of a sustainable future that extends beyond its own corporate footprint.
Additionally, by 2050, the firm pledges to achieve net zero emissions across its entire value chain, encompassing all direct and indirect business elements that contribute to GHG emissions (scopes 1, 2 and 3). This target was pledged through the Race to Zero campaign and the SBTi's Business Ambition for 1.5°C pathway—initiatives using climate science frameworks to reach net zero in a global effort to avoid the most catastrophic impacts of climate change.
Click here to download Climate Risk in Asia Pacific: Real (E)state of Emergency.