The past decade has seen a staggering increase in the number of companies making public commitments about their carbon footprint. With roughly 40% of carbon emissions coming from buildings, no industry is more under pressure to make this commitment than the real estate industry. Since the 2015 Paris Agreement set a goal of achieving net-zero global carbon emissions by 2050, decarbonization goals and efforts have accelerated around the world. In the United States, some of the largest real estate developers and operators have set ambitious targets to significantly reduce their carbon emissions and reach net-zero by certain milestones. Here, we look at some of the most ambitious commitments made by industry giants and analyze their content and progress to date.
Clarion Partners
New York-based real estate asset management company Clarion Partners signed up to the Urban Land Institute (ULI) initiative in 2021, committing to reach net zero. The program, administered through ULI's Greenprint Building Performance Center, involves reducing scope 1 and scope 2 greenhouse gas emissions to net zero by 2050. The company is also looking at scope 3 emissions, which are indirectly generated by the company and are notoriously difficult to calculate, and is exploring additional targets. Clarion's roadmap to achieve its goal is through seven areas: greenhouse gas management, energy efficiency and conservation, on-site renewable energy, off-site strategies, new developments and major renovations, building electrification, and employee and tenant engagement.
Clarion tracks its ESG and net-zero progress in its annual report to shareholders. According to its latest report in October 2023, the company is updating its entire portfolio of more than 1,480 properties to be more energy efficient. Approximately 60% of Clarion's portfolio (250 million square feet) is industrial, with the remainder consisting of residential, office, retail, life sciences and hospitality. In 2023, Clarion achieved Energy Star certification for 75 buildings and initiated 241 energy efficiency projects, including piloting shadow meter projects at 40 industrial sites and launching an LED lighting retrofit program. The addition of rooftop solar is a big part of Clarion's onsite renewable energy strategy, and the company now has 31 MW of solar installed on rooftops across its portfolio.
Nuveen
Nuveen, the global investment management arm of parent company TIAA, committed in 2021 to achieve net-zero carbon emissions across its global portfolio by 2040. One of the world's largest real estate owners, Nuveen manages more than $133 billion in real estate assets. The company also aims to reduce its properties' energy consumption by 30% by 2025, updating its original goal of 2030. According to the company's latest progress update, it is on track to exceed the goal. Energy intensity has been reduced by 22%, putting it on track to meet its goal of a 30% reduction by 2025. Nuveen has already met its 2025 goal of collecting whole-building data on 50% of its managed assets in Europe and Asia Pacific, and is also closing in on this in the United States, where it has collected data on 45% of its assets.
Nuveen's affiliate, Nuveen Green Capital, was founded in 2015 and has been very active in the green lending space, particularly with the C-PACE program, which has seen strong demand recently. The platform currently manages $1.7 billion in private capital and is driving the expansion of the C-PACE program at both the state and national levels. At Nuveen and parent company TIAA's New York headquarters (730 Third Avenue), the company recently began a $120 million relocation that included replacing all windows with smart windows, upgrading lighting, and several other energy efficiency improvements.
Bentall Green Oak
Like other large investment managers, Bentall Green Oak (BGO) has committed to achieving net-zero emissions across its commercial real estate investment portfolio by 2050. The Miami-based firm, the real estate investment arm of Sun Life Financial, said it signed onto the Net Zero Asset Managers Initiative in 2021 and will review its targets at least every five years. The firm's interim goals for 2030 for its core North America strategy include a 72% reduction in scope 1 and 2 greenhouse gas emissions, a 50% reduction in residential investment greenhouse gas emissions and a 57% reduction in commercial investment greenhouse gas emissions.
BGO conducts an annual sustainability benchmarking program to track sustainability data at the property level. This data is used to assess and address climate-related risks. The company says it has reduced its Scope 3 emissions by 20% since 2019. Earlier this year, BGO completed construction of the first all-electric, net-zero industrial building in Ontario, Canada. The 234,000-square-foot building features an all-electric HVAC system, a 500-Kw rooftop solar array, and an efficient building envelope. The company says the property's annual operating costs are expected to be 59% lower than a traditional new build.
Hines
Houston-based Hines announced in 2022 that it aims to be a net-zero operation by 2040 without using offsets. The global real estate company plans to use renewable technologies to reduce emissions and invest heavily in sustainable initiatives across its portfolio of 1,530 properties in 28 countries around the world. In its latest ESG report covering 2022, the company reported that it is making progress in expanding its T3 projects that use renewable wood, has begun developing an internal carbon impact assessment tool, issued its first green bond report, and has begun drafting an internal guide on operational carbon. Hines also rolled out EXP by Hines, a platform for investing in ESG products and innovative early-stage companies in the commercial real estate space.
One of Hines' most sustainable and energy-efficient properties is 555 Greenwich, a Manhattan office building that opened last fall. The 16-story property, being developed in partnership with Hudson Square Properties, is believed to be one of New York City's first office developments to create a circular energy infrastructure. The building integrates geothermal piles, thermally activated radiant slabs, a dedicated outdoor air system and an all-electric heating system to reduce carbon emissions and improve occupant comfort. According to Hines, the project exceeds New York City's 2030 office building climate goals by more than 45 percent and aligns with New York State's 2050 carbon neutral goal.
Prologis
Prologis, the largest owner and developer of industrial and logistics facilities in India, has been an industry leader in decarbonization efforts. The company has committed to achieving net-zero greenhouse gas emissions across its portfolio by 2040 and is making steady progress towards that goal. According to the company's latest ESG report, Prologis is on track to reduce Scope 1 emissions by 25%, Scope 2 emissions by 99% and Scope 3 emissions by 29% in 2023 from its 2019 baseline. The industrial giant has also added LED lighting to 74% of its portfolio, installed over 500MW of solar PV and storage capacity, and has achieved or is in the process of achieving sustainable building certification for 96% of its projects.
Last year, a warehouse developed by Prologis in the Netherlands became the first industrial building to receive zero-carbon certification from the International Living Future Institute. Eindhoven DC4, completed in 2020, has net-zero carbon emissions and generates more electricity than it consumes. Built on the site of a former waste dump, the building was constructed using sustainable building materials that incorporate an all-electric heating system. The concrete used in the building's foundations was responsibly sourced, and the project used nearby suppliers to further reduce the carbon footprint of its construction. After the building was completed, Prologis collected data and analyzed it to confirm the building's high sustainability.
While these companies represent the industry's most high-profile net-zero pledges, there are many more companies in the commercial real estate industry that are stepping up their sustainability efforts and setting their sights on net-zero pledges. The number of companies making net-zero pledges is expected to continue to grow, as increased regulation and the impacts of climate change increase the need to curb greenhouse gas emissions around the world. Another big driver of these decarbonization pledges is the fact that carbon neutrality is mandated in many parts of the world where the industry's largest players own properties. But, as is often the case, the big challenge to achieving these goals lies in the implementation. And as long as companies are regularly tracking their progress and sharing updates, we'll at least know how well they're doing on their pledges.