Real estate investors failing to take ‘basic steps’ to address climate change

Despite rising climate risks to their portfolios, real estate investment managers fall short on actions to tackle the crisis, according to new research by ShareAction.

The organisation, which campaigns for responsible investment, ranked 16 real estate investment managers on 12 key standards for climate action – including net zero targets, decarbonisation strategies and public disclosures.

It found that each standard was met by at least one investment manager, but nine of the 16 managers – who collectively have over US$1.66 trillion in assets under management – didn’t meet even half of them.

Some of the largest firms – Blackstone, Starwood Capital Group and Greystar – failed to achieve any of the key standards, ranking last in the benchmark. Meanwhile, only one firm – Denmark’s Nrep – was able to achieve every one of the 12 standards.

Managers in the top half of the ranking have all set science-based targets, created decarbonisation plans, and transparently disclose their emissions: they include Savills Investment Management, Patrizia, Heimstaden and Prologis, as well as Hines and CBRE Investment Management.

Aidan Shilson-Thomas, Senior Research Manager at ShareAction, said: “Some of the world’s largest real estate investment managers are failing to act on climate change at a time when rapid action is needed. The construction and operation of buildings account for a staggering third of global emissions, creating financial risks that managers must take seriously. The asset owners they act on behalf of, including pension funds, are relying on them to do so.”

Investors exposed to financial climate risks

By failing to adopt measures such as net zero targets covering Scopes 1, 2 and 3 and interim targets including embodied emissions, using scenario analysis to assess the climate resilience of assets or conducting lifecycle assessments for new developments, these companies are exposing real estate asset owners to significant risks, ShareAction argues.

The report also reveals a concerning lack of transparency from real estate investment managers about their approaches to tackling climate change, with several firms not disclosing the emissions from their portfolios at all, despite making public climate commitments.

It also remains unclear whether investment managers are anticipating and addressing the impacts of decarbonisation on their tenants, the communities they operate in, and workers in their supply chains, as the social impacts of decarbonisation are almost entirely absent from public disclosures.

“A few investment managers demonstrate commitment to climate action, but continued inaction by their peers is pulling the real estate sector further off track from net zero, with devastating consequences for people and planet. Given the size of this sector, we need managers to step up and take responsibility for their impacts, while ensuring workers, tenants and communities are at the centre of plans to tackle climate change,” added Shilson-Thomas.