A report by BlackRock Alternative Investors and U.K. banking firm NatWest Group PLC to find out how the net-zero transition will impact the U.K. real estate sector and investors there highlights how much more there is to know.
Emerging technologies to decrease real estate’s carbon footprint, such as advanced data monitoring, energy efficiency measures and renewable energy sources, will help as more companies, governments, lenders and investors commit to a more sustainable transition, but it will take industrywide collaboration, said the London-based co-authors of the report, Simon Durkin, head of European real assets research and strategy for BlackRock, and Charlotte Foster, managing director of real estate finance, large corporate, for NatWest.
Real estate investors will also benefit from advances in data monitoring and collection, but the challenges are not insignificant, the authors said. Any delay in retrofitting commercial buildings could make decarbonization increasingly impossible, they warned. Pressure from U.K. and European regulators and investors to make real estate cleaner could also mean more expensive debt.
“Action needs to be taken immediately to prevent these assets from becoming stranded” if improving real estate becomes financially unviable, the authors warn. Increasing the share of renewable power available to building users will be key, along with better information on buildings’ energy profiles and more uniform industry standards, the authors said.
KKR & Co. Inc. has an education program for its portfolio companies to help them understand and manage climate risk, including measuring greenhouse gas emissions and considering carbon offsets.
KKR recently joined the Initiative Climat International, a global community of investors seeking to understand and manage climate risks, and helps to run the private equity working group at climate advocacy group Ceres that is helping general and limited partners address the impacts, risks and opportunities of climate change in alignment with the goals of the Paris Agreement.
Physical climate risk has been a KKR priority for more than a decade, said Ken Mehlman, partner, global affairs head and co-head of KKR Global Impact, a fund investing in climate action and other sustainable themes. “If you are investing in oceanfront property, it’s important, but it’s also important if you are investing in other places that could be impacted by supply chain issues. Managing exposures to extreme weather is increasingly important. We hear this from our LPs and our public investors,” he said.
“More broadly, climate risk and opportunity is something we intend to continue increasing our focus on across all the investments we make,” Mr. Mehlman said.
When it comes to addressing physical climate risk, “we do see more movement on the private (investment) side,” said the Rev. Kirsten Snow Spalding, senior program director of the Ceres Investor Network in Berkeley, …….