Net Zero Carbon Portfolio
The built environment is responsible for close to 40% of global carbon emissions. Despite the relatively tiny scale of our assets under management in the context of the global built environment, we strongly believe that every little bit counts. Therefore, we have a responsibility to find environmentally-friendly solutions and reduce carbon emissions.
We are committed to making our entire portfolio Net Zero Carbon by 2040. Our ‘Mission 2040’ campaign is aligned with the World Green Building Council’s definition of Net Zero Carbon. This states that buildings should be highly energy efficient and fully powered from on-site and/or off-site renewable energy sources. We follow the four steps below, which have also been described and communicated in our visual roadmap.
Step 1: New platform to measure and disclose energy consumption
The first step to reaching a Net Zero Carbon portfolio is to know where we currently stand in terms of our assets’ energy consumption and emissions. To do this, we have partnered with Fabriq, a digital platform that allows us to capture and analyse energy and other environmental data across all of our assets, enabling us to view our entire portfolio in a single dashboard. As we have started to link different data sources (such as smart metres and other billing data) to the platform, we are gaining a comprehensive overview of our portfolio’s current energy performance. We aim to have 80% of our portfolio connected to the Fabriq platform by the end of 2021.
Step 2: Reduce energy demand
Reducing energy demand is a critical step in achieving Net Zero Carbon buildings. This is addressed by taking a ‘fabric first’ approach, which entails optimising the building fabric in areas such as airtight, well-insulated façades and roofs and the optimal use of daylight. This should result in reduced operational energy demand and consumption. Furthermore, when redeveloping a building, our preferred option is to disconnect it from fossil fuel supplies. 18 Septemberplein in Eindhoven, the Netherlands is a good example of this type of redevelopment project. We took several measures to improve the energy efficiency, and we disconnected the asset from natural gas during the redevelopment. You can read more about this redevelopment in the case study.
Step 3: Generate balance from renewables
Renewable energy generation must be taken into consideration during the design and redevelopment of buildings. This should not only include solar PV studies for roofs and façades but must also look at any other fossil-free option to generate electricity on-site. In 2020 we launched Project Solar together with our shareholder COFRA Holding. Project Solar provides clean, on-site energy generation by installing solar panels on the roofs and carparks of the retail park assets that we manage for COFRA in Belgium.
Step 4: Embodied carbon, especially upfront embodied carbon, must be taken into consideration when (re)developing assets
Whilst steps 2 and 3 outlined above are clearly intended to drive down operational energy consumption and corresponding CO2 emissions. However, the built environment sector is fast recognising that (upfront) embodied carbon – emissions related to the materials, transport and construction of real estate assets – is also a significant contributor to overall emissions and must be mitigated as much as possible. It is our intent to work with our supply chain partners (architects, advisors and construction companies) in the years to come to take a more deliberate approach to reducing the embodied carbon related to our redevelopment projects. As this is still fairly new terrain for the real estate sector, we all need to learn how best to measure, record, reduce and report on embodied carbon emissions. We look forward to reporting on our progress in future editions of our Responsible Investment Report.
Four signature projects
We have selected four signature projects to demonstrate how we can achieve Mission 2040. As we learn by doing, these signature projects will identify the actions needed to make buildings Net Zero Carbon (NZC).
- Retail transformation project in Hamburg, Germany. A building in the heart of the shopping district of Hamburg will be demolished and rebuilt to create a NZC mixed-use landmark. The architect for this project will be selected in Q2 2021.
- On-site renewable energy generation project. We have joined forces with our shareholder COFRA Holding to initiate a large-scale, on-site renewable energy generation project called Project Solar. This will help us provide clean, on-site energy generation by installing solar panels on the roofs and carparks of the retail park assets that we manage for COFRA in Belgium. This initiative is an expression of our efforts to contribute to UN’s SDG 7 – Affordable and clean energy. The project team expects to complete approximately ten solar installations by the summer of 2021. These projects have a total capacity of around 2.1 MWp* of energy per year which equals the average energy consumption of approximately 200 households. Projects with a further capacity of about 5 MWp are in the pipeline for the second half of 2021.
- Inner-city shopping centre project in Bordeaux, France. We have committed to operating this existing, recently redeveloped, multi-tenanted asset at Net Zero Carbon level by 2030. We have engaged a specialist consultancy, who undertook a full site survey to establish key requirements and write an action plan outlining key deliverables to bring the asset to NZC in 2030. After the successful installation of smart metering, we have now entered the next phase where we will be looking at making both physical and operational improvements to the asset.
- Residential development project in Amstelveen, the Netherlands. This residential project consists of 172 rental homes, parking spaces and a commercial space. The total complex consists of two towers on a shared parking garage. The second tower contains 130 homes that will be sold by the developer. The final design will be ready in the summer of 2021 and construction is planned in the period 2022-2025.
BREEAM is a well-recognised, international standard that takes a holistic approach to measuring the environmental performance of real estate assets. We make the explicit assumption that a higher BREEAM In-Use rating translates into greater positive environmental impact, improves resilience, reduces the risk of long-term obsolescence, ensures compliance with incoming legislation, and helps to enhance – or at least sustain – the value and quality of our property portfolio. In recent years (see our previous Responsible Investment Reports) we have deliberately focused on improving the BREEAM In-Use ratings of a number of assets every year through redevelopments or other specific interventions that have yielded additional credits and a higher rating. This approach to continuous improvement has been our way of ‘future-proofing’ our assets under management on behalf of our investor clients.
In 2020, we improved the BREEAM In-Use ratings of 27 properties, one asset more than targeted for the year. Eight properties were downgraded this year. However, our country teams still found opportunities to further improve the assets under management. A great example is the improvement of the BREEAM rating of our asset at James Street in London from ‘Pass’ to ‘Very Good’. Besides replacing all lighting in the common parts to LED lighting and executing HVAC (heating, ventilation and air conditioning) efficiency measures, we created a green wall and green roof. In addition to the ecological benefits, this is also a physical symbol of sustainability and greening our portfolio. It was the largest single cost item, however it is also the greatest single contributor to the improved score.
2020 also marked the point that we achieved our target of having more than 50% of our assets under management (by value) certified with BREEAM ‘Very Good’ or better. We are very proud of this achievement as this was originally set as a medium-term target to be achieved before the end of 2022.
As a result of Mission 2040 and our desire to make deliberate choices to drive down carbon emissions related to our assets under management we will be focusing on KPIs that reflect that desired outcome from 2021 onwards. Over the past four years we have been recertifying the vast majority of our portfolio on an annual basis, even when nothing at the asset-level has changed. Going forward, we will no longer be certifying all assets under management in a yearly cycle. Instead, we will only certify assets when these are newly acquired or when significant redevelopments have been undertaken. This will allow us to understand the actual environmental performance of newly acquired assets and to identify improvement opportunities. When we undertake significant redevelopments, the certification process will help us look at sustainability holistically as we ‘future-proof’ the assets.
Ambition for BREEAM In-Use ‘Excellent’ redevelopment ratings
In light of the above approach, we have also raised the bar for significant redevelopments to deliberately target BREEAM In-Use Excellent. Redevelopments represent moments in its lifecycle in which we can have the biggest impact on an assets’ performance. In 2020 we completed the redevelopment of a C&A Flagship Store in Zurich. The renovation comprised better insulation and glazing as well as more energy efficient technical HVAC installations which has resulted in a reduction of energy consumption in this building. In addition, we created a new green terrace for employees use. The green roof was made by a specialist who planted native plants creating a habitat, hiding place and food supply for native insects/animals. The redevelopment has transformed it into an energy-efficient property, with a BREEAM In-Use Excellent sustainability rating.
Challenges we identified
The transition to a Net Zero Carbon portfolio is one of Redevco’s top priorities, but we are also aware that this transition will be characterised by uncertainties, changes and risks. We have to recognise that the entire built environment sector is still learning how to tackle the energy transition, along with the uncertainties that come with it such as the pace of energy transition, government policies, technological developments and changing consumer behaviour.
Collaboration with tenants
At Redevco, we understand that building and maintaining strong relationships with our tenants is key. We therefore focus on successful collaboration with tenants during the planning and execution of our improvement projects. This early engagement approach doesn’t just lead to better tenant relationships – it has also proven to lead to better environmental outcomes as well as increased tenant engagement.
Collecting reliable and accurate data
Obtaining reliable and accurate data to find out where we stand today remains challenging. Over the years, we have been collecting energy consumption data from our tenants directly, a process that was both laborious, time-consuming and that added little value to our tenant relationship: we simply did not have the tooling to report back. However, reliable and accurate energy and emissions data underpins Mission 2040 and our drive to becoming Net Zero Carbon. We have therefore committed to installing smart meters in all our properties, connecting this to local and a pan-European platform. This will allow us to report and engage with our tenants on energy consumption and energy saving opportunities and will help us report on progress towards our Mission 2040 target.