Carbon risk real estate monitor: making decarbonisation in the real estate sector measurable. Issue 3 (24th July 2020)

• Record Type: Journal Article
• Authors: Spanner, Maximilian M.; Wein, Julia
• Is Part Of: Journal of European real estate research. Volume 13:Issue 3(2020)
• Page Start: 277
• Page End: 299
• Publication Date: 2020-07-24
• Subjects: Risk management -- Commercial real estate -- Science-based targets -- Decarbonisation -- Downscaling -- Carbon risk -- Stranding risk -- Excess emissions; Real property -- Economic aspects -- Europe -- Periodicals; Commercial real estate -- Europe -- Periodicals; Housing -- Finance -- Periodicals; Housing -- Europe -- Periodicals; 333.5068
• DOI: 10.1108/JERER-05-2020-0031
• Languages: English
• ISSNs: 1753-9269

Abstract

Abstract : Purpose: The purpose of this paper is to investigate the functionality and effectiveness of the Carbon Risk Real Estate Monitor (CRREM tool). The aim of the project, supported by the European Union's Horizon 2020 research and innovation program, was to develop a broadly accepted tool that provides investors and other stakeholders with a sound basis for the assessment of stranding risks. Design/methodology/approach: The tool calculates the annual carbon emissions (baseline emissions) of a given asset or portfolio and assesses the stranding risks, by making use of science-based decarbonisation pathways. To account for ongoing climate change, the tool considers the effects of grid decarbonisation, as well as the development of heating and cooling-degree days. Findings: The paper provides property-specific carbon emission pathways, as well as valuable insight into state-of-the-art carbon risk assessment and management measures and thereby paves the way towards a low-carbon building stock. Further selected risk indicators at the asset (e.g. costs of greenhouse gas emissions) and aggregated levels (e.g. Carbon Value at Risk) are considered. Research limitations/implications: The approach described in this paper can serve as a model for the realisation of an enhanced tool with respect to other countries, leading to a globally applicable instrument for assessing stranding risks in the commercial real estate sector. Practical implications: The real estate industry is endangered by the downside risks of climate change, leading to potential monetary losses and write-downs. Accordingly, this approach enables stakeholders to assess the exposure of their assets to stranding risks, based on energy and emission data. Social implications: The CRREM tool reduces investor uncertainty and offers a viable basis for investment decision-making with regard to stranding risks and retrofit planning. Originality/value: The approach pioneers a way to provide investors with a profound stranding risk assessment based on science-based decarbonisation pathways.