The last decade has seen astounding growth in the number of companies making commitments about their carbon footprints. No industry has more pressure on it to do this than the real estate sector, since around 40 percent of carbon emissions come from buildings. Ever since the 2015 Paris Agreements established a global net zero goal by 2050, decarbonization goals and efforts have ramped up worldwide. In the U.S., some of the biggest names in real estate development and operations have set ambitious goals around slashing their carbon footprint and going net zero by a certain target. Here, we look at some of the most lofty commitments from major industry players and break down what they’ve said and the progress they’ve made so far.
Clarion Partners
New York-based real estate asset management firm Clarion Partners made a commitment to going net zero in 2021, when it signed on to an initiative through the Urban Land Institute (ULI). That program, run through ULI’s Greenprint Center for Building Performance, entails reducing Scope 1 and Scope 2 greenhouse gas emissions to net zero by the year 2050. The company is also looking at Scope 3 emissions, emissions indirectly created by a business that are notoriously tricky to calculate and is exploring additional targets. Clarion’s road map for meeting its goal is being undertaken 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 engagement with employees and tenants.
Clarion is tracking its ESG and net zero progress in its annual reports to shareholders. The latest report, from October 2023, shows that the company has been updating properties to be more energy efficient throughout its portfolio, which totals more than 1,480 properties. Around 60 percent of Clarion’s portfolio—250 million square feet—is industrial, with residential, office, retail, life sciences, and hospitality making up the rest. In 2023, Clarion achieved Energy Star certification for 75 buildings and launched 241 energy efficiency projects, including piloting a shadow metering project at 40 industrial sites and kicking off an LED lighting retrofit program. Adding rooftop solar is a big part of Clarion’s on-site renewable energy strategy, and the company currently has 31 MW of solar on rooftops across its portfolio.
Nuveen
Nuveen, the global investment management arm of parent company TIAA, committed to net zero carbon emissions by 2040 across its global portfolio in 2021. One of the world’s largest real estate owners, Nuveen has more than $133 billion worth of real estate assets under management. The company is also looking to slash energy consumption at its properties by 30 percent by 2025, an updated target to its original goal of 2030. According to the company’s most recent update on its progress, it is tracking ahead of its goals. It has reduced its energy intensity by 22 percent, well on its way to its goal of 30 percent reduction by 2025. Nuveen has already surpassed its 2025 goal of capturing whole building data for 50 percent of its assets under management in Europe and Asia Pacific and is close in the U.S., where it has captured 45 percent.
An affiliate of Nuveen, Nuveen Green Capital, launched in 2015 and has been very active in the green lending space, especially with the C-PACE program, which has seen significant demand lately. The platform now has $1.7 billion in private capital managed and has been pushing to scale the C-PACE program on both a state and national level. At Nuveen and parent company TIAA’s New York City headquarters, 730 Third Avenue, the company recently launched a $120 million repositioning that included replacing all windows with smart windows, lighting upgrades, and several other energy efficient improvements.
BentallGreenOak
Like other major investment managers, BentallGreenOak (BGO) committed to net zero emissions across its entire commercial real estate investment portfolio by 2050. The Miami-based firm, which is the real estate investment arm of Sun Life Financial, signed on to the Net Zero Asset Managers Initiative in 2021 and said it will review its target at least every five years. The company’s interim target for 2030 for its core North American strategies includes a 72 percent reduction in Scope 1 and 2 greenhouse gas emissions, a 50 percent reduction in greenhouse gas emissions of its residential investments, and a 57 percent reduction in greenhouse gas emissions of its commercial investments.
BGO conducts an annual sustainability benchmarking program where it tracks sustainability data at the property level, which is then used in assessing and acting on climate-related risk. The company said it has reduced its Scope 3 emissions by 20 percent since 2019. Earlier this year, BGO completed construction of the first all-electric, net zero spec industrial building in Ontario, Canada. The 234,000-square-foot building has all-electric HVAC systems, a 500 Kw rooftop solar array, and an efficient building envelope. Annual operating costs for the property are anticipated to be reduced by 59 percent compared to traditional new construction buildings, according to the company.
Hines
In 2022, Houston-based Hines announced that it was targeting net zero operations by 2040, without using offsets. The global real estate firm is planning to use renewable tech to reduce its emissions and invest heavily in sustainable initiatives through its portfolio of 1,530 properties in 28 countries around the world. In its most recent ESG report, covering the year 2022, the firm reported making progress on expanding its T3 projects, which use renewable timber, began developing an internal carbon impact assessment tool, published its first green bond report, and began drafting an internal guide to operational carbon. Hines also rolled out EXP by Hines, a platform for the firm to invest 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, an office building in Manhattan that opened last fall. The 16-story property, which is being developed in partnership with Hudson Square Properties, is thought to be one of the first office developments in New York City that creates a circular energy infrastructure. The building integrates geothermal piles, thermally active radiant slabs, a dedicated outdoor air system, and a fully electrified heating system to reduce carbon emissions and improve occupant comfort. According to Hines, the project exceeds New York City’s 2030 climate targets for office buildings by more than 45 percent and aligns with New York State’s 2050 carbon neutral targets.
Prologis
The country’s largest owner and developer of industrial and logistics properties, Prologis, has become an industry leader in terms of decarbonization commitments. The company committed to net zero greenhouse gas emissions across its portfolio by 2040 and has been making steady progress toward its goal. In 2023, Prologis reduced Scope 1 emissions by 25 percent, Scope 2 emissions by 99 percent, and Scope 3 emissions by 29 percent from its 2019 baseline, according to the company’s most recent ESG report. The industrial giant also added LED lighting across 74 percent of its portfolio, installed more than 500 MW of solar and storage capacity, and achieved or is in progress of achieving sustainable building certifications for 96 percent of eligible 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. Completed in 2020, Eindhoven DC4 has net zero carbon emissions and generates more power than it consumes. The property, built on the site of a former waste dump, was constructed using sustainable building materials that integrated an all-electric heating system. Concrete used in the building’s foundation was responsibly sourced and the project used nearby suppliers to further lower carbon emissions associated with construction. After it was built, Prologis collected data which it then analyzed to confirm the building’s high level of sustainability.
These companies represent some of the most high-profile net zero commitments in the industry, but there are many more companies in the commercial real estate space that are ramping up sustainability efforts and eyeing net zero commitments. The number of firms pledging to go net zero is expected to continue to grow, as increased regulations and the effects of climate change put pressure on the need to curb greenhouse gas emissions worldwide. Another major factor in these decarbonization pledges is the fact that in many parts of the world where the industry’s largest players have properties, carbon neutrality is mandated. But as is often the case, the big challenge in reaching these goals lies in implementation. And as long as companies regularly track their progress and share updates, we’ll at least get a sense of how far they are getting with their commitments.
Read more: The Commercial Real Estate Owners With the Most Ambitious Net Zero Goals.