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Giving credit to decarbonisation (part 2)

What actions are commercial real-estate owners, and their lenders, taking to reduce carbon emissions – and how can this impact the performance of their assets?

In episode 13 of Delta, our fixed-income podcast, we assess the progress made in disclosing and reducing carbon emissions throughout the corporate credit and real-estate debt sectors.

In the first instalment of this two-part episode, we focused on decarbonisation in the corporate credit market. Now we turn to the real-estate sector to discuss how the owners of commercial properties – and those lending to them – seek to reduce emissions directly and by engaging with tenants.

Having implemented Responsible Property Investment principles since 2008, our Real Estate team has reduced emissions from assets across its commercial property portfolio and seen the long-term results.

“There’s a clear line between operational efficiency, reducing carbon emissions and then demonstrating that your asset is worth more through better management, rents and occupancy rates,” says Sharon Brown, Head of Risk and Responsible Property Management Implementation.

Lenders to commercial-real-estate owners are a further step removed from the ability to directly manage buildings to be more environmentally friendly – particularly since transactions are typically have three-year horizons in the context of the 10-to-30-year onset of global warming.

There is scope for this to change, says Vincent Nobel, Head of Asset Based Lending, and to engage property owners and tenants on sourcing energy through green tariffs.

“I find that climate change is an inter-generational issue and the problem is that there is a lack of a contract between the two parties,” Nobel says. “You have a deal between those who are here now and those who are not represented at all – the future generations. They are a key stakeholder in this, with no voice.”

Why should fixed-income investors give credit to decarbonisation? To find out, tune it to Delta.

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