Due to the enormous rise in greenhouse gas emissions, the low energy efficiency of the real estate sector, and the insufficient renovation rate of existing buildings, the European Union has set itself the challenge of decarbonizing the building sector by 2050. Faced with ever-more stringent environmental regulations and growing market expectations, Member States must drastically reduce their carbon footprint in order to reduce the carbon risk associated with the potential depreciation of their assets. To guide real estate companies, the European Union has decided to fund the CRREM (Carbon Risk Real Estate Monitor) project, a tool for projecting trajectory and comparing them with Europe’s climate ambitions.
What is CRREM?
The CRREM is a tool that allows companies in the real estate sector to develop their ESG strategy by:
- taking stock of their GHG (greenhouse gas) emissions
- forecasting scenarios to limit global warming by 1.5 or even 2°C.
In concrete terms, CRREM acts as a tool that helps companies in the real estate sector to centralize data on their real estate assets in order to assess their environmental impact and limit the ESG risks associated with their activities.
The CRREM also shifts the focus from return on investment in renovations to the risk of obsolescence of assets, and extra-financial valuation.
How was CRREM funded?
The CRREM research project was funded by the European Union. Its consortium is composed of five institutions with expertise in the field of carbon research:
- IIÖ Institute for Real Estate Economics (Austria),
- University of Alicante (Spain),
- University of Ulster (UK),
- GRESB (Netherlands),
- TIAS Business School of Tilburg University (Netherlands).
Who can benefit from this tool?
- What types of properties can use CRREM?
CRREM covers a wide range of property types: office, retail, shopping centers, retail stores, hotels, industrial distribution warehouses, healthcare, leisure, medical offices, multi-family residential, and single-family residential.
- Which countries have assets participating in CRREM?
The CRREM tool is offered free of charge to commercial real estate companies within the European Union. However, it is now available beyond these borders and covers more than 40 countries worldwide: Australia, Austria, Belgium, Brazil, Bulgaria, Canada, China, Croatia, Czech Republic, Denmark, Estonia, Finland, Germany, Greece, Hong Kong, Hungary, India, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Netherlands, New Zealand, Norway, Philippines, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, United Kingdom, United States.
In what context was CRREM created?
The CRREM project was created in a context defined by two key elements:
- The fight against global warming: In Europe, more than 40% of GHG emissions come from the real estate sector. It is therefore imperative to reduce carbon risk factors by improving the energy efficiency of buildings.
- Strengthening European regulations: The European Union wants to tighten laws in order to decarbonize the sector by 2050. The Tertiary Decree and the Climate and Energy Transition Law encourage the reduction of energy consumption and the modernization of buildings, and greatly influence current investment decisions in order to meet new market expectations.
By helping real estate players to take stock of their level of consumption and GHG emissions, the CRREM allows them to visualize projections while aligning themselves with a scenario that limits global warming to 1.5 or 2°C.
The tool also encourages stakeholders to invest in energy efficiency so that their buildings meet future standards and the expectations of different stakeholders – investors, customers, employees, etc.
What criteria does CRREM take into account?
First, the CRREM tool only accounts for operational energy use. The approach is atakes into account the energy use of the entire building, both in common areas and tenant areas.
However, the carbon emissions resulting from a potential energy retrofit are analyzed for their impact on energy savings.
The CRREM tool allows the introduction of an energy retrofit measure for each asset analyzed over time.
It is also important to bear in mind that:
- Upgrades may be required when the asset no longer complies with the decarbonization pathway,
- The CRREM user can work with the default data provided by the tool or make their own assumptions about capital costs and energy savings,
- CRREM uses a transparent downscaling methodology based on the sectoral decarbonization approach (SDA).
The SDA methodology allows users to:
- Provide independent and objective information on the alignment of their strategy and actions with sectoral decarbonization trajectories,
- Identify areas for improvement to better structure their climate strategy,
- Understand the sectoral decarbonization trajectories in order to anticipate the associated transition risks.