The Intersection of Buildings, Energy, and Emissions Reduction

The Intersection of Buildings, Energy, and Emissions Reduction

By Sarah Adams, Vert Asset Management

Above: Japan Real Estate CorporationOtemachi Park Building received a 5-star DBJ Green Building Certification to acknowledge that it is best in class for environmental & social awareness.

Buildings use energy. Lots of energy. Buildings account for 30-50% of building energy use globally; in the US it’s 39%, more than industry and transportation. 

UA Building Sector End Use Energy Consumption infographic
Figure 1 shows the US building sector energy consumption, courtesy of Sunproject. Source: World Economic Forum. (October 2022). Here’s How We Can Heat, Ventilate, and Cool Buildings More Efficiently. WEF.

Building owners have traditionally focused on improving energy efficiency first because energy bills hit the building’s bottom line. The savings are tangible. In other words, energy use is financially material to both the building owners’ operating expenses and their capital investments. As the cost of solar dropped from $378 MWh (megawatt per hour) in 2000 to $68 MWh in 2019, building owners started to explore onsite energy production. Their focus was still primarily on reducing energy costs. The economics of solar are feasible for some projects, but not all, in particular buildings without much roof space relative to their energy consumption.

LEED (Leadership in Energy and Environmental Design) is a green building certification founded in 1998. It originally rewarded building performance and energy efficiency. Fast forward 25 years, there are now LEED Zero certifications for projects which address net-zero carbon, energy, water and waste. LEEDv4 incorporated added credits for renewable energy and the first time the certification incorporated greenhouse gas emissions. In 2023, LEEDv5 now asks building owners about their carbon reduction plans.

In 2000, the CDP (formerly known as the Carbon Disclosure Project) started asking companies to report their greenhouse gas emissions also known as their carbon footprint. Today, over 18,700 companies globally voluntarily report corporate emissions to CDP. Once firms started reporting their emissions, they started looking for ways to reduce them. As more solar and other renewable energy was built to scale into the existing grid, building owners started to seek ways to procure that green energy.

Since the Paris Agreement was signed in 2015, building owners, tenants, and investors have expanded their focus from pure cost reduction to emission reduction. The Agreement has 198 signatories to date and was ratified by both the US and China, together the largest contributors to pollution globally. The Agreement was the impetus for the public and private sector to put capital investment to work to limit global warming to 1.5 degrees Celsius above pre-industrial levels to mitigate the worst effects of climate change.1

Chart-2-Electricity from Renewables
Source: Roser, M. IRENA 2020. (December 2020). “Why did renewables become so cheap so fast?” Licensed under CC-BY. Note: The relative price decline associated with each doubling of cumulative experience is the learning rate of a technology.

Decarbonization Strategies for REITs

As buildings are responsible for 40% of CO2 emissions as the by-product of their energy use and energy source, they are a critical component of the efforts to reduce climate change.2And, roughly 80% of the buildings you see today will still be standing in 2050. Building owners need to take action on energy efficiency and renewable energy procurement to reduce their overall emissions.

One way that REITs can translate their decarbonization aspirations into action is through science-based targets. Science-based targets are emissions reductions targets that companies are setting to reduce greenhouse gas emissions in their corporate operations and supply chain. There can be a lot of variance in the way companies set climate targets. To create more consistency, the Science-Based Targets Initiative (SBTi) reviews and validates public and private sector targets. SBTi validates targets using models based on the Intergovernmental Panel on Climate Change (IPCC) scenarios and the International Energy Agency. The SBTi is a collaboration between the CDP, the UN Global Compact, World Resources Institute and the World Wide Fund for Nature (WWF – formerly the World Wildlife Fund).3

The guidance aims to establish a global pathway for buildings’ in-use emissions and embodied emissions aligned with 1.5°C. A company first indicates their commitment SBTi to set either a near-term or long-term target. Near-term targets are 5 to 10 years. Long-term targets that are 10 years or more require the company to set a net-zero target.4

Companies then have 24 months to develop their targets using the tools provided by SBTi and submits targets to the SBTi for validation. SBTi is the third-party that reviews a company’s proposed strategy to approve their action plan.

What does the SBTi look like in practice? There are few common strategies that REITs pursue when they set emissions reduction targets, including:

1)  Conduct an energy audit of the property to assess building specific challenges and opportunities. 

2)  Make improvements to the energy efficiency of building systems such as lighting, insulation, heating and cooling. 

3)  Electrify buildings. One example is to replace gas powered boilers with heat pumps.

4)  Procure renewable energy either on-site and/or off-site for a building’s electricity needs. 

5)  Include design specifications to reduce energy-intensive materials in retrofits or new construction.

Here are how three REITs from the office real estate sector across the globe are tackling their science-based targets:

Gecina – France, Diversified Office |  96/104 Neuilly uses a wood structure to reduce its emissions by 37% compared to a similar size concrete structure. Additionally, thermal solar panels produce 40% of the hot water needs of the tenants.

In 2017, Gecina5,6 validated its 1.5°C aligned Emissions and Reduction Targets with SBTi. The company is targeting 42% emissions reduction in the entire commercial portfolio by 2030. The company’s strategy for reducing carbon across its portfolio includes: 

  • Setting a carbon intensity reduction goal of 25%
  • Identifying decarbonization solutions (i.e. thermo-regulating paint, electric water heating, etc.)
  • Adding emissions reduction targets to renovation projects
  • Tenant engagement – reduction of operational emissions through building energy efficiency work.

In 2022, Empire State Realty7,8 validated its 1.5°C aligned Emissions and Reduction Targets with SBTi. The company is targeting 80% emissions reduction in the entire commercial portfolio by 2035. To date, ESRT has reduced emissions by 43% portfolio wide. The company’s strategy for reducing carbon across its portfolio includes: 

  • Whole-building energy use and life cycle analysis to assess upgrades
  • Reduce operational emissions through building energy efficiency work
  • Green leases – addressing split incentives for investment in energy upgrades
  • Tenant engagement – detailed and actionable sustainability guidelines for tenants
  • Purchase of wind renewable energy credits (RECs) for 100% of the commercial portfolio’s electrical usage.
ESRT - The Green Leader
Empire State Realty Trust – US, Office | One Grand Central Place tour book summarizes the building’s green credentials to prospective tenants.

In 2022, Japan Real Estate Investment Corporation9,10 validated its 1.5°C aligned Emissions and Reduction Targets with SBTi. The firm is targeting 80% emissions reduction in the entire commercial portfolio by 2030. The company’s strategy for reducing carbon across its portfolio includes: 

  • Joined RE100 to procure renewable energy at 90% of properties by 2030
  • Analyzing the portfolio to reduce energy intensity at existing and new properties
  • Added sustainability considerations of green building certifications and emissions performance to its acquisition evaluations.11
The Intersection of Buildings, Energy, and Emissions Reduction
Japan Real Estate Corporation | Otemachi Park Building received a 5-star DBJ Green Building Certification to acknowledge that it is best in class for environmental & social awareness.


Sarah Adams of Vert Asset Mgmt.Article by Sarah Adams, Chief Sustainability Officer and co-founder at Vert Asset Management. Vert was founded to bridge the gap between financial services, capital markets, and environmental advocacy. Sarah leads on engagement at Vert which is three things – dialogue with the companies we invest in, advocacy with regulators and government, and being a model sustainable business. 

Sarah has a multidisciplinary experience across the finance sector and environmental policy. Before Vert, Sarah started a consultancy educating financial advisors on sustainable and impact investing in the UK and US. Previously, Sarah worked on social finance initiatives for advocacy NGOs in the UK at the WWF and Forum for the Future. She started her career in institutional finance at Dimensional Fund Advisors and Grantham Mayo Van Otterloo (GMO).

Sarah is passionate about sustainability education for financial services. She is a teacher for the Chartered SRI Counselor (CSRIC) and she sits on the USSIF Education Committee. She earned the CFA UK Certificate in ESG Investing and the Sustainability Accounting Standards Board’s FSA Credential. She has a BA in History from UCLA (US), a MSc in Environment and Sustainable Development from University College London (UK), and a MA in Environmental Law from SOAS (UK). 


Footnotes and Sources:
[1]  United Nations Framework Convention on Climate Change. (2015). The Paris Agreement. UNFCC. 

[2]  ASHRAE. (nd). “What is Building Decarbonization?” ASHRAE. 

[3]  Science Based Targets Initiative. (nd). “Buildings Sector Science Based Targets Setting Guidance.” SBTi. 

[4]   Science Based Targets Initiative. (nd). “Companies Taking Action.” SBTi. 

[5]   Gecina is 0.63% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of June 30, 2023. 

[6]   Gecina. (2023). 2022 Universal Registration Document. Gecina. 

[7]   Empire State Realty Trust is 0.14% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of June 30, 2023. 

[8]   Empire State Realty Trust. (2023). 2022 Sustainability Report. ESRT. 

[9]   Japan Real Estate Investment Corp is 0.63% of the Vert Global Sustainable Real Estate Fund (VGSRX) as of June 30, 2023. 

[10]   Japan Real Estate Investment Corp. (2023). Sustainability Report 2022. JRE. 

[11]  DBJ Green Building Certification Program was launched by Development Bank of Japan Inc. (DBJ) for the purpose of supporting the properties which give proper care to environment and society (Green Building). The program evaluates, certifies and supports properties which are required by society and economy. It makes comprehensive assessment of properties, while evaluating various factors which range from properties’ environmental features to their communication with stakeholders, such as disaster prevention and proper care for surrounding communities.

The Vert Global Sustainable Real Estate Fund holds publicly traded REITs. 

Fund holdings and sectors are subject to change at any time and should not be considered a recommendation to buy or sell any security.

Mutual fund investments involve risk. Principal loss is possible. Investors should be aware of the risks involved with investing in a fund concentrating in REITs and real estate securities, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. A REIT’s share price may decline because of adverse developments affecting the real estate industry. REITs may be subject to special tax rules and may not qualify for favorable federal tax treatment which could have adverse tax consequences. The Fund’s focus on sustainability may limit the number of investment opportunities available to the fund and at times the fund may perform differently to funds that are not subject to similar investment considerations.

The Vert Global Sustainable Real Estate Fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The statutory and summary prospectuses contain this and other important information about the investment company, and may be obtained by calling 1-844-740-VERT or visiting . Read carefully before investing.

The Vert Global Sustainable Real Estate Fund is distributed by Quasar Distributors, LLC 

Energy & Climate, Featured Articles, Impact Investing, Sustainable Business

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