Recent Global ESG trends in Real Estate
Globally, areas that are more advanced in moving towards net zero are starting to understand the energy transition and the outlook for real estate assets. Survey results from European Commercial Real Estate managers showing that half of the managers acknowledge that up to 30% of their assets (across all sectors) are currently stranded due to the energy transition and have lost significant asset value.
Closer to home ESG Real Estate outlook
Mandatory climate reporting is coming with the Australian Government recently putting before parliament a new bill that is targeting the introduction of mandatory climate reporting from 1 January 2025 for large entities (companies with 2 of these 3 thresholds – over 500 employees, over 1 billion in gross assets and/or revenue of 500M) and other entities in the following years. The recent trend to new higher quality office with better ESG credentials may accelerate even further as tenants may increasingly move to these buildings as a result of the upcoming mandatory climate reporting.
New Planning Laws introduced by the NSW Government’s Sustainable Buildings SEPP was introduced on 1 October 2023 and set new planning requirements for residential and non-residential development. For example, new office developments must report on embodied carbon at various stages of the development process. They must also provide a net zero report (provided by an engineer) that demonstrates how their building will operate with renewables by 2035.
Changing Governments occurred in New Zealand recently. The new government has recently walked away from the previous government’s promise to punish the agriculture sector as it will no longer be included in the national emission trading scheme (previously it was to be included in the scheme as early as 2025). The agriculture sector currently represents half of all national emissions in NZ.
A close eye is to be kept on the energy transition but as it stands today there is an uncertain outlook over any future government changes, emission reduction targets and additional planning requirements and the pressures these may place on assets. Ultimately, though there may be significant opportunities to benefit from the future energy transition.