When Joe Biden was sworn in as US president and made addressing climate change one of the central pillars of his policy, it felt like a watershed moment.
While the previous White House incumbent had effectively turned his back on the most pressing long-term issue facing humanity, the rest of the world was, to varying extents, grappling with how to address carbon emissions and their impact on the environment and society. Thankfully, the US has now rejoined the Paris Agreement and can start showing what the world’s largest economy can contribute to the net zero carbon process.
The UK is one of the few countries that has already committed to net zero by 2050. In line with this, in January, Legal & General Investment Management Real Assets published its strategy for achieving this target across a £21bn UK real estate portfolio.
Our ‘Real Estate: Net Zero Carbon Roadmap’ report is the latest manifestation of Legal & General’s long-standing commitment to a low-carbon economy and sets out how we, as owner of more than 76m sq ft of UK property across over 700 commercial assets, can hit the target by 2050 or sooner.
Collaboration across our organisation and with external partners will be the key to decarbonising and future-proofing these assets. We will work closely with all our stakeholders, but the most pivotal partnership will be with the businesses and individuals that occupy the buildings we own.
Property owners can shape the fabric of buildings to support the journey to net zero, but occupiers’ behaviour is equally important. For real estate owners, engagement with occupiers will be critical in the net zero process. Building on our proactive and transparent approach to occupier collaboration, we are developing a data-sharing programme and providing access to our specialist partner network, helping occupiers who need support with their transition. We will put in place incentives and opportunities to deliver carbon reduction programmes that align all parties with meeting this ambition.
The way occupiers source and use energy is a priority consideration, but many other facets of a business’s operation can make a positive contribution, and we want to facilitate this as much as is possible.
On the road to net zero, addressing an issue that has profound implications for all of humanity also makes good business sense. As new sustainability regulations come into force, those that do not meet required performance levels risk becoming stranded assets that are unattractive to occupiers, and lose value accordingly – which will adversely affect returns. So, as investment managers, we have a social responsibility to future-proof our real asset investments, as well as our fiduciary responsibilities and duty of care to our investors.
Achieving net zero is not going to be easy. But it is beyond doubt that our industry must decarbonise and move to being part of the climate change solution rather than part of the problem.
Bill Hughes is head of real assets at Legal & General Investment Management