Presentation by Julia Wein, Associate, Institute for Real Estate Economics / Carbon Risk Real Estate Monitor

1. KEY GHG METRICS TO ASSESS GHG PERFORMANCE,
CLIMATE ALIGNMENT AND TRANSITION RISKS
Julia Wein 22/02/2023

2. Slide 2
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CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM OPEN Q&A + Training session
05.12.2022
Green Governance
Track and Revise
Financial planning and
budgets
Comprehensiveness Identifying decarbonization levers
Feasibility and clear measures
Defining status quo and targets
Qualified ambition definition
A good climate transition plan is so much more than just committing to a target!
GET STARTED!

3. Slide 3
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CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM
22.02.2023
QUESTIONS NEEDED TO BE ANSWERED
What are the strategic questions on individual assets & real estate portfolios?
❖ Are our properties currently above or below country average regarding energy intensity in the reporting year?
❖ Do we have sufficient energy consumption data and general property information to make strategic decisions?
❖ What might be future payments related to high consumption - if carbon pricing will be introduced or intensified?
❖ What is a benchmark against which we could compare our own consumption?
❖ How might climate change and decarbonization of energy grids affect our CO2 balance over time?
❖ Do we have particularly “good” or “bad” properties in our portfolio in terms of energy consumption?
❖ Can we visualize and communicate our carbon footprint for sustainability and risk reporting?
❖ How do we deal with missing information/data gaps (e.g. not full year of reporting data available, missing tenant data/ data
coverage, occupancy)?

4. Slide 4
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CRREM
22.02.2023
DEFINING YOUR CORPORATE AMBITION IS THE FIRST STEP
Laggard
Current
Standards
Pioneer
Net Zero Target No corporate target yet 2050-2060 2030
Emission Reduction
Self-defined goals, if
any
Taxonomy conformity;
Emission reduction plan; net
zero aspirations for scope 1
& 2
Decarbonization (Scope 1-3)
in line Paris Agreement;
goals validated by SBTI
Share- and Stakeholder
Focus on short term
shareholder interest
Consideration of mid and
long term shareholder
interests
Integration of stakeholder
interests in the decision
making process / protecting
and creating long term values
Resilience in
economic cycles
Postpone or cancel
reduction targets /
“short term cash first”
Maintain targets and wait for
market development
Target review and update
independent of short and mid
term market turmoil
GREEN
GOVERNANCE

5. Slide 5
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22.02.2023
OPERATIONAL MEASURES TO BECOME A PIONEER
Laggard
Current
Standards Pioneer
GREEN
GOVERNANCE
Financial Incentives None None Employee targets aligned with ESG strategy → bonus payment
Employee support Little to none Implementation of company ESG guide Detailed guide with milestones broken down for every asset in the portfolio
Training No ESG training Voluntary training for some employees
Compulsory ESG training for every new employees and decision makers (incl.
Executive Management)
Internal CO2-pricing None
None or low carbon price without
consequences
Ambitious internal CO2 price paid into company-owned GHG reduction fund
ESG Due Diligence
No integration into
transaction process
Partly integrated in DD Extensive ESG DD, essential part of transaction process
LCA-Assessment No support taken
Orientation on existing frameworks and
initiatives, exchange with market participants
Cooperation with partners to develop a tailormade strategy
Supply chain
Chosen solely by
lowest price
Question supply chain for ESG performance Review of supply chain and active creation of demand for sustainable products
Carbon footprint No efforts to capture Start to Calculate a carbon footprint Calculate a robust carbon footprint of your portfolio
Renewable energy
No/Little use of
renewable energy
Use of less than 50% on site fossil fuels
Ensure 100% off-site energy is procured from renewable-backed sources, where
available
Green Leases No aspirations Active proposal, but no targets Priorities tenants prepared to sign Green Leases and ambitious targets
Green finance
Only use of normal
financing products
Sporadic demand for sustainable financial
products
Predominant demand for sustainable financial products
Standards

6. Slide 6
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22.02.2023
TRACKING PROGRESS
Laggard Current
Standards Pioneer
GREEN
GOVERNANCE
Standardization
No reporting or data collection
standard applied
Minimum standards aligned with
regulation
Detailed reporting and monitoring system
supported by a publicly recognized standard
(e.g. TCFD)
Data collection
Emission data is collected
centralized by the ESG team
Analog internal collection by the
employees
Automized collection of relevant date via smart
meters and digital data collection platform,
collection of certified data
Data analysis and
reporting
Superficial data analysis – no
public reporting
Systemized analysis done by
ESG department, reporting
yearly to C level, partly public
disclosure of results
Systemized analysis done by ESG department,
reporting quarterly to C level, full public
disclosure of results
ESG KPI’s No scope Scope 1 and 2 Analysis of Scope 1-3
Benchmarking No benchmarking taking place
Benchmarking taking place, but
not standardized and disclosed
Benchmarking against the individual peer group
(with GRESB e.g.)
Transparency
Transparency not secured, no
standardized procedure
Internally secured transparency
– procedure standardized, partly
public disclosure
Full internal and external transparency, honest
communication of mistakes and shortcomings
Embodied Carbon None New construction Retrofits
Standards

7. Slide 7
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CRREM | CARBON RISK REAL ESTATE MONITOR
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22.02.2023
REPORTING ON FINANCED GHG EMISSIONS
Data
Quality
Options to
estimate the
financed
emissions
When to use each option
Score 1
Option 1:
Actual building
emissions
1a Primary data on actual building energy consumption (i.e. metered data) is
available. Emissions are calculated using actual building energy consumption
and supplier-specific emission factors specific to the respective energy
source.
Score 2
1b Primary data on actual building energy consumption (i.e. metered data) is
available. Emissions are calculated using actual building energy consumption
and average emission factors specific to the respective energy source.
Score 3 Option 2:
Estimated
building
emissions
based on floor
area
2a
Estimated building energy consumption per floor area based on official
building energy labels AND the floor area are available. Emissions are
calculated using estimated building energy consumption and average emission
factors specific to the respective energy source.
Score 4 2b
Estimated building energy consumption per floor area based on building
type and location specific statistical data AND the floor area are available.
Emissions are calculated using estimated building energy consumption and
average emission factors specific to the respective energy source.
Score 5
Option 3:
Estimated
building
emissions
based on
number of
buildings
3
Estimated building energy consumption per building based on building type
and location-specific statistical data AND the number of buildings are
available. Emissions are calculated using estimated building energy
consumption and average emission factors specific to the respective energy
source.
DATA QUALITY SCORE TABLE FOR COMMERCIAL REAL ESTATE

8. Slide 8
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CRREM | CARBON RISK REAL ESTATE MONITOR
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22.02.2023
CARBON- AND ENERGY-INTENSITY ARE INTERLINKED
INTENSITY INDICATOR 2
CO2 Emissions per m²
(kgCO2e/m²)
BUILDING EMISSIONS
=
CO2
Σ All emissions (kgCO2e)
Rented area (m²)
EMISSION FACTORS
WHOLE BUILDING ENERGY
Tenant
electricity
kWh
Common area
electricity
Heating
energy
Σ All consumption (kWh)
Rented area (m²)
=
INTENSITY INDICATOR 1
Energy consumption per m²
(kWh/m²)
Tenant controlled
(pruchased & consumed)
Landlord controlled
(passed on to tenant)
Purchase by
landlord
Tenant 1
Consumption
Tenant 2
Consumption
Tenant 3
Consumption
E.g. per kWh
0.203 (kgCO2e)
E.g. per kWh
0.475 (kgCO2e)
Or 0 (kgCO2e)
kWh
kWh
Source: Alstria, 2020
➢ Lesson learned:
1. There might be
properties with 1.000
kwh/m²/pa - which
would be a “nightmare”
in terms of energy
consumption – BUT
they could be fully
decarbonized.
2. Less relevant but still:
there could be (vice
versa) properties with a
fairly high energy
efficiency but still
running on fossil fuel
combustion on site.
3. Energy efficiency first
is the approach for real
estate!

9. Slide 9
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CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM
22.02.2023
IDENTIFICATION OF PARIS-ALIGNMENT
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GHG
intensity
[kgCO2e/m²/yr]
Excess emissions Decarbonisation target
Baseline asset performance Climate and grid corrected asset performance
Stranding 2020 Performance
Past performance
ILLUSTRATIVE MISALIGNMENT AND STRANDING DIAGRAM FOR CHINA
OFFICE BUILDING (1.5°C SCENARIO)

10. Slide 10
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CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM
22.02.2023
CHALLENGES & SOLUTIONS
Challenge I : Over 80 %* of the property stock which will be used in 2050 is already built today.
✓Solution: Operational use phase should be optimized to win the race to net-zero.
Challenge II: Standing real estate assets are heterogeneous (countries/bioclimatic zones, use types).
✓Solution: One general/uniform global pathway will not do – country- and use-type differentiation is
needed for industry guidance/ and target setting.
Challenge III: Not just the GHG-intensity but likewise the energy efficiency (EUI) should be addressed.
✓Solution: CRREM provides both a carbon- and energy-intensity pathways.
Challenge IV: “Explosion” of industry initiatives for Net-zero might be confusing for market participants.
✓Solution: Global alignment and harmonization with other sectors / approaches / initiatives is required
such as the NZAOA, The SBTi, IIGCC, EPRA, ANREV, INREV, NAREIT, UNEP FI etc. etc.
Challenge V: Tenant-landlord relations.& scope attribution (S1, S2, S3) causes complexity for stakeholders.
✓Solution: Whole building approach is needed since only holistic view allows to decarbonize the asset.
Challenge VI: KPIs should be easy to benchmark & industry standard to ensure acceptance in the market.
✓Solution: Typical reference point for real estate is per sqm / sq foot (so intensities can be derived).

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nbacher-Straße 1
A - 6300 Wörgl
info@crrem.eu
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WWW.CRREM.EU / WWW.CRREM.ORG
Contact: julia.wein@iioe.at

12. Slide 12
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CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM
22.02.2023
TRANSITION RISKS IN REAL ESTATE
➢ Global C02 only emissions of all sectors sum up
to approx. 33 Gigato/pa.
➢ Including other GHGs the overall global annual
emissions amount to approx. 50-52 Gigato/pa.
➢ Remaining anthropogenic carbon budget until
2050 is approx. 470 Gigato for CO2 only, which
prevents a temperature overshoot (here: limit
global warming to 1.5°C), with a probability of
50% (see IEA).
➢ Real estate share for just operational uses of
that remaining budget is approx. 25%.
➢ Other GHGs like F-gases play and important role
and need to be addressed – hence the
respective budgets for other GHG need to be
added on top of that.
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Remaining Global CO2 Budget p.a. (in Gigatons)
Other Sectors Building Operations

13. Slide 13
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CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM
22.02.2023
CASE STUDY: „DO NOTHING“ IS NO OPTION!
OFFICE BUILDING
GERMANY*
0
1
13
€/m2
5.000
m2
CRREM OFFICE GERMANY
TARGETS 2030
21
kgCO2
/m2/a
109
kWh
/m2/a
16.250€
9.375€
5.625€
0€
31.050€
17.550€
9.900€
0€
47.300€
26.925€
15.525€
0€
6%
3%
2%
0%
20.625€ 41.400€ 62.025€ 8%
E
54kgCO2; 201kWh
*CRREM Baseline 2020
47kgCO2; 178kWh
36kgCO2; 148kWh
30kgCO2; 131kWh
21kgCO2; 109kWh
CO2 Overshoot
Costs p.a.
% of rental
income p.a.
Total
kWh Overshoot
Costs p.a.
Assumptions for 2030:
125€/tCO2 ; Heating (fossil fuels) + Electricity = 0.09€/kWh
Source: Own calculations based on E3G.ORG and Umweltbundesamt, 2022 // * net rental income per month/m²

14. Slide 14
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CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM
22.02.2023
CARBON- AND ENERGY-INTENSITY TARGET SETTING NEEDED
➢ Decarbonization of the grid is the obligation for the Energy Sector. So why setting
targets for the Real Estate Sector to reach Net Zero by 2050.
➢ “Wise” approach: „Why can´t we just switch all energy sources (of properties)
to electricity and wait until the energy sector solves our problem?”
I. Renewable energy in 2050 will be a limited good: IEA projects a maximum
availability of renewable energy. This implies: not all sectors can consume
what they want. A certain “macro” allocation will be a likely outcome in
2050.
II. (High) Energy demand equals (higher) energy costs: High consuming
properties in combination with rising energy prices will lead to lower tenant
demand and/or lower net rent (since the overall occupancy costs will be
relevant).
III. Regulation might directly address energy efficiency – limiting GHG
emissions and high consumptions at the same time.
➢ In future, increasing renewable energy production on-site will have a significant
positive impact on emissions and GHG intensity. Renewables have the benefit of
higher security of supply and also reduce exposure to further increases in energy
prices.
E.g. Netherlands:
→ Many countries are setting minimum energy
efficiency requirements. Restrict renting or selling!

15. Slide 15
© CRREM 2022
CRREM | CARBON RISK REAL ESTATE MONITOR
CRREM
22.02.2023
KEY CRREM BENEFITS
KEY BENEFITS OF CRREM:
✔Stranding point: point at which the property is no longer compliant with the Paris-aligned target
✔Identification of Paris-alignment on property level & target setting - 1,5 and 2 degree scenario
✔Country-average default values used in tool (if asset specific data is not available)
✔Data extrapolation in the tool helps to deal with data gaps
✔Results displayed on asset & portfolio level
✔Identification of “good” vs. “bad” assets in the portfolio
✔Visualization of carbon and kWh intensities
✔Looking also on nasty detail: F-Gases, HDD/CDD normalization etc.
✔Monetarization of transition risk for operational carbon emissions
✔Simplify reporting& accounting requirements (e.g. for TCFD, PCAF, SBTi etc.)
✔Scenario analysis with retrofit