Decarbonization pathways for real estate and portfolios: CRREM

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CRREM – Carbon Risk Real Estate Monitor

Limiting the global temperature increase to a maximum of 2°C or 1.5°C is a central goal of the Paris Climate Agreement. A decarbonization strategy not only helps to achieve this goal, but is also essential to avoid stranded assets and the associated financial risk. The Carbon Risk Real Estate Monitor(CRREM) and the associated Risk Assessment Tool show the CO2 impact of properties and portfolios and provide appropriate decarbonization pathways for a meaningful and effective reduction of emissions.

CRREM Risk Assessment Tool: Analysis

The CRREM Risk Assessment Tool shows how much CO2 individual buildings or portfolios actually produce and how much they are likely to produce in order to achieve the climate targets. The tool can be used to create these pathways and forecasts for both the 2-degree and 1.5-degree targets. When calculating the “target values”, CRREM relies on average values for certain asset classes and countries.

CRREM uses greenhouse gas emissions and energy consumption per m2 to determine an intensity-based transition pathway for a building or portfolio. As basic data, the property location, size and asset class must be entered once. Energy data must be updated annually.

This data is presented as “pathways”, i.e. transition paths for the individual assets with forecasts up to the year 2050. These pathways in turn consist of more detailed paths that map the decarbonization target for the individual years.

The CRREM analysis includes the following points in the risk assessment:

• National requirements
• International requirements: Paris Agreement, climate targets, EU taxonomy
• Changing market expectations: increasing interest in sustainability and sustainable investments

If changing requirements or expectations are not taken into account in property maintenance, stranded assets can quickly arise and assets rapidly lose value.

How does the CRREM Risk Assessment Tool work?

The software developed as part of the CRREM project derives CO2 emission intensities and energy consumption intensities from the real estate data provided and assesses the extent to which the properties analyzed are equipped to meet the 2°C target. In other words, it assesses whether a property can cope with the changing requirements associated with limiting global warming to a maximum of 2°C. The software helps to identify those properties in the portfolio that are at risk of a massive loss in value: On the one hand, because they do not meet the increasingly stringent building codes and regulations and, on the other hand, because they cause significant additional costs due to high emission intensities and rising CO2 prices.
In addition to identifying CO2 risks, the tool also helps to identify and visualize improvement strategies. The CRREM tool offers the possibility to assess the progress of a portfolio’s CO2 reduction performance based on the reduction targets (the developed “pathways”) according to the Paris Agreement (i.e. limiting global warming to 2 °C / 1.5 °C). The tool can also be used to analyze the impact of the refurbishment of individual properties on a company’s overall CO2 performance.

CRREM and GRESB

GRESB is part of the CRREM project and offers its users the option of having the stored portfolio data automatically transferred to the CRREM tool in order to identify potential transition risks for individual assets and provide guidance on existing CRREM paths. GRESB is a rating system for measuring and evaluating the sustainability performance of entire real estate portfolios according to ESG criteria. It is designed to make it easier for investors to access reliable data on the ESG performance of potential investments.

If you have any questions about decarbonization strategies and ESG requirements, we will be happy to advise you personally!

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