18 September 2023 | 6 min.

Positioning paper: building within the CO2 budget

Building within the Paris climate objectives is the challenge facing the construction and real estate sector. In order to build and renovate in a way that meets these climate objectives, the sector’s CO2 emissions must be drastically reduced. That is why a CO2 budget has been determined: the remaining CO2 that the sector can emit until 2050.

The built environment is responsible for a large portion of CO2 emissions, making it a major contributor to global warming. In the Netherlands it is currently responsible for 39% of the total CO2 emissions. 28% of which can be attributed to ‘operational emissions’ – the energy consumption of buildings – while the remaining 11% is attributable to ‘material-related emissions’. These are CO2 emissions resulting from the extraction, production, transportation and assembling of building materials, but also from construction and demolition waste or dismantling at the end of their useful life. It was agreed in the Paris Climate Agreement that global warming must be limited to a maximum of 1.5⁰C. Following the whole life carbon (WLC) approach, including operational and material-related emissions, a CO2 budget was determined for the Netherlands. This budget allows for 100 million tons of CO2 emissions for the entire construction sector to stay within the Paris climate objectives.

Operational and material-related emissions

The construction and real estate sector have been working to reduce operational emissions for years already. The Carbon Risk Real Estate Monitor (CRREM) sets out international pathways for energy- and GHG intensities by country and asset type. When these are met, the real estate sector stays within the CO2 budget for operational emissions. Because operational emissions are being reduced, the share for material-related emissions is increasing. The construction and real estate sector can collaboratively set reduction targets, comparable to the operational emissions.

The role of a real estate investment manager

As a real estate investment manager, a.s.r. real estate can influence both new developments and the renovations of existing real estate. This gives the opportunity to apply an integrated ambition on the reduction of both operational and material-related emissions. For operational emissions, we developed Paris Proof roadmaps based on asset-level implementation plans. The roadmap is reviewed annually based on progress and advanced technical understanding.
In 2022, a study was carried out on our influence on material-related emissions and available standards to measure and limit the emissions. International standards have been developed for the real estate sector by i.e. RICS, RIBA Ramboll, LETI and DGBC. The DGBC standard is currently the most suitable for our real estate funds in the Netherlands. The standard sets limit values per asset type for material-related emissions by means of a Paris Proof material-related indicator (PPm indicator). This indicator can be used alongside the CRREM standard for operational emissions, challenging market parties to take an integrated look at reducing both operational and material-related emissions.

Three strategies for reducing material-related emissions

a.s.r real estate implements three strategies for the transition to futureproof construction:

1. Retaining existing real estate

First we take a critical look at existing real estate. All existing assets should be used for as long as possible. This ensures the longest possible use of existing materials and prevents new material-related emissions. After all, the biggest impact is made by preventing emissions in the first place. When a building no longer meets the demands of the market, then renovation is preferred over demolition. By using an integrated ambition on operational emissions and material-related emissions, renovations can be done within the CO2 budget. When renovation is excluded for specific reasons, the building can be demolished in a circular way to conserve as much of the existing materials and value as possible.

2. Application of biobased materials

To reduce material-related emissions during projects, we can use biobased building materials. Both the supply and demand side for biobased materials are developing rapidly. Investing in biobased materials is an important step to reduce CO2 emissions of a project and accelerating the transition to a biobased construction industry. By implementing the limit values of the PPm indicator in all our projects, a.s.r. real estate is challenging the market to increase the usage of biobased materials. At every design stage, design choices should be made with this integrated ambition. By doing this, development partners can increase their experience in the application of biobased building materials and the biobased construction industry continues to grow.

3. Involving the agricultural sector

Facing the increasing demand for biobased building materials, one of the challenges that arises is availability. At the moment, materials are mainly imported and the Dutch agriculture sector is facing the challenge of becoming more sustainable. The agricultural sector can combine these challenges and have an important role in the biobased construction industry. a.s.r. real estate manages a portfolio of agricultural lands that are leased out to farmers. Together with these leaseholders, a.s.r. real estate has explored business cases which involve a switch to high-fibre crops. By now, high-fibre crops are already being grown on various plots of our agricultural fund and used as building materials in the construction sector.

Let’s work together to ensure futureproof real estate

Meeting the climate objectives is a major challenge for the construction and real estate sector. As a real estate investment manager an integrated ambition on operational and material-related emissions will significantly contribute to building within the CO2 budget and a future proof real estate. This requires leadership, new collaborations and a willingness to innovate.

[1] NIBE & Dutch Green Building Council (2021) Background report Paris Proof Embodied Carbon

[2] Dutch Green Building Council (2021) Whole Life Carbon Positioning Paper