Australia’s path to achieving net zero emissions by 2050 relies heavily on the real estate sector, according to a new report from the EY Net Zero Centre.
Titled Zeroing in on Net Zero Buildings, the report highlights the crucial role of commercial buildings, which account for a quarter of the nation’s energy consumption and 10 percent of its emissions.
The report states that buildings designed to be net zero by 2030 are currently in the design phase, stressing the urgency for immediate action.
Despite efforts to cut emissions, there’s a significant gap in the industry’s understanding of how addressing emissions can create new value.
Selina Short, EY Oceania Market Segment Leader for Built Environment & Resources, pointed out the potential for companies to use green building credentials to boost asset value and share prices, marking a shift towards a sustainable and value-driven approach.
“Our research indicates that those who can directly link green building credentials with asset value and share price will discover new areas of commercial advantage,” said Short.
EY’s survey of executives from leading property companies and corporate tenants in Australia showed a strong commitment to net zero targets.
However, the survey revealed two distinct approaches within property companies: compliance-oriented firms focusing on minimizing risk and costs, and brand-oriented firms using sustainability to enhance their image and attract customers.
The report emphasizes the need to align these objectives to effectively create new value.
It notes that 92 percent of corporate tenants are more likely to remain in a property with strong green credentials and are willing to pay a premium for it.
Looking ahead, new reporting standards and disclosure requirements, such as the IFRS Sustainability Disclosure Standards, will reshape how green buildings are valued.
These standards, effective from 2025, will incorporate climate, emissions, and sustainability into financial reporting, making it a key consideration for businesses.
Emma Herd, Co-Leader of the EY Net Zero Centre, highlighted that CFOs and audit committee chairs now bear the responsibility for sustainability, emphasizing the shift from cost-focused to value-driven sustainability strategies.
The report also identifies key areas for emissions reduction in buildings, including electrification, energy efficiency, grid interactivity, renewables, and embodied carbon.
It underscores the importance of tenants’ expectations and willingness to pay in driving investment decisions.
In conclusion, the report suggests that businesses in the real estate sector have yet to fully realize the benefits of sustainable building practices, indicating the need for a more comprehensive and value-focused ESG strategy in the industry.