In 2019, there was a big boost around corporate sustainability. A record number of companies made or accelerated commitments to sustainability or climate action. They managed large investments in renewable energy, reaching new all-time highs, and the business community made great strides toward responsible operation.

TREND #1: Companies are making new climate commitments leading the way

Companies from all sectors are making the changes to their business models necessary to achieve net zero emissions by 2050. So far, 201 signatories have pledged, including global representatives in the real estate industry such as Australia's Dexus, City Developments Limited (CDL) from Singapore, Gebalis from Portugal and Landsec from the UK. Many other companies are setting and meeting ambitious goals, investing in clean energy, and creating or demanding sustainable solutions within their own business operations and supply chains. Created for companies to commit to being 100% renewable, RE100, the initiative features' representation from real estate agents, from Germany's Alstria to one of the initiative's newest members, the United States' Hudson Pacific. The actions they have created address the reduction of their own emissions, although they are also promoting policy changes in their countries and regions, generating loops of ambition in the rest of the agents of society and politics, to accelerate climate action.

TREND #2: Global investors adopting green investments

The current investment community has a growing interest in sustainable companies, that is, all those that show progress towards a world of 0 growth in the temperature of the Earth. In the influential annual letter from Larry Fink, CEO of BlackRock, he explained that his company would not make investments in companies that "may pose a higher risk related to sustainability."

At the end of 2019, 631 investors from around the world, representing some 37 trillion dollars in assets, committed to sustainability and signed a letter that they sent to all governments, calling for them to intensify their efforts against climate change. As if that weren't enough, the EU recently presented the “Action Plan: Financing Sustainable Growth” to require mandatory disclosure of climate risk. This is part of a new set of regulations, designed to finance sustainable growth, supporting an economy that produces less carbon. Respondents from the commercial real estate industry responded in a recent survey that pressure from sustainable investors and gaining a competitive advantage were the top two drivers of green investments in their business.

TREND #3: Corporates buying renewable energy always and everywhere

The real estate industry has acquired renewable energy for long periods of time. Digital Realty, one of the five largest publicly traded US REITs, has been one of the first to invest in renewable energy, signing more than 274 MW of renewable energy power purchase agreements (PPAs) since 2016. With this, it has managed to offer its customers carbon-free computing. Equinix, Prologis and Iron Mountain can be mentioned as other REITs that are part of the real estate industry that buys renewables. In the past year we were able to see many important developments in the renewable energy sector. It is also important to mention that there has been a steady growth of renewable opportunities in the US. Europe continues to advance as an attractive market for corporate PPAs, a trend that continues to accelerate in 2020.

TREND #4: Climate risk and carbon neutrality top corporate agendas

2019 ended up being a year when there were worrying cases of natural disasters, and in 2020 these risks continue to increase. More than 70% of those surveyed agree that risks will increase in the next 10 years, especially weather-related disasters such as extreme heat waves and wildfires.

These risks make real estate companies understand that the reality will be to see an even greater push from the investment community in the attempt to solve the risks related to climate change. The recent announcement that BlackRock has made explaining that it will eliminate its investments in companies that generate more than 25% of the income from coal, is a good example. In 2020 companies are responding to these investor pressures by acting on climate change, planning within different scenarios, and adopting key TCFD recommendations, as well as tangible measures to mitigate carbon emissions.

Some big companies like Microsoft are making even bigger changes, addressing the possibility of generating negative carbon, that is, committing themselves, not only not to generate, but to absorb carbon dioxide from the atmosphere by 2030. As this happens, experts are aligned that any net zero initiative must start with emission reductions.

TREND #5: Scope 3 management demands advanced data practices

Companies with carbon neutrality objectives are interested in complementing these efforts, such as purchasing renewable energy, with efforts to address the reduction of indirect emissions, such as those that occur in a supply chain. They are not required to do so, unless in the nature of the business these emissions can be a significant risk factor for commercial real estate. To conclude, we will only explain that achieving a reduction in carbon in the supply chain will provide a breakthrough for real estate companies, since the reduction of environmental impacts could be exponential compared to focusing only on the emissions of the operations of real estate a company.

A good example is Schneider Electric, which is charged with providing its customers with the tools and guidance they need to achieve their sustainability or carbon reduction goals. Since the sustainability consulting services they offer cover a wide spectrum of activities, from a company that sets goals for the first time, to a leader in advanced corporate sustainability. They advise you on the targets to set and what the limits should be, or if the targets you have in place are solid to achieve a carbon reduction. They also advise those businesses that want to explore innovative solutions to achieve those goals.