CRREM is not every green property lover’s favourite rating tool, especially in Australia. This week, we found out why.
The tool – full name, Carbon Risk Real Estate Monitor – sent a media statement from its headquarters in Amsterdam on Monday to announce it had nine new members in its 13 member board, Rick Walters of Australia’s AWARE super among them. The full list is below.
The tool has become widely used by investors in Europe, with significant interest from the US as well, to understand where buildings are on the path to net zero, according to IPE Real Assets.
The aim is to become a de facto global standard with “guidance to the real estate industry to align the sector’s decarbonisation efforts with the requirements of the Paris Agreement to limit global warming to a maximum of 1.5 degrees Celsius”.
The tool was initiated by academics and now supported by Dutch pension funds APG and PGGM, Norway’s Norges Bank Investment Management and Japan’s Government Pension Investment Fund.
In June this year, it hired its first chief executive officer, Andrea Palmer, formerly responsible investment lead for global real estate securities at Dutch pension fund asset manager PGGM.
Palmer told the publication that the ambition is to understand the nature of real estate with its infrequent opportunities to modernise and retrofit, and that buildings are “intrinsically locked into a utility grid”.
Australians are not fans – they have something better
But Steve Ford, who’s spoken at one of our six events this year and at others previously,is the former head of sustainability and energy for GPT, explained why the mere mention of CRREM has made some people look decidedly uncomfortable when The Fifth Estate has mentioned its name.
The tool, explained on its website here, is not his favourite, Ford said.
“It’s a waste of time in a country like Australia, where we have something much better like NABERS.”
The thing is, CRREM rates for stranded asset risk measure energy but not carbon. And when it comes to our need to get to net zero, the most important measure is carbon emissions, he said.
The tool makes assumptions about grid carbon intensity and does not consider nuanced details like renewable energy contracts attached to a building that could mean the building has very low carbon emissions.
The European tool also doesn’t allow consideration for the time of use. In a “buildings as batteries” scenario, which we profiled last year in a masterclass, property owners are increasingly able to consume the majority of the energy they need during daylight hours when solar energy is abundant and at very low cost or free.
NABERS, by contrast to CRREM, also normalises for services in a building, for comparable assets and for locations, Ford noted.
For instance, the carbon intensity of the grid varies significantly from Sydney to Darwin.
“You’re not using the same energy intensity in Sydney as Darwin,” he said.
“CRREM is a monitor set up to see if you are at risk of a stranded asset or a slow transition to low carbon.”
To answer that question, he said you need to ask: “Am I improving at better than the benchmark, or my competition? Because you’re not going to have a stranded asset if you’re performing at the top end of the market.”
It might make more sense in that case to investigate a region or city’s risk. For instance, whether Darwin’s dependence on the gas industry or the Hunter region’s dependence on coal might make the area a risk proposition in 10 or 15 years’ time.
Ford says Europeans love the tool because they don’t have NABERS, which is “more sophisticated in every way”.
CEO Andrea Palmer said in announcing the new board appointments that: “This marks an exciting new era for CRREM. Our board combines deep investment expertise, operational know-how, and a broad regional reach— exactly what’s needed as we move from intent to execution.
“We’re thankful for their commitment and are confident that their collective insight will help scale science-based decarbonisation across the real estate industry.”
New members of the CRREM board are
- Dan Ahmed, investment manager, Sustainable Investments / Head of PrivateMarkets ESG Integration, CalPERS, (US)
- Abigail Dean, head of strategic insights, Real Assets, Nuveen (UK)
- Hala El Akl, global head of sustainable investing and operations, Oxford Properties, OMERS (UK)
- Adalberto Cabrera, EDGE global technical lead – operations officer, International Finance Corporation (US)
- Sunita Mahant, managing director, risk, sustainability, and managing director, Toronto, La Caisse (Canada)
- Uma Moriarity, senior investment strategist and global esg lead, CenterSquare Investment Management (US)
- Adam Slakman, managing director, head of sustainability, real estate, J.P. Morgan Asset Management (US)
- Vinamra Srivastava, chief sustainability and sustainable investments officer, CapitaLand Investment (Singapore)
- Rick Walters, senior manager, responsible ownership, Aware Super (Australia)
AWARE Super declined to comment.