Climate governance & reporting trends of the ASX50 in 2024: Real estate

Preparing for mandatory climate reporting

We are increasingly seeing real estate entities integrate climate risk into their governance structures and strategic planning as they prepare for mandatory climate reporting. Examples of actions being taken included:

• broadening the scope of the entity’s audit, risk and compliance committee to include oversight for sustainability disclosures;
• having a standalone board sustainability and innovation committee to oversee property innovations, including technologies that impact sustainability;  
• developing climate transition action plans that align with the Science Based Targets initiative (SBTi) and the TCFD recommendations;
• commissioning a gap analysis to highlight areas for improvement; and
• engaging external consultants to review proposed disclosures and make recommendations for improved alignment with TCFD, TNFD, ISSB and the EU Sustainable Finance Disclosure Regulation reporting frameworks.

Practice was mixed amongst entities in this sector as to whether entities included their climate reporting in a separate report, or as part of their annual report (or a mix of both).

Reporting on emissions

The real estate sector has significantly reduced its scope 1 and 2 emissions over the last couple of decades due in large part to divestments and a shift in energy generation consumption from fossil fuels to renewable energy.

Even accounting for the increased electrification and use of renewable electricity over time, energy usage for some entities has almost halved. This demonstrates the impact improving energy efficiency in buildings and adopting smart building technologies like automated lighting and temperature controls can have.

All entities had adopted their own net zero target or ambition for 2025 or 2030. 2 reported that they had achieved their target in 2021.

These net zero targets were often supplemented by other short and medium-term targets, for example achieving 100% renewable electricity use within operations by 2025 or prioritising centre efficiency and the generation and procurement of renewable energy to achieve an interim 50% reduction in scope 1 and 2 emissions by 2025.

Reviewing scope 3 emissions

We also noted that entities within this sector were still reviewing their scope 3 emissions inventories and were at different stages of formulating their approach to scope 3 emissions. For example, we observed that:

• one entity included activities such as business travel, advertising, staff commuting, and data servers within its scope 3 emissions calculations, but did not include embodied carbon from developments and customer emissions. It reported that it was currently reviewing the ‘appropriate reporting and targets associated with scope 3 emissions’ as it looks to comply with the new mandatory disclosures. By 2030, it had committed to halving its square-metre intensity of greenhouse gas emissions from a 2021 baseline (which covers the use of its buildings by its customers and the use of its buildings which it has sold);
• meanwhile another entity reported scope 3 emissions on a limited basis, including emissions from transmission and production losses, waste disposal, car and airline travel. It had deferred reporting of more fulsome scope 3 emissions (including embodied emissions) to 2025 so that its reporting can "align with the relevant standards and market comparability". It also disclosed that it aimed to halve its scope 3 emissions intensity by 2030; and
• another entity excluded scope 3 emissions from its net zero target and reported that it was continuing to assess the categories that were relevant to its business. It measured four categories: fuel and energy related activities, waste generated in operations, business travel and employee commuting but recognised there were additional categories (purchased goods and services, capital goods, tenant electricity and small equity investments) which it planned to further assess in terms of relevance and materiality.

Switching to renewable energy

Additionally, the real estate sector also recognised that renewable generation was one of the key mechanisms to minimise emissions during the ongoing occupation of a building. Accordingly, entities in the real estate sector have been:

• installing solar photovoltaics on rooftops to generate renewable energy;
• installing charging points for electric vehicles;
• maximising energy efficiency of technologies like automated LED lighting;
• buying 100% renewable electricity through arrangements like power purchase agreements; and
• offering building users access to renewable energy via embedded networks.

Renewable energy usage varied significantly between entities from as high as 80% to as low as 25%. We also observed that the purchase of large-scale generation certificates and GreenPower often comprised the highest proportion of the sector’s energy mix.

Real estate entities also reported that they were forming innovative partnerships to achieve their renewable energy ambitions. For example, one entity has partnered with a distributed energy resources entity to achieve 100% renewable energy across its portfolio and net zero scope 2 emissions by 2025. This approach also generates recurring income for this entity from licensing roof space for solar infrastructure.

Adopting circular economy principles

Several entities in this sector also reported that they were embracing circular economy principles to reduce waste and enhance resource efficiency. They were doing this by:

• reusing and recycling materials: one entity reported that they had set a goal to achieve zero waste to landfill by 2030, with significant progress already made, including a 96% diversion rate for construction waste;
• using lower carbon materials and construction processes: one entity reported it had entered strategic partnerships with suppliers to promote the use of lower carbon materials and construction techniques, which has allowed it to use 100% lower-carbon concrete products for home slabs in certain developments and adopt road surfacing materials containing highly recycled content. Meanwhile, another entity shared that it had trialled low carbon concrete at one development in Melbourne, reducing 10,000 tonnes CO₂-e in embodied carbon;
• tracking building materials through their lifecycle: one entity reported it had partnered with an architect to pilot a digital tool that provides insights into the potential reuse of building components; and
• embedding circular design principles into their projects: one entity reported that it was piloting a new framework to build only what was needed, efficiently, and with the right materials.

Global developments

New technologies continue to be developed, including specific solutions for real estate asset managers and investors.^[2] This reflects the evolving needs of institutional investors and managers seeking deeper insights into the sustainability performance of individual assets.

Meanwhile, investments in renewable energy infrastructure are becoming increasingly important. Real estate investor BGO recently doubled its equity stake in Bulk Infrastructure to support a €1 billion expansion of renewable-powered data centres in Norway, driven by rising demand for AI computing power.^[3] This investment underscores the growing importance of renewable energy sources in real estate developments, particularly in data centres and other energy-intensive facilities. 

To learn more about climate governance and reporting trends in 2024 across other ASX50 sectors, click on the relevant sector below:

Otherwise, for further advice on navigating the Australian mandatory reporting regime, please contact a member of the King & Wood Mallesons or Owl Advisory team.