9. Carbon risk

On May 26, a court in The Hague, Netherlands , ruled that the current greenhouse gas reduction targets of British-Dutch oil giant Royal Dutch Shell were insufficient, and ordered the company to reduce its greenhouse gas emissions by 45% by 2030 compared to 2019 levels.

(Article excerpt)
Shell unveiled one of the most ambitious climate change strategies in the energy industry this year, setting targets to cut greenhouse gas emissions intensity (per unit of production) by at least 6% below 2016 levels by 2023, at least 20% by 2030, at least 45% by 2035 and 100% by 2050.

The court's ruling said the company's strategy was "unclear and subject to various conditions which are insufficient" and risked breaching its reduction obligations.

The order requires Shell, its suppliers and its customers to reduce their total carbon dioxide (CO2) emissions by 45% by 2030 compared to 2019 levels.

(Text: Shell Netherlands Court

Immeasurable carbon risks

Carbon risk is a general term for non-physical corporate risks resulting from climate change and greenhouse gas emissions. It can have a significant impact on a company's revenue trends and cost structures, and poses a major risk to corporate management.

As seen in the news at the beginning, even Shell, which had set its own management goal of decarbonization as a global company, has experienced carbon risks that exceeded its expectations. CO2 reduction has become a top priority issue for both the public and private sectors around the world and is accelerating.

Carbon risk is an emerging trend in the early stages of the transition to a decarbonized society, and for businesses and real estate owners, the risk appears to be an immeasurable threat.

Carbon risks for real estate are huge

Carbon risks in the real estate management field include corporate liability, financing, carbon taxes, regulations and penalties.

Real estate is a sector with extremely high potential carbon risks, because approximately 30% of global greenhouse gas emissions are generated from the daily operation of real estate, and when combined with emissions from travel and transportation originating from real estate, this accounts for approximately 50% of global greenhouse gas emissions.

Real estate is always connected to various daily activities of people and companies, and is closely linked to the CO2 emitted from those activities. However, only 15% of greenhouse gas emissions caused by real estate are known and controlled by real estate owners.

Who will bear the remaining 85% of carbon risk? The property owner? Or the tenant?

Given the current social and industrial structure, it would be fair to say that property owners should provide methods and tools to enable both property owners and tenants to reduce at least this 85% of carbon risk.

And given the potential impact of this enormous carbon risk, it is urgent that we begin taking action.

Climate change measures filled with new rules and frameworks

On the other hand, with the rapid acceleration of climate change countermeasures and ESG initiatives, various new rules and frameworks, standards, regulations, and international industry associations are rapidly increasing around the world.

In an interview with EaSyGo, the head of ESG at a major overseas real estate management company commented, "New rules and frameworks are popping up like bamboo shoots after a rain. A lot of resources are being taken up by responding to rules and standards and setting goals, so there is still no sign of any efforts to bring about fundamental change."

Real estate managers and institutional investors are having to devote most of their resources to adapting to new rules and standards.

While rules and frameworks are very important, they are not intended to encourage individual companies to take substantive action toward decarbonization.

Furthermore, as seen in the Shell example at the beginning of this article, we are moving towards a situation where carbon risks cannot be hedged, even if one follows "industry-standard initiatives" or "within existing rules and frameworks."

"Substantial efforts" are at the heart of companies' decarbonization

It can be said that the decarbonization efforts of companies and real estate managers have now reached a stage where a "just do this and you'll be fine" approach is no longer sufficient.

While following basic top-down rules and frameworks to "disclose information, obtain certification, and set goals," it is also necessary to turn attention to bottom-up "efforts to create unique, substantial ESG benefits."

Real estate is an asset that includes many unique elements of the property, such as facilities, location, tenants, and culture, so it can be said that a bottom-up approach is essential when it comes to reducing CO2 emissions and implementing ESG measures.

This property's unique bottom-up approach to substantial decarbonization and ESG measures will not only hedge carbon risks, but also create new value for the real estate and the company.

While rules and frameworks are very important, they are not intended to encourage individual companies to take substantive action toward decarbonization.

Furthermore, as seen in the Shell example at the beginning of this article, we are moving towards a situation where carbon risks cannot be hedged, even if one follows "industry-standard initiatives" or "within existing rules and frameworks."

"Substantial efforts" are at the heart of companies' decarbonization efforts

It can be said that the decarbonization efforts of companies and real estate managers have now reached a stage where a "just do this and you'll be fine" approach is no longer sufficient.

While following basic top-down rules and frameworks to "disclose information, obtain certification, and set goals," it is also necessary to turn attention to bottom-up "efforts to create unique, substantial ESG benefits."

Real estate is an asset that includes many unique elements of the property, such as facilities, location, tenants, and culture, so it can be said that a bottom-up approach is essential when it comes to reducing CO2 emissions and implementing ESG measures.

This property's unique bottom-up approach to substantial decarbonization and ESG measures will not only hedge carbon risks, but also create new value for the real estate and the company.

For the next generation of real estate, failure to address climate change will be a major factor in the obsolescence of real estate in many aspects, including corporate responsibility, fundraising and borrowing, attracting tenants, and asset value. It is expected that addressing climate change will be a major factor in determining the value of real estate for at least the next 10 years.

EaSyGo leverages its unique specialist background in global real estate ESG for institutional investors and personalized real estate tech to lead the way in the fight against climate change.

By providing real estate owners and managers with the right tools, the real estate ESG tech service "EaSyGo" goes beyond the boundaries of individual properties and connects them to the "lines" that connect other dots, encouraging behavioral change that will lead to a shared commitment to sustainability for people in the real estate industry.

To encourage people to actively change their behavior towards sustainability, EaSyGo provides real estate users with the elements and options necessary for sustainability initiatives, such as motivation, means, evaluation, sharing and empathy .

We spread sustainability from individuals to communities, from communities to towns and towns to cities.