Companies often talk about becoming ‘carbon neutral’ or achieving ‘net zero,’ but what does that actually mean?
Climate science has become even more robust and alarming as of late, with the recent Intergovernmental Panel on Climate Change (IPCC) Report suggesting that the 2°C target for limiting climate change set out in the Paris Climate Agreement is no longer sufficient to protect our ecosystems and economy from the worst effects of climate change.
Trang Bui, Country Head of Cushman & Wakefield Vietnam, comments: “In recent years, Vietnam's major cities have made significant progress in urbanization, but the tight construction density of high-rise office, retail and apartment building projects are crammed on an increasingly narrow land fund. This phenomenon also increases the density of the population concentrated in one area, leading to an overload of infrastructure and a very low ratio of green areas per capita,”. According to the report from the General Department of Environment in 2020, the average rate of green space area per capita in Ho Chi Minh City only reached 0.55 m2/person. It is estimated that each urban dweller needs an area of about 10m2 of trees to ensure fresh air for life.
“Public space will be narrowed or completely lost if the developer is only interested in making the most of the land fund for buildings, without paying attention to creating green living space connecting between buildings and other facilities. Businesses that recognize their part in mitigating climate change can better recruit and retain employees, and better serve customers, shareholders and stakeholders,” added Trang.
Investors are putting more focus on Environmental, Social and Corporate Governance (ESG) metrics than ever before. From January through November 2020, investors in mutual funds and exchange-traded funds (ETFs) invested US$288 billion globally in sustainable assets, a 96 percent increase over the whole of 2019. Why? Because they are beginning to recognize that companies that focus on ESG and reducing their carbon footprint offer sound investments while outperforming their peers.
Spurred by demand from customers, and pressure from investors and their own employees, the number of companies that have pledged to become net zero has increased over the past few years—with many moving their targeted timeline up to 2030 from the initial goal of 2050. But with so many companies setting ambitious goals and talking about becoming ‘carbon neutral’ or achieving ‘net zero,’ what does that actually mean?
Becoming ‘carbon neutral’ or achieving ‘net zero’
Based on estimates by Cushman & Wakefield, by 2050 there will be 6.6 billion square meters of commercial real estate across 143 countries. And the cost to decarbonize the global real estate market is estimated at $18 trillion. Most organizations are working to achieve their goals of reducing emissions, using clean energy sources, and offsetting any remaining emissions. There are essentially three steps to
- Set a baseline. Calculate carbon emissions and other greenhouse gas emissions created by business activities.
- Reduce emissions wherever possible through increased efficiencies and investments in onsite renewable energy.
- Balance the remainder of emissions through purchasing carbon offsets.
Unfortunately, the definition of carbon neutrality is vague, and it is increasingly viewed as common and is not much of a differentiator. Instead, companies wanting to demonstrate their commitment to climate change are increasingly adopting the Science-Based Targets initiative (SBTi) which independently assesses whether a company is aligned with the carbon emissions reduction required to keep global temperature increases below the 1.5°C and 2°C limits set out in the Paris Climate Agreement. If a company is not on track, SBTi helps guide the company to determining the number of reductions needed each year to achieve the company’s end goal and timeline.
Many organizations are already aligned with the greenhouse gas (GHG) protocol, which is an international standard for corporate GHG accounting and reporting that began in the late 1990s. In addition, more companies are opting to pursue a third-party verification for their emissions targets and REC purchases. RECs are already certified using Green-e, which is a third-party certification to prove the validity of the projects that are being used to support the RECs. Similarly, carbon offsets are certified to verified carbon standard (VCS) to prove their validity.
If you’re a veteran of sustainability and reducing carbon, your next steps would be to make sure you’re in line with SBTis and getting your program third-party verified. Another initiative might be to move up your carbon neutrality timeline.
No matter where you are in your carbon journey, these initiatives will help you and your company be better stewards of the planet, increase investor attention and prove to your employees and customers that you’re standing behind your commitment to them and future generations.
During the COP26 conference, Prime Minister Pham Minh Chinh announced Vietnam’s goal of achieving "zero" net emissions by 2050. This shows that the government is making efforts to change the urban landscape by incorporating technology to improve the living environment. However, this is just the beginning, the city needs more participation from the people and efforts from the government to be able to achieve the set goals. “These benefits promise to bring about significant changes in the future, creating landscapes and helping urban living environments become more civilized and progressive. Future real estate projects that do not incorporate ESG factors can run the risk of becoming obsolete,” Ms. Trang Bui concluded.
View the HCMC Q4 2022 MarketBeat from Cushman & Wakefield here.