Australia’s journey towards achieving net zero emissions by 2050 hinges significantly on the real estate sector, according to a new report by the EY Net Zero Centre.
Titled Zeroing in on net zero buildings, the report underscores the pivotal role of commercial buildings, responsible for a quarter of the nation’s energy consumption and 10 per cent of its emissions, in this transition.
The report reveals that buildings slated to be net zero by 2030 are currently in the design phase, emphasising the need for immediate action.
Despite ongoing efforts to reduce emissions, there’s a notable gap in understanding within the industry about how addressing emissions can create new value.
Selina Short, EY Oceania Market Segment Leader for Built Environment & Resources, highlighted the potential for companies to leverage green building credentials to enhance asset value and share prices, indicating a shift towards a more sustainable and value-driven approach.
“Our research suggests those that can draw a direct link between green building credentials, asset value and share price will unearth new areas of commercial advantage,” said Short.
EY’s survey of executives from leading property companies and corporate tenants in Australia found a strong commitment to net zero targets.
However, the survey uncovered two distinct approaches within property companies: compliance-oriented firms focusing on minimising risk and costs, and brand-oriented firms leveraging sustainability to enhance their image and attract customers.
The report emphasises the need for aligning these objectives to create new value effectively.
It notes that 92 per cent of corporate tenants are more likely to stay in a property with strong green credentials and are willing to pay a premium for it.
Looking ahead, new reporting standards and disclosure requirements, such as the IFRS Sustainability Disclosure Standards, are set to reshape how green buildings are valued.
These standards, effective from 2025, will integrate climate, emissions, and sustainability into financial reporting, making it a key consideration for businesses.
Emma Herd, Co-Leader of the EY Net Zero Centre, highlighted that the responsibility for sustainability now lies with CFOs and audit committee chairs, emphasising the shift from cost-focused to value-driven sustainability strategies.
The report also identifies key areas for emissions reduction in buildings, including electrification, energy efficiency, grid interactivity, renewables, and embodied carbon.
It underscores the importance of tenants’ expectations and willingness to pay in driving investment decisions.
In conclusion, the report suggests that businesses in the real estate sector have yet to fully realise the benefits of sustainable building practices, indicating the need for a more comprehensive and value-focused ESG strategy in the industry.
