As with all asset classes, the asset alignment target can be split into the five steps.
1. Setting the scope
When setting the scope of the asset alignment target for real estate, investors are recommended to include:
- Investments: Individual direct investments, investments in assets pooled through a fund structure, and investments in listed real estate companies, and real estate debt.
- All types of real estate: Retail, office, industrial, residential, hotel, lodging, leisure & recreation, education, and technology/ science.
- Lifecycle stage: Existing real estate assets and those in development.
2. Assessing alignment
Investors are recommended to develop an approach to assessing the alignment of real estate within their portfolios using NZIF’s criteria.
For real estate assets being managed in line with net zero, investors are recommended to assess the current and past performance and forward-looking alignment based on carbon emissions and energy intensity in line with net zero pathways. Assessments are recommended to include scope 1, 2 and material scope 3 emissions.
NZIF recommends that investors use the CRREM tool to assess the alignment of real assets. This has the functionality to assess current and past performance, as well as forward looking alignment including assumptions on the effect of future actions, such as planned retrofits, etc. In regions where CRREM is currently less applicable due to market-specific differences, investors may use alternative Paris-aligned methodologies or tools to assess alignment.
For investors setting embodied carbon targets, this is recommended to include the emissions associated with the production, transport and installation of building materials and components, as well as the construction or renovation process itself.
