Carbon disclosures in listed real estate

The greening of the built environment — which represents over 40% of global emissions — is a key element in reducing carbon emissions, aligning the world to a net zero trajectory and dealing with other issues, such as urban pollution.

It is also important for multi-asset investors looking to integrate sustainability considerations into their diverse portfolios. However, aligning the real estate segment of portfolios can be challenging, due to the sector’s unique climate exposures.

Our research focuses on the difficulties companies in this sector currently face in quantifying their carbon emissions exposures, the tools FTSE Russell and partner Measurabl offer to help investors navigate this space, and resulting outcomes.

Points of differentiation: 

• A deep dive on company carbon emissions disclosures across the largest global FTSE EPRA Nareit Developed Index constituents, with a focus specifically on their disclosures in relation to different scopes, the topics of operational and embodied portfolio emissions, and their alignment to reporting standards.
• An assessment of the sector and country attribution affects driving past performance outcomes of the FTSE EPRA Nareit Developed Green Low Carbon Target Index relative to its parent index, and stock level initiatives that might help drive future performance.

What does our research mean for investors?  

This paper predominantly focuses on 40 of the largest companies in the EPRA Nareit global universe to provide an overview of the real estate sector’s carbon emission disclosures practices, namely Scope 3 tenant and embodied carbon disclosures, to highlight the key challenges companies face in reporting impacting on the quality of reported emissions data.

We highlight FTSE Russell's partnership with Measurabl, using machine learning estimation approaches to ensure comparable climate metrics figures across countries and sectors within the EPRA Nareit Developed universe.

In addition highlighting how historical sustainability trends within the FTSE EPRA Nareit Green Low Carbon Target Index have impacted performance, we show how regulatory changes and technological advancements — combined with FTSE Russell’s target exposure methodology and proactive index management — provide promise for future returns in the sustainable listed real estate universe.