Not all net zero pathways are created equal

Investors are demanding more precise disclosures to compare different investment products, not only in terms of returns or risks, but also progress towards reducing greenhouse gas emissions.

Net zero pathways represent a product’s timeline of the ‘path to net zero’ based on the underlying real estate asset’s operating emissions. Therefore, such pathways are helpful tools for comparing investment products’ climate ambitions and progress over time. Additionally, net zero pathways help make the long-term decarbonization trajectory tangible, enabling real estate managers to review the impact of their planned decarbonization measures regularly.

While real estate managers in most countries have yet to publish net zero pathways for real estate investment products, large institutional real estate managers in Switzerland are already disclosing their pathways. Moreover, we expect this to prevail across other markets in the near term. As is so often the case, disclosure and transparency are the first necessary steps before we can assess actual progress and performance.

Currently, there are no binding industry-wide standards for calculating and presenting net zero pathways. Thus, real estate managers and investors can only loosely compare real estate products’ pathways as approaches, parameters and assumptions vary by product. Until industry-wide standards are established, investors should scrutinize the detailed assumptions and parameters applied by real estate managers in their net zero pathways. Not all pathways (and disclosures) are created equal.