Investors have the ability to push real estate to net zero
The real estate industry is no more complex than others and citing complexity as a reason for delaying measures to address climate change is no longer valid, according to Jeremy Oppenheim, co-founder and senior partner of system change specialists Systemiq.
He acknowledged that real estate is complex though: “It has many actors who have played different roles within the system – from the capital providers, to the developers, to the construction companies, to the tenants – so it is inherently very complicated and operates within a complex policy environment.”
However, speaking to Real Asset Insight’s Richard Betts during the ULI’s recent C-Change summit, he said that having worked with multiple Industries on their transformation journeys “every single industry explains to me how they are the most complicated industry on the face of the planet, they therefore legitimately are going slower than other Industries and there are good reasons why they should be allowed a little bit more time.”
“That set of arguments might have been relevant 15 to 20 years ago when we had just a bit more time to deal with the climate and nature challenges that we face, but today those arguments do not hold up.”
Oppenheim said real estate is a fantastic industry filled with “astonishing, creative, brilliant actors and I have great confidence in their ability to overcome the complexity of their sector.”
The key to transformation is the creation of demand for new products and new solutions, he added.
And he said that investors will play “an absolutely critical role” in sending a demand signal through the real estate industry by recognizing two simple propositions. First, there must be a general flight to quality, of which carbon and net zero is one component.
Second, investors who fail to properly price climate risk into their capital allocation and their portfolio decisions will be the investors left with stranded assets.
“Real estate is not acting quickly enough, that’s for sure. There are some brilliant investors who are at the forefront and we’re very privileged as Systemiq to be working with a number of those investors,” he said.
“But this is the biggest asset class in the world,” he added. “We need tens of trillions of dollars and we need to get on with it quickly. What we have to do is to take that simple logic of the carrot and stick and not get stuck with stranded assets.”
“We need to start scaling it up,” Oppenheim said. “When you get to critical mass – maybe 30 to 40 of the big guys – we create a tipping point in the system. The investors in this industry are the players that are most likely to create that tipping point for the industry as a whole.”
