Data dearth: challenges on the path to net zero | Online

Deepki blog

Total greenhouse gas (GHG) emissions have continued to rise between 2010 and 2019, as have cumulative net carbon emissions since 1850. Average annual GHG emissions over the past decade were higher than in any previous decade.

However, the IPCC notes that the rate of GHG emission growth between 2010 and 2019 was lower than the previous decade, and there are clear indications that “we have the tools and know-how required to limit warming and secure a liveable future.”

The IPCC notes that the real estate sector in particular can achieve “substantial reductions in CO2 emissions from energy use in buildings over the coming years, using mature technologies for energy efficiency that already existed widely and that have been successful”.

However, the report authors concede that “due to the long lifetime of buildings and their equipment, as well as the strong and numerous market barriers prevailing in this sector, many buildings do not apply these basic technologies to the level life-cycle cost minimisation would warrant”.

Lack of data

Deepki’s research, covering 250 European pension fund managers in the UK, Germany, France, Spain and Italy, with a combined AUM of €402 billion, found a number of challenges property facing investors as they make their transition to net zero.

Half of respondents say that just 21%-30% of their fund’s commercial real estate assets have strong ESG credentials, with the majority saying that a lack of suitable, quality data is the greatest challenge when it comes to ensuring their commercial real estate assets align with their responsible investment strategies.

More than half (53%) say they struggle to collect quality data; 44% say they have compliance concerns over data collection; two-fifths reveal that asset managers supply inconsistent data; and more than a third (36%) say data is incomplete.

It is no wonder then that 41% of European investors responding to the Deepki survey struggled to analyze and understand the data; 34% find measurement and benchmarking a challenge which leads 47% to concede that their ability to develop a strategy based on the data is hampered.

Real estate complexity

Gathering ESG data for real estate is complicated. Property management involves numerous actors often across multiple jurisdictions encompassing different legislation, standards and disclosure requirements.

Even where data are gathered, different management systems can be used and the level of granularity may vary, making it incredibly difficult for investors to analyze information.

These challenges are further compounded by the inability to harmonise quantitative and qualitative data. For example, while measuring and analyzing environmental data such as carbon emissions may be relatively straightforward, it may not be equivalently easy to collate non-financial, social or governance information.

These various complexities make it problematic to look across each asset in a portfolio and identify where improvements need to be made to comply with ESG goals.

New technology

Solutions are emerging to help investors manage the lack of ESG data in their portfolios and we can expect to see further innovation in this space.

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