Climate Target Setting for Real Estate Sector Financing | NZBA

This NZBA guide helps banks set net-zero targets for real estate portfolios, balancing decarbonisation and emissions data.

The Net-Zero Banking Alliance (NZBA) has published a guide to assist banks in setting decarbonisation targets for their real estate financing portfolios. This paper highlights the challenges banks face when aligning real estate portfolios with climate goals, especially considering the significant share of global CO2 emissions attributed to buildings. NZBA provides a non-prescriptive approach, allowing banks to set individual targets based on their portfolio characteristics, data availability, and regional factors.

The guide distinguishes between residential and commercial real estate, recommending separate monitoring due to different emission pathways and operational considerations. Key metrics for target setting include both absolute and emissions intensity metrics, allowing banks to assess the climate performance of properties relative to their surface area and energy use. Banks can choose between balance sheet and portfolio weight approaches for emissions attribution, each with its own advantages and limitations.

The paper further stresses the importance of data quality in setting and tracking targets, recognizing that current data limitations, particularly for embodied emissions, may pose challenges. The guide encourages banks to adopt science-based decarbonisation scenarios, such as those from the IEA, and recommends using benchmarks to evaluate progress. Banks are advised to periodically review and update their targets as better data and methodologies become available.

Read the full document here: https://bit.ly/4080WrY.