Real Estate Portfolio Carbon Risk Score (CaRiS)

Decarbonising the built environment continues post-COP26 to receive heightened focus as organisations sign net zero declarations, a range of third party voluntary commitments enabling transparency are on offer and an array of carbon calculators, tools and processes help somewhat in guiding and in decision making. Rightly so much attention has focused on construction professionals and their role in decision making to decarbonise new build and, to a lesser extent, refurbishment.

The growth in green financing that supports ESG transparency and disclosure has seen a huge upshift in the green bonds offered by financial services associated with the built environment assets. Buildings are estimated to be worth \>£12tn across the UK (commercial, residential). Within this the residential sector (multi-occupancy, including apartments, hotels) dominates, which according to Savills in 2019 was worth £7.4tn and in 2022 is estimated close to £9.0tn (85% privately owned).

For a portfolio of residential buildings there is a lack of visibility or awareness of the operational carbon load and the embodied carbon an investor is taking on. This conceals risks, but also opportunities. Financial services organisations need to better understand the relative contributions that operational and embodied carbon make on the climate and environmental risk associated with assets (and the impact that lifecycle considerations, and refurbishment interventions have). However, there is currently no consistent methodology to do this.

CaRiS is a methodology and proof-of-concept tool that enables financial services organisations to better understand embodied and operational carbon associated with a portfolio of built environment assets, enabling effective risk management and better decisions in managing portfolios in future.

The project will enable work with stakeholders to better understand the specific need, and to develop and test an early prototype of the CaRiS tool drawing upon existing data sets and tool outputs. The materials bank principle will be explored to quantify potential for an 'embodied carbon credit'. Such a credit would enable clients to manage their built assets as valuable materials banks (rather than embodied carbon liabilities). For operational carbon we will look beyond EPC for data sources and approaches that can be harvested to provide a consistent measure. Interventions (e.g. renewables, heat, fabric) to improve the assets operational carbon performance will be presented alongside embodied carbon incurred. The two strands combine as a carbon trajectory for the asset (aggregated into the portfolio) enabling a carbon risk score concept.