Uncovering the Carbon Risk Real Estate Monitor (CRREM): A key tool for decarbonizing real estate

August 2, 2023

Due to high energy consumption and greenhouse gas emissions in the real estate sector, the European Union has set itself the ambitious challenge of decarbonizing the building sector by 2050. To aid in the achievement of this goal, the EU has decided to fund the Carbon RIsk Real Estate Monitor (CRREM) project, which has become the leading global standard and initiative for operational decarbonization of real estate assets.

In this blog, we explore CRREM and uncover how the tool benefits stakeholders across the property sector, improving transparency about carbon risk and helping the industry take effective steps towards decarbonization.

What is CRREM?

CRREM is a research and innovation project that outlines science-based decarbonization pathways for the real estate industry in order to manage transition risks and align with the Paris Climate Goals of limiting global temperature rise to 1.5ºC.

The project offers a comprehensive framework focused on carbon risk exposure and provides the real estate industry with appropriate, science-based carbon reduction pathways at building, portfolio and company level as well as with financial risk assessment tools to cost-effectively manage carbon mitigation strategies.

These tools allow companies in the real estate sector to develop their ESG strategy by taking stock of their GHG emissions and forecasting scenarios to limit global warming by 1.5ºC. By including elements needed to undertake scenario analysis, it can be used to comply with large-scale initiatives such as the Task Force on Climate-related Financial Disclosures.

What are the main objectives of the project? 

The initiative’s main objective are to:

  • Increase transparency in the real estate sector
  • Encourage adoption of the Paris-aligned decarbonization targets and empower real estate investors and asset managers to measure their operational carbon footprint at property and portfolio levels
  • Support global harmonisation of decarbonization initiatives within the real estate sector
  • Ensure higher awareness for transition risk within the real estate industry

Through these objectives, the project’s ultimate purpose is to contribute to an increase in energy efficiency investments in the real estate sector by addressing the need to understand the risks of climate change. 

What is meant by ‘stranded assets’ and ‘stranding risk’?

The term ‘stranding risk’ refers to the potential devaluations of assets due to direct climate change impacts and the transition to a low carbon economy. For example, risks to properties with relatively high energy consumption include higher energy costs, building regulations and carbon taxes.

‘Stranded assets’ are those properties that will not meet future energy efficiency standards and market expectations, thus rendering them exposed to the risk of early economic obsolescence. 

Changing market expectations and regulations along the way to a low-carbon economy create stranding risks that have the potential to amount to significant losses, resulting in a growing liability upon company leaders. Long term investments, such as property, are extremely vulnerable to the risks of asset stranding, creating the need for property owners to use CRREM to mitigate these risks.

How can building analytics mitigate stranding risk?

Leveraging smart building analytics software, like CIM's PEAK Platform, can significantly aid in mitigating transition risk and minimising the risk of asset stranding. These platforms provide detailed insights into building performance, energy usage, and emissions profiles, enabling stakeholders to identify inefficiencies and develop targeted strategies for improvement. By optimising energy use, reducing carbon emissions, and enhancing overall sustainability, stakeholders can ensure their assets stay compliant with evolving regulations, market expectations, and decarbonization pathways like those outlined by CRREM. This proactivity not only mitigates transition risk but also prevents assets from becoming stranded or obsolete in a progressively low-carbon economy.

What are the benefits of CRREM?

The extensive quality assurance and international consultation undergone by CRREM resources provides stakeholders with a reliable and proven methodological approach to address transition risk. Utilising these resources brings numerous benefits and supports stakeholders in various ways. For example, CRREM:

  • Empowers investors and owners to align their real estate portfolios with decarbonization pathways that comply with the Paris Agreement.
  • Provides a mechanism to monitor the reduction of greenhouse gas emissions over time.
  • Facilitates transparent communication about ESG targets.
  • Enables analysis of the impacts of retrofitting measures on overall carbon performance.
  • Ensures compatibility with other standards and initiatives, including GRESB, BREEAM, and TCFD.

What types of properties can use CRREM?

CRREM covers a wide range of property types, including office, retail, hotels, industrial distribution warehouses, healthcare, leisure, medical offices and multi and single family residential.

The tool has already been used for over 10,000 properties, representing over 100 million square feet of space globally.

What are the CRREM decarbonization and energy reduction pathways?

CRREM has published decarbonization pathways that translate the ambitions of limiting global warming by 1.5ºC by the end of the century into regionally and property-type specific trajectories against which real estate assets and portfolios can be benchmarked. 

CRREM uses GHG emissions (and energy consumption) divided by floor area coverage to determine an individual asset’s intensity-based transition pathway. This details how specific assets need to become more efficient in order to align with certain transition scenarios.

The pathways can be downloaded here.

What is the CRREM Tool?

The CRREM decarbonization pathways are integrated in the CRREM Tool, an easy-to-use Excel tool which allows investors and asset managers to assess the stranding risk of their buildings, or even whole portfolios. 

After inputting specific information about particular assets, investors and asset managers can use the tool to analyse real estate portfolios in a number of different ways, from alignment with Paris goals to identification of assets that are in danger of stranding, to potential retrofit strategies.

The CRREM Tool thus allows for better informed investment decisions, as investors can easily evaluate the progress of a portfolio’s carbon reduction performance against reduction targets in line with the Paris Agreement.

How do CRREM and GRESB work together? 

GRESB has been an active member of the CRREM project, having served as a resource in its development. As a result, the CRREM Tool aligns closely with the performance data GRESB collects on real estate assets. 

GRESB is currently in the process of integrating the CRREM pathways into the GRESB portal, in order to provide a more complete evaluation of climate risk and sustainability performance. 

The first step in the integration was automating the process of filling in the CRREM Tool with asset-level performance data uploaded to the GRESB Asset Portal. This allowed some GRESB members to experiment with using their asset-level data to identify and manage transition risks for individual assets against the CRREM pathways for commercial properties.

In the next phase, GRESB will concentrate on improving their transition risk analytics capabilities through an in-house solution powered by the GRESB portal. This new tool will cover all the CRREM guidelines for reducing carbon emissions globally, including those for residential properties.

Cillian Casey
August 2, 2023