RECP IV pioneers method to drive down construction emissions
Goldman Sachs Alternatives managed fund takes building life-cycle approach to carbon
The CEFC and Real Estate Credit Partners IV (RECP IV) are taking an industry leading full life-cycle approach to carbon within projects, co-investing in construction debt facilities in the residential and commercial office sectors.
$160 million
CEFC commitment
Sustainability
focus
Life-cycle
approach
Building next generation and energy efficient assets is at the forefront of driving asset quality, operating performance and investment outcomes in the real estate market.Richard SpencerCIO for Real Estate Credit, Goldman Sachs Alternatives
Our investment
The CEFC has committed $160 million alongside Real Estate Credit Partners IV (RECP IV) to demonstrate how private capital can rapidly effect systemic change across the building sector and encourage stronger sustainability measures in the broader real estate market.
RECP IV will leverage the international capabilities of its fund manager Goldman Sachs Alternatives to demonstrate a progressive approach to sustainable debt finance in the Australian market.
Projects financed jointly by the CEFC and RECP IV in Australia will measure and demonstrate cost effective pathways to positively influence the carbon outcomes across projects ranging from embodied carbon to operational efficiency and physical climate risks, in line with international sustainability best practice.
Our investment will also demonstrate how Australian non-bank lenders can enhance their investment approach from one of passive reporting to a more active approach focused on driving meaningful transitional change. This in turn will incentivise the construction sector to lift sustainability standards, which are essential to our transition to net zero emissions.Michael Di RussoHead of Property, CEFC
OUR IMPACT
A focus on embodied carbon
Embodied carbon represents the greenhouse gas emissions associated with the creation of a building and its maintenance over its lifetime.
It is estimated that between 2020 and 2050, embodied carbon will be responsible for almost half of new construction emissions.1
Approximately 40 per cent of the 50 billion tonnes of carbon emissions released globally each year come from the built environment, and 22 per cent of that total comes from embodied carbon emissions in infrastructure and construction.2
Australia has a $450 billion commercial real estate debt market that can play a vital role in the climate transition by using its size and liquidity to influence sustainability outcomes.
To support the Australian property sector in its efforts to decarbonise, the CEFC is focused on investment that tackles the challenge of embodied carbon. The CEFC is also focused on setting detailed Environmental, Social and Governance reporting requirements for individual borrowers to ensure the integrity of sustainability targets.
Transparency and accountability in sustainability outcomes
Each CEFC and RECP IV project is required to feature minimum standards across operational energy efficiency and embodied carbon. Additional requirements include the preparation of physical climate risk assessments, as well as the consideration of stretch targets aligned with the International Energy Agency definition of zero-carbon-ready buildings.3 These include electrification and renewable energy supply.
The CEFC investment will leverage RECP IV’s existing sustainability framework which is designed to adhere to the requirements stipulated in Article 8 of the European Sustainable Finance Disclosure Regulation (SFDR).
In line with these requirements, funds must not only promote environmental and/or social characteristics, but also provide a comprehensive disclosure of the initiatives they undertake. This approach ensures transparency and accountability in the delivery of sustainability outcomes.
1. World Green Building Council, Bringing Embodied Carbon Upfront: Coordinated action for the building and construction sector to tackle embodied carbon.
2. KPMG, Tackling embodied carbon within Australia’s construction and infrastructure sector,p13.
