On the road to net zero building certification

On the road to net zero building certification

As investors in REITs, green building certifications give us the confidence that individual buildings have been constructed to - and are managed to - standards that an independent third-party has verified as ‘sustainable’. However, we’re not sure these ‘holistic’ certifications go far enough to aid the decarbonisation of buildings.


The IEA’s Net Zero Emissions scenario requires policies for new buildings to be “zero energy ready” by 2030, while major economies have set zero-energy targets for all buildings by 2050. Within our investment strategy we are able to seek out REITs that are net zero/carbon neutral-certified at the corporate level. However, we found that on a more granular level there are a limited number of properties achieving the same.


However, we found that on a more granular level there are a limited number of properties achieving the same. It’s important that buildings, as well as corporates, achieve net zero status to avoid corporates being able to offset away any problem buildings.


One reason for the focus on the corporate level may be the historic lack of asset-level certifications that focus solely on net zero achievement. Industry bodies have left the definition of a ‘zero energy’ building purposefully vague1 to allow local markets to adopt their measures based on local needs and conditions.


Japan’s Zero Energy Building Certification follows the ‘energy efficiency first’ principle; at a minimum, a building must have achieved a 50% reduction in energy consumption versus benchmark before it can be considered “ZEB (zero energy building) ready”. Further reductions and/or increases in renewable energy will qualify assets for “ZEB” status.


In the USA buildings that have already been LEED (Leadership in Energy and Environmental Design) certified can apply to the LEED zero program. This program looks simply at the carbon or energy balance of a building over the previous 12 months. Where the total carbon emitted (energy and occupant transport) over the last year is less than carbon avoided through renewables and offsets, a certification is awarded.


Under mainstream design-based certifications, zero-energy status for a building is hypothetical. For instance, under BREEAM New Construction a building would need to meet the following criteria:

  • A predicted operational energy performance ratio of 0.9 relative to a theoretical reference building. i.e. a 10% reduction in energy use.
  • Inclusion of energy considerations in the design process and additional consumption modelling.
  • Some equipment energy use from low carbon energy sources directly connected to the property.


There are significant gaps between modelled and actual energy use2 and therefore emissions. At the end of the day what we really care about is actual tonnes of GHGs emitted – not modelled. There is no retrospective check on the savings modelled.


While building owners are making great progress overall, net zero at the building level will be additional evidence of real decarbonisation. We believe standalone performance-based zero energy certification has the potential to be an important tool to achieve a credible decarbonisation of real estate. We would hope, in time, net zero building certification would look further at whole-life analysis of a building and thereby incorporate guidelines on carbon intensity in development, flexible design and locational aspects.


1 E.g. EU: “a building that has a very high energy performance”; the nearly zero or very low amount of energy required should be covered to a significant extent by energy from renewable sources.

2 For example: https://www.researchgate.net/publication/283482593_A_strategy_for_energy_performance_analysis_at_the_early_design_stage_Predicted_vs_actual_building_energy_performance



Important Information

More about the authors

Robin Honeyman Responsible Investment Associate

Robin Honeyman is a responsible investment associate in the responsible investment team.

Read next