The real estate sector emits around 25 percent of Switzerland's total greenhouse gases. The federal government therefore regards the real estate sector as a key element in the implementation of the 2050 energy strategy. How is Zürcher Kantonalbank's Asset Management doing its bit here?
Rafik Awad: Asset Management at Zürcher Kantonalbank has clearly defined the road ahead: the real estate portfolios we manage will be climate-neutral by 2050. At the same time, we will meet our financial responsibilities towards our investors. These are mostly pension institutions which depend on constant, market-based returns to ensure they meet their pension commitments.
We need to achieve both sustainability and profitability.
And how is that done? Sustainability does not come free.
Sustainability comes at a price but that's good. Why? A price tag has a disciplining effect on investment decisions and requires forward-looking planning before making a move. The fact is that sustainable real estate generates added value at various levels, such as lower ancillary costs for tenants or a greater willingness to pay in the transaction market.
In specific terms, how much CO2 have you actually been able to save?
We have been working on sustainability measures in the Swisscanto real estate products managed by Zürcher Kantonalbank since 2016. That is why our average emission intensity in 2021, at 11.3 kg of CO2 per heated square metre, was significantly lower than that of the Swiss building stock at over 15 kg/m2. We achieved this for the most part at relatively low costs by implementing comprehensive operational optimisations and smaller maintenance measures. Achieving greater CO2 reductions will require a growing shift in energy sources, shell renovations, and new replacement buildings. This requires significantly higher investments.
The recently adopted Climate and Innovation Act includes subsidies of CHF 3.2 billion. Will this compensate for the additional costs of major changes?
Only partially. For this reason, it is essential we have detailed analyses that show as objectively as possible which CO2 reduction measures make sense at what time and for which properties, both ecologically and financially.
Which criteria determine the implementation of CO2 reduction measures in a portfolio?
In essence, we ask ourselves two questions: are we investing in the right measures from a cost-benefit analysis and do the measures also align with the property strategy?
In the cost-benefit analysis, we focus on the avoidance costs of different measures. In other words, how much does it cost to save one tonne of CO2 per year? The benefit here is of an ecological, rather than an economic, nature. The avoidance costs vary significantly depending on the measure and property. To calculate these accurately, we have collaborated with a specialised engineering firm to create a reduction path tool. This makes it possible to compare the investment costs and CO2 savings ratios of various measures such as heat pumps, district heating, biomass, shell renovations and photovoltaics for each property. The combination of various measures can, depending on the situation, lead to an additional reduction in avoidance costs.