Real estate investment and the net-zero imperative
Investors across the world have recognized the power their industry holds in driving the real economy toward a net-zero future. Real estate is a crucial asset class in investors’ net-zero strategies, not only because it contributes roughly 35% of global GHG emissions but also because it represents a tangible sector with significant potential to transform energy consumption and generation practices and patterns.
In any net-zero framework for real estate, there is general consensus on the various elements required for decarbonization. These elements include decreasing energy demand, increasing energy efficiency, incorporating on-site solar, electrifying systems, and enhancing grid interactivity. Regardless of the specific combination or order of these elements for a particular asset, off-site renewable energy procurement remains a key component of any building’s net-zero transformation.
Thus, insight into the quality of off-site renewable energy procurement is critical for investors to assess the credibility of net-zero transitions in real estate.
Carbon accounting: The net-zero measuring stick
Carbon accounting is the measuring stick by which financial institutions gauge whether they are on track to align their portfolios with net-zero goals. The global standard for accounting and reporting financed emissions for financial institutions, known as PCAF, is built upon the standards of the GHG Protocol, the global standard for corporate GHG accounting and reporting.
Consequently, when trying to determine whether renewable energy procurement aligns with their net-zero objectives, many stakeholders, both financial and corporate, look to the GHG Protocol.
In its current Scope 2 Guidance, released in 2025, the GHG Protocol outlines two methods for calculating Scope 2 emissions: the location-based method and the market-based method. While the former relies on the average emissions intensity of the electricity grid from which the reporting entity consumes its energy, the latter was devised to encourage individual action by sending market signals about the need for more clean energy generation.
The crux: The relationship between renewable energy markets and carbon accounting
This is where the physical reality of energy generation and consumption starts to diverge from what gets accounted for. Because electrons cannot be tracked once they enter the electrical grid—and because not everyone who wishes to consume renewable energy has the demand, capacity, or resources to finance, build, interconnect, and manage their own renewable energy generation facilities—renewable energy markets were formed.
The GHG Protocol’s market-based method relies on these markets, built on the understanding that by participating in them, an entity can claim the “use” of renewable energy and “subtract” the corresponding emissions from its GHG accounts.
The problem is that not all renewable energy markets function effectively—let alone efficiently. This has led to several distinct and significant challenges:
- Entities can reduce their market-based Scope 2 emissions with little to no impact on renewable energy markets or the actual development of renewable energy generation capacity, and by extension, little to no impact on real-world system-level reductions in GHG emissions.
- Some impactful renewable energy practices—those that result in increased renewable energy generation like financing renewable development via Power Purchase Agreements, or that send strong market signals to displace fossil fuel power production like 24/7 matching—are not recognized by the GHG Protocol if they aren’t paired with market-based claims.
Pushing forward: The GRESB approach
GRESB is a strategic partner for resilient and high-performing investments across real assets and climate-critical industries. Its wide membership of over 2,200 real estate funds, consisting of 200,000+ real estate assets, exhibits a range of philosophies, strategies, and practices related to renewable energy procurement, its relationship to carbon accounting, and consequently, net-zero alignment. Naturally, GRESB has members who experience the challenges outlined above.
To help its members better track and understand the range of renewable energy practices, GRESB has looked to the world’s leading renewable energy coalition, the RE100, and leveraged its framework to more precisely characterize how real estate companies procure electricity and make associated renewable energy consumption claims.
RE100 is a global initiative where influential businesses commit to sourcing 100% renewable electricity. It’s widely recognized as a leading framework for renewable energy quality due to its credible standards, high-profile membership of major corporations, and significant impact on driving demand for renewable energy in global markets. The initiative’s transparency, clear guidelines, and ability to influence energy policies have made it a benchmark for corporate renewable energy commitments.
RE100’s technical criteria are largely an interpretation of the GHG Protocol Corporate Standard market-based Scope 2 accounting guidance, applying the principles of market-based greenhouse gas emissions claims to renewable electricity usage claims by recognizing that both types of claims are made possible by the same market-based instruments. However, due to its close reflection of the GHG Protocol, RE100 faces similar challenges as the former.
GRESB has disaggregated the RE100’s Procurement Type classification system to separately capture (1) how the electricity is procured and (2) how and if market-based renewable energy claims are substantiated. By separating these two concepts (electricity procurement and market-based claims), GRESB provides greater granularity regarding the relationship between market-based claims and procurement actions by specifying whether the claim is “bundled” or “unbundled” with the method of energy procurement. This distinction is important because, while current carbon accounting practice does not differentiate between the two, the impact on system-wide GHG reduction can be significant, particularly in larger and more dispersed renewable energy markets.
Furthermore, GRESB will also capture information regarding two other dimensions of the market-based claim: proximity and vintage.
- Proximity refers to the spatial closeness between the point of generation and the point of consumption. Generally, the closer, the better, due to energy losses in transmission and distribution, as well as reflecting a closer relationship between energy generation and demand.
- Vintage refers to the temporal closeness between the time of generation and the time of consumption. Again, the closer, the better, because a closer matching of vintage sends a clearer market signal regarding the demand for renewable energy during that specific time period.
For these concepts, GRESB also leverages the definitions and guidance provided by the RE100.
Together, these four characteristics—procurement type, market-based claims, proximity, and vintage—provide a detailed picture of how real estate interacts with the grid and renewable energy markets in its effort to advance net-zero ambitions.
The balancing act: Driving progress while respecting the current state-of-play
As the steward of a global standard, the GRESB Foundation strives to balance guiding the industry towards real performance with ensuring that the majority of the industry understands the direction and comes along for the ride.
With full appreciation of this delicate balance, GRESB has multiple key mechanisms at its disposal. While the GRESB Score provides the simplest indication of best practice, it can be thought of as step three. Steps one and two are transparency and benchmarking, respectively.
The power of capturing and making data transparent and understandable should not be underestimated. It can not only influence behavior but also, perhaps more importantly, change the understanding of the relationship between action and system-wide impact. Benchmarking takes this a step further by clearly illustrating current practices and what is being achieved by the industry currently.
GRESB will start by making renewable energy data transparent and meaningful, aiming to catalyze the industry through steps two and three in alignment with the urgency of the global transition to net-zero.
In parallel, GRESB continues to be actively involved in the revision of the GHG Protocol, with representation on its Scope 2 Technical Working Group. This involvement ensures that the perspectives and experiences of the global real assets industry are reflected in the process, and that the updated standards help global renewable energy markets function effectively in advancing a low-carbon energy system.