Summary
An asset management firm needed to estimate the carbon emissions produced by their real estate global portfolio to meet regulatory requirements. They use an in-house model that estimates carbon emissions at the asset, country and asset sector level. To ensure that the model is doing its job to adequately prevent investments in risky deals and ensure risk is appropriately mitigated, Evalueserve provided a thorough validation of the model.
The Challenge
As the regulatory requirements for carbon footprint reporting continue to develop, a leading asset manager needed to accurately assess the emissions produced by their real estate portfolio. The firm uses an in-house developed model based on the Verco’s Aim for zero (AZ4) model, a widely known and deployed methodology across multi-million international real estate portfolios. Taking asset information and the respective data on energy consumption, the model estimates carbon emissions. Additionally, the model uses assumptions of energy efficiency improvements and energy grid decarbonization to generate a set of projected carbon emissions scenarios. Because the model analyzes a portfolio AUM of $9.1 billion, it was imperative that the validity of the model was verified through independent testing.
Our Solution
Evalueserve provided a full validation of the model encompassing a thorough technical assessment of the methodology used for transforming asset and energy data into carbon emissions information. To do so, the team reviewed the GHG Protocol, GRESB carbon emissions model, Verco’s AZ4 model, and novel scientific research and standards to assess the appropriateness of the model developed by the firm. Moreover, the model was also independently replicated to ensure that it was correctly implemented and an in-depth review of the processing components of the models and the implementation methods was performed through sensitivity and stress testing. Finally, Evalueserve assessed the quality of inputs used by comparing the model’s assumptions and key data with existing research and publicly available information.
Business Impact
The increasing commitment to implement sustainable strategies for value allocation and portfolio management coupled with developing reporting requirements present a need for thorough carbon footprint assessments. The asset manager’s model performs a critical job of assessing carbon emissions of their real estate portfolio with an AUM of $9.1 billion. The asset manager can now be confident in the accuracy of their model thanks to the thorough validation performed by Evalueserve.
Conclusion
Evalueserve played a pivotal role in addressing an asset management firm's challenge of accurately estimating carbon emissions from their global real estate portfolio to meet regulatory demands. The firm's in-house model, vital for assessing emissions and mitigating risks associated with a $9.1 billion portfolio, underwent rigorous validation by Evalueserve. This validation provided the asset manager with confidence in the model's accuracy, aligning with the growing need for sustainable strategies and stringent reporting requirements in portfolio management.