CRE Private Equity Firm Announced Net-Zero Carbon Operations in Its Corporate Campus

“The Roxborough Group, a real estate private equity firm headquartered in San Francisco with investments across the Western United States, has completed the conversion of its Kirkland 405 Corporate Center campus to net zero carbon operations,” came the announcement.

It’s understandable, given growing concern over climate change and the impact on commercial operations and CRE portfolios. Extreme weather events can keep a facility from operating or increase the costs of tenants’ energy and HVAC bills.

In this case, the move is reportedly accomplished through a shift to all electric power backed by a renewable source program available to commercial customers of Puget Sound Energy.

“PSE’s Green Power program replaces the use of coal and natural gas-generated electricity, which comprises just over half of PSE’s typical electricity fuel mix, with predominantly wind and solar-based production,” says the announcement. “Approximately 8% of PSE’s customers have enrolled in the Green Power program.”

And that may be as direct and accurate as it sounds. However, in general, tenants, investors, and property owners have to ask more questions. Like, how much does a net-zero power source depend on renewable power sources and how much does it rely on carbon allowances and offsets as well as other environmental accounting strategies.

Although this isn’t exactly the correct terminology according to experts, put allowances and offsets into a general category of carbon credits. One company, like an electric car firm, has relatively low carbon generation. They sell those credits to another company that wants to move toward a lower carbon impact, maybe even net-zero emissions.

But there is no actual reduction of carbon. It’s like taking spending from the income statement and moving it to an off-balance sheet transaction. The spending seems to disappear from the company’s books, but the expenditure is real.

Any such scheme needs three different characteristics: additionality, leakage, and permanence. The first means a reduction, like planting trees, wouldn’t have happened anyway. Leakage is ensuring that something done in one place isn’t undone in another, like one farmer converts a corn field to trees but another farmer cuts down a different set of trees to plant corn that’s in demand. Permanence is stickier because it looks at how long a carbon effect will continue. If you plant trees, will they eventually be cut down?

For an office building, does a net-zero achievement mean less if the occupants are involved in activities that generate extensive amounts of carbon. Does that green power come from all renewable sources, or is it buying carbon credits?