Net Zero Standard Gets Looser And CRE Investors Face More Risk

The controversy centers on the third major section of the recently released update, which is titled "Act transparently on a best‑efforts basis." Under this approach, companies are expected to set "actionable, context‑specific targets" and then pursue them on a best‑efforts basis, with transparency about their assumptions and dependencies.

According to reporting by the Financial Times, SBTI does not plan to identify companies that fall short of their goals, as long as they can document their science‑based best efforts, point to obstacles and describe the actions they have taken. Critics argue that this effectively lowers the bar, allowing firms to miss targets while keeping their net‑zero credentials intact.

For commercial real estate investors, those nuances are not academic. Over the past several years, many have used SBTI‑aligned targets when screening tenants, borrowers and counterparties in ESG frameworks, green bond issuances and sustainability‑linked loans.

If companies can fail to hit their goals yet still wear the SBTI badge by explaining what went wrong, then the badge no longer offers a clear line between leaders and laggards. That makes it harder to gauge long‑term transition risk that can affect occupancy, operating costs and capital expenditure at the asset level.

Certificates, Offsets And A Murkier Picture

The new standard also expands the use of certificates and offsets in ways that could further blur the picture for real estate capital. Under Version 2.0, companies would be allowed to buy certificates for lower‑carbon products that they did not actually purchase, produce or use themselves.

These certificates could represent investments in sustainable fuels, low‑carbon cement or green steel, even if their own operations remain tied to higher‑carbon inputs. The Financial Times reported that under this framework, an AI company could claim that its natural‑gas‑powered data centers were effectively covered by clean-energy investments, and that heavy energy users could buy carbon offsets to argue that their activities were not increasing their carbon footprint.

For commercial real estate investors, that creates a due diligence problem inside the four walls of a building. Landlords and lenders are trying to understand the actual emissions profiles of their tenants and borrowers, not just the stories they tell in sustainability reports.

If a company can claim progress through certificates tied to products it never used, the emissions picture available to investors may diverge sharply from what is happening in the equipment rooms and loading docks of the properties it owns or finances.

That gap can translate into surprise capex to meet tightening building performance standards, or into stranded‑asset risk when occupiers prove less prepared for future regulation than their climate labels suggested.

SBTI maintains that the "level of ambition is unchanged; what has changed is the practicality." In its view, making room for best‑efforts language and expanded instruments such as certificates will bring more companies into the fold and help accelerate real‑world decarbonization.

For investors, though, the immediate effect is that it gets harder to use an SBTI‑aligned status as a simple yes‑or‑no screen for climate credibility. Instead of treating the label as a shortcut, real estate capital may have to dig into how much of a company's progress rests on actual operational changes versus financial instruments and narrative framing.

Who Regulates The Referee

Another source of discomfort is who is actually wielding this growing power over climate standards. Tommy Ricketts, chief executive of carbon rating agency BeZero Carbon, told the Financial Times that it is "not sustainable" for an unregulated charity to oversee standards with such broad reach. "At what point were they supposed to be the global regulator for climate action?" he asked, adding, "There is no way they can be held accountable."

That critique lands differently when you consider how deeply SBTI has become embedded in investment policy statements, lending criteria and corporate disclosure.

For commercial real estate investors, that raises a practical question: how much weight should they continue to give to SBTI when evaluating counterparties' climate performance and transition plans? Version 2.0 may still be useful as a baseline, but it now looks less like a hard standard and more like a negotiated framework with room for interpretation.

The combination of best‑efforts targets, expanded use of certificates and the lack of a mechanism to call out companies that miss their goals could lead to greater opacity in a market that already struggles with inconsistent data and fragmented regulation.