Paul Richards
Managing Director, The Association of Real Estate Funds
The 2050 vision: buildings drive carbon neutrality. Explore retrofitting’s economic shift, investment opportunities and the path to net zero.
Imagine it’s early 2050, not 2024. The net zero target is already upon us. Let’s imagine the offices, schools, homes and factories that once emitted 37% of the world’s carbon are now playing a full role in carbon neutrality. How did we get here?
Energy-efficient retrofitting
Public and private actors rapidly realised the importance of retrofitting existing buildings. This meant sustainable energy generation from solar panels to heat pumps, converting from gas to electricity — and effective insulation.
In 2023, Historic England calculated that Manchester required around 5,000 workers to retrofit the city region’s 311,000 buildings, and London needed 16,300 workers generating £3.1 billion. Huge numbers matched huge opportunities.
Retrofitting boosts value
Retrofitting buildings made not just environmental and economic sense — they were also a sound investment opportunity.
After all, back in 2024, investors used a building’s energy efficiency rating to help them price it. A retrofitted building with an energy performance certificate rating of ‘A’ was a far more attractive proposition than an untouched building labelled ‘G’ for inefficient.
A retrofitted building with an energy performance
certificate rating of ‘A’ was a far more attractive
proposition than an untouched building
labelled ‘G’ for inefficient.
Declining funds hinder retrofitting progress
Large institutional investors — including pension funds, insurance and private investor money — primarily funded retrofitting. However, the current reality shows a decline in funds supporting Britain’s buildings and net zero.
Once, huge defined benefit pension funds — common in the 70s to 90s — made huge investments in real estate, providing steady returns tied to economic growth. They still have around £1.7 trillion in assets, but they are in runoff and investing less capital in growth assets like real estate — and therefore net zero and retrofitting.
Opportunity in real estate
Defined contribution pensions — where the worker assumes the investment risk — doubled to £600 billion from 2015–2021. Real estate is a natural investment for them, helping workers aim for retirement savings.
However, defined contribution savers have very limited access to real estate funds. Regulators drag their feet. Legislators struggle to see beyond technical difficulties. Opening UK real estate to more UK investors gives us all a better chance of achieving our 2050 goals. It’s a huge opportunity.