Photography by Cristian Mihaila

For many private real estate organizations, 2021 was the year they declared plans to reduce their carbon emissions. In an effort to be visible in the fight against the adverse effects from climate change, managers and investors alike joined the ‘race to net zero’ with announcements declaring when they expected to neutralize the amount of carbon dioxide they produce. Their announcements coincided with the 2021 United Nations Climate Change conference in Glasgow, which was staged in November and attracted business and government leaders from around the world.

Many expressed ambitions to reach carbon neutrality by 2050, the deadline set by the Intergovernmental Panel on Climate Change (IPCC) that determined at the same conference in Paris in 2015 that the earth’s temperature should not exceed 1.5 degrees above pre-industrial levels beyond 2050 to avoid a surge in natural disasters. Some went one better, stating 2040 net-zero targets. In doing so, they transformed the industry’s effort into a competition.

Copenhagen-headquartered manager NREP has publicly declared an intent to win it. In October, the firm pledged to fully decarbonize its real estate portfolio by as early as 2028. In just six years, NREP expects its embodied and operational carbon emissions to be net neutral – without the use of carbon offsets, financial instruments which essentially allow buyers of renewable energy to mitigate the amount of carbon dioxide they produce.

But while NREP’s announcement was aggressive, Claus Mathisen, the firm’s chief executive, insists NREP’s ambition to be net-neutral first does not stem from a desire to beat other organizations. He is keener to demonstrate the introspective nature of the target. “We’re not doing this to prove we can beat the guy next door,” Claus Mathisen, NREP’s chief executive officer tells PERE. “We’re doing it to prove it is possible and to fuel a demand-driven change in the real estate value chain.”

He reckons 2040 or 2050 targets, so widely visible elsewhere in the industry, would not work at NREP for cultural reasons. Mathisen says his firm believes it is important the people setting the target still work for the business when it is achieved. “There’s the motivation,” he states. NREP has about 500 employees, with an average age of 35. “They just wouldn’t be happy if our target is when they’ve retired,” he says.

Additionally, Mathisen wants NREP to demonstrate to the market how a faster pace of change can be achieved. “If this entices other people to revisit their number, then great.” He knows the declaration of a 2028 target will grab attention; he also admits an effort to reach it will mean some pain and a lot of learning for his company. “That’s the right competitive pressure.”

The path to zero

On including ‘without offsets’ in NREP’s target, Mathisen is equally resolute in his opinion, labeling their use as a tax, as they must be purchased. “You’re asking someone else to address the problem for you. That could actually lead to you emitting even more CO2.”

Indeed, Mathisen finds this area of the carbon cutting equation disturbing as he acknowledges using these credits enables firms to hit targets without properly engaging with methods to actually reduce carbon emissions. Like its peers, NREP currently uses offsets, but positioned them as a way of economically incentivizing the firm to get away from having to use them.

Mathisen is more enthusiastic discussing the strategies NREP will engage to turn the firm’s €14 billion of assets under management net carbon neutral. As has become common, it is splitting its effort into two areas: embodied carbon and operational carbon. Adopting various technologies and data sets, the firm assesses these areas using sector- and geography-specific metrics.

These assessments, Mathisen says, are homemade. In the absence of universally-adopted measurements, Mathisen believes it is incumbent upon NREP to generate its own best assessment practices. He hopes other organizations come to adopt them. “The ability to share our findings broadly overshadows any competitive edge we would have. I hope others will be inspired by our solutions.”

NREP’s net zero timeline


Sets net-zero real estate portfolio target


Upfront embodied carbon to be reduced by 33 percent and operational carbon by 50 percent from 2020 levels


Three large net-zero innovation projects to complete. These to serve as prototypes for wider portfolio


Entire portfolio to achieve net-zero status

NREP has long positioned sustainability goals as a priority. Even before setting its carbon neutrality target, the firm promoted initiatives including the development of CO2-neutral geothermal heating systems and developments made entirely from ‘upcycled concrete.’ For instance, the firm invested in UN17 Village, a 350,000-square-foot, five-building residential project in Copenhagen that achieves all 17 of the United Nations’ sustainable development goals in one project. The firm is also sharing many of the technologies used to achieve its sustainable goals with the capital markets. Last year, it launched proptech venture capital business 2150, raising €268 million for its first fund – a hit with investors, which oversubscribed the vehicle by more than 30 percent.

But now, with its self-imposed carbon neutrality target, Mathisen acknowledges its work must pick up pace. To ensure that happens, interim timescales have been set in addition to an end point at 2028. By 2023, NREP aims to reduce embodied carbon emissions from the firm’s assets by a third and cut its operational carbon by 50 percent.

For the operational component, there is often a meeting of minds between NREP and its occupiers, Mathisen says: “The energy solutions we provide are in collaboration with our tenants upfront.”

The embodied part, however, is more complicated. Often responsible for more than half the carbon emissions from a piece of real estate, embodied carbon emissions can depend on many more stakeholders and the jurisdiction. Mathisen insists regulatory prohibitions are not always easy to navigate.

Much of the challenge of reducing carbon emissions here, Mathisen believes, stems from adjusting supply chains, which are often long and firmly established. For instance, switching from concrete to increasingly trending wood-based materials is fraught with complications from limited local supplies to inappropriate and often outdated local building accreditation. “Certainly, building in wood requires regulatory changes in some of the markets we’re in,” Mathisen says.

He sees a major solution in the reuse of existing building materials. “In some Nordic countries, there’s no more gravel – the stuff we put in concrete. We can’t source it anymore,” he says. “We started experimenting with recycling materials back in 2014 with the construction of a storage facility.”

For Mathisen, many cities offer “urban mines” of materials that need converting to be reused. He says many buildings are “dumps that need to be repurposed,” and believes in developing the methods to manage that process.

He acknowledges the feat is “super difficult” and requires the widescale adoption of these methods by the market’s supply and value chains. “There needs to be a quality reassurance of these reused materials,” he insists. But he is convinced that will happen eventually.

Mathisen also expects updates to regulation, not just to facilitate for things like concrete use, but to enforce sustainable activities in the built environment more generally. He points out how the Danish ombudsman ruled against so-called ‘greenwashing’ in December, meaning firms will no longer be at liberty to label assets ‘green’ or ‘sustainable’ if they have not carried out a Life Cycle Assessment. The firm has already implemented LCAs on its entire property portfolio, versus only 1 percent for the overall industry, as per a report by the World Business Council for Sustainable Development published last year.

Carrying the cost

Mathisen accepts there will be a premium cost to developing decarbonizing methods first. But he does not think the institutional capital NREP serves needs to foot the bill. NREP raised more than €1 billion across its value-add flagship Nordic Strategic Fund series and its maiden core vehicle, NREP Income-Plus, in 2021.

He says while deal sourcing and execution is made more complicated by its sustainability ambitions, vehicle performance should not be impacted. Pointing to recycled materials again, Mathisen explains: “Recycling the concrete is hard from a people perspective. But actually the property is cheaper. So, constructing a building is almost the same as for a normal building.”

When completed, he says NREP is able to command premiums to tenants.
Augustus, one of NREP’s offices in Copenhagen, has an outer surface of upcycled bricks and an interior of upcycled wood. Even waste fish flour is used in its construction. The office was launched amid covid-19 when the city’s tenant demand was uncertain. The firm’s valuing broker advised that full lease-up would take three years. It took nine months to be 95 percent let, with its co-working areas leased at more than 10 percent over initial estimated rents.

In another example, for Plushusene – NREP’s sustainable multi-generational community living program, which it is developing across Denmark in a joint venture with local developer CASA Group – 22 percent more of the units have rented versus the residential benchmark the firm uses. “There isn’t an additional cost for introducing these elements,” says Mathisen. “It is either reflected in a higher rent or in the cap rate on exit. It is in the risk profile of the asset which we make commensurate with what our funds need to do.”

Speaking of commensurate, PERE asks whether NREP’s AUM size, small relative to some of the organizations which announced decarbonization targets in 2021, is a competitive advantage. Mathisen agrees the firm is at a good size to execute on the 2028 target and acknowledges the relative difficulty firms with multiple more billion dollars of assets to address will face. “I think we have enough size to be relevant and to put money into this. It could be harder if there was a lot more. There would also be many more stakeholders to manage. It is also more complex if you are a global player than if you’re predominantly Northern European. We’re Nordic and come from a part of the world where this is embedded.”

Mathisen: NREP’s smaller relative size is an advantage in executing on the 2028 target

NREP’s 2028 net-zero target has seen the firm shortlisted in the inaugural ESG Firm of the Year, Global and ESG Firm of the Year, Europe categories in the 2021 PERE Global Awards.

It is competing with other environmental and social impact industry pioneers including Houston-based manager and developer Hines, New York-based asset manager BentallGreenOak and Melbourne-headquartered manager Charter Hall. Last year’s awards received more than 10,000 votes. At the time of writing with a week to go before this year’s voting closed, NREP was winning in one category and placing a close second in the other. Winners will be announced on March 1.

While Mathisen is not focused on competition for competition’s sake, other figures in the private real estate industry agree the industry’s instinct to compete should aid the cause. Further, given the lack of imposed carbon-cutting targets, self-imposed aims were necessary. Sylvain Fortier, chief investment and innovation officer at Canadian investor Ivanhoé Cambridge, for example, told PERE at the PERE Global Summit last year: “I very much believe in giving yourself specific targets.”

Ivanhoé Cambridge, which manages C$60 billion ($47.5 billion; €41.9 billion), set a 2040 net-zero target last April. “If everyone picks a year and it becomes a bit of a competition, then good. People like to win.”

Of the carbon cutting targets out there, few would argue NREP’s was not notably ambitious. “A target that early is aggressive and will put them well ahead of the pack,” says Alasdair Grainger, net zero director at consultant Grant Thornton. “2030 would be regarded as ‘early’ in most sectors.”

Grainger believes NREP’s geographic position, excluding its operations in Poland, are an advantage but that should not detract from the firm’s bold plans. “Firms that can create a competitive advantage by setting and, critically, obtaining stretching goals in a sector will be well positioned to reap the benefit.”

NREP might win PERE’s and other awards along the way. But for Mathisen, winning the race to net zero offers the biggest prize: the ability to prove to the private real estate industry that its bold carbon-cutting target is not fanciful, but doable.

Beyond the year target

While NREP’s 2028 carbon-cutting target stands out among its peers, another point of differentiation is the standard at which efforts are measured.

At APG Asset Management, the Dutch pension manager, for example, an asset must comply with Carbon Risk Real Estate Monitor requirements to be considered as net zero.
Derk Welling, senior responsible investment and governance specialist, says: “The key is the definition. If a building is performing below this then it is considered net zero. New developments should perform below CRREM pathways for the next 20 years – in line with average life cycle of a building. If not, we would not consider it to be net zero.” NREP has ticked that box. When the firm announced its 2028 target, it confirmed its adoption “of the decarbonization tools of the CRREM.”


Mathisen’s tech picks

NREP is a proponent of investing in technologies that would further its goals of becoming a more sustainable operator.

Even before the launch of its 2150 proptech venture capital business last year, the firm was investing in the sector using balance sheet capital. With 2150’s arrival, the firm was able to focus its ambitions on investing in what it terms ‘gigacorns’ – commercially viable businesses able to mitigate or capture one gigatonne of CO2 per year. PERE asked Mathisen for three choice selections to demonstrate the kinds of technologies NREP is backing.

CarbonCure: aims to reduce CO2 emissions by 500 million tons annually by 2030

Spacemaker: A technology adopting artificial intelligence to develop more customer-centric and sustainable real estate. In early work on a residential scheme, NREP has been able to increase the number of apartments by 6 percent while adding more sun and daylight to each home.

AeroSeal: A technology aimed at reducing drafts and general air leakage. According to the International Energy Agency, between 30 and 40 percent of energy use is spent on heating space. This technology is expected to reduce that by plugging gaps in a property.

CarbonCure: A cleantech business that injects CO2 into fresh concrete which forms a ‘nano-sized mineral’ to make it stronger, thereby reducing the need for traditional volumes of concrete. CarbonCure’s aim is to reduce CO2 emissions by 500 million tons annually by 2030.