Interview Patrick de Baat on internal carbon pricing

'I am part of the Sustainability team of a.s.r. real estate, which is responsible for developing and implementing the ESG strategy (Environmental, Social and Governance). The team ensures that the funds – covering property, agricultural land and solar and wind farms – continue to advance in sustainability.'

‘Our ESG strategy consists of four strategic pillars: (1) reducing CO₂ emissions, (2) identifying and mitigating climate risks, (3) making a positive contribution to biodiversity and ecosystems, and (4) improving health and equality in the physical living environment. 

The first pillar focuses on achieving a CO₂-neutral property portfolio by 2045 at the latest, thereby contributing to international climate objectives of climate neutrality by 2050. This is accomplished by renovating existing buildings and acquiring only properties that meet the 2045 standard, ensuring a future-proof real estate portfolio.’

‘Internal carbon pricing is a way of assigning a monetary value to the CO₂ emissions generated by business activities such as procurement or outsourcing – including the acquisition, renovation and operation of buildings. CO₂ emissions can be difficult to interpret, but everyone understands euros. By attaching a financial value to CO₂ emissions – giving every tonne of CO₂ a price – the impact becomes clear and investment decisions can be assessed more consciously. This provides colleagues with an additional tool to determine whether an investment is the right one.’

‘For each new purchase, the internal CO₂ price is calculated. This is a so-called shadow price, used solely for decision-making and is not actually charged. A market price of € 106.80 per tonne of CO₂ applies to emissions within the CO₂ budget, while a societal price of € 994.50 per tonne applies to emissions outside the budget. The calculation includes total CO₂ emissions from both energy and material use – covering operational and material-related emissions – during the first fifteen years of use.’

‘This value is assessed against the purchase or renovation costs, offering insight into the ‘hidden costs’ of CO₂ emissions and supporting the case for more sustainable investments. For instance, a timber building may be slightly more expensive than a concrete one, yet its CO₂ emissions are considerably lower. Applying the internal CO₂ price demonstrates that a modest additional investment in a sustainable option today delivers greater long-term value – while contributing positively to the planet.’

‘The ultimate goal is to achieve the climate policy targets and the corresponding international climate commitments. Internal carbon pricing supports this by integrating CO₂ emissions into risk assessments and decision-making processes. This approach enables the identification of more sustainable buildings and promotes investments that contribute to a carbon-neutral real estate portfolio.’

‘Sustainability is a key priority for a.s.r. and other investors share that conviction. However, for investors, it can be challenging to determine whether a more sustainable investment is the right choice, as financial considerations play a major role. By calculating the hidden costs of CO₂ emissions, sustainability can be expressed in monetary terms. This provides a complete picture and allows investors to make decisions based on clear and transparent information.’

'Without sustainability, there is no future - for us or for future generations. This is something I sincerely believe in. That is why I find it interesting to explore how we can collectively create a resilient living environment: working within our economic system to build a greener future by making choices that contribute to it and can be fully justified, including financially.'