UBS Executive Calls For a Retrofit Revolution in Real Estate

Real estate investors need to allocate considerably more resources to climate-proofing old buildings rather than erecting new structures, to keep up with net zero regulations and avoid being saddled with stranded assets.

Those are the findings released Tuesday by UBS Group AG, with the Swiss bank’s Sustainability and Impact Institute calling for nothing less than a “retrofit revolution.”

“Investors always have to weigh up risks versus the financial returns on a case-by-case basis,” Michael Baldinger, UBS’s chief sustainability officer, told Bloomberg. And there “will be cases where new builds can benefit from emerging materials and technologies to lower emissions and optimize energy usage,” he said.

However, UBS is making “the case for retrofitting as a preferred option because in many cases, it can improve rental yields, add value to buildings over time and safeguard them against becoming stranded assets,” Baldinger said.

Retrofitting old buildings can save as much as 75% of the carbon that would be emitted if an equivalent new structure were erected, UBS estimates.

The world’s buildings accounted for about 37% of energy and process-related CO2 emissions as recently as 2021, according to the United Nations Environment Programme. For now, just 1% of that real estate is retrofitted each year, while 99% of existing buildings aren’t aligned with the goal of eliminating emissions by 2050, UBS said.