Climate & Environment
Decarbonization
Climate change represents a huge challenge and opportunity for the real estate industry. With buildings accounting for almost a fifth of carbon emissions in Canada, the real estate sector has an important role to play in decarbonization and limiting the impacts of climate change.
At KingSett, we recognize the significant opportunity to create value for our stakeholders by accelerating the transition to a low-carbon economy. We continue to build on our past success by setting emissions reduction targets, making prudent investment decisions and creating and executing our asset-level decarbonization strategies.
The transition to a net-zero carbon portfolio is a significant opportunity and requires long-term strategic planning. We have a systematic, bottom-up approach to identify and execute asset-level decarbonization strategies that meet or exceed the Paris Climate Agreement.
Our Decarbonization Strategy
We define a decarbonization strategy as a property-level roadmap for management teams to achieve carbon reductions of over 50% from baseline. Our approach includes identifying opportunities in our existing portfolio and working with management teams and mechanical and electrical design consultants to understand where we need to take action before developing property-level strategies.
The implementation of our decarbonization strategies is consistent across asset classes. Once a property’s decarbonization plan has been completed, carbon credits are purchased for the residual emissions. Each property-level strategy includes:
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Assessing the property’s current energy use makeup and capital budget plans
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Targeting at least 50% carbon reductions from baseline
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Scoping projects to decarbonize operations including fuel switching, electrification, deep energy retrofits and increased tenant awareness and communication
Prerequisites to Decarbonize
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Major mechanical systems must be at or near end-of-life
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The property must have real-time data for all major systems for at least one heating and one cooling season
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The property must be able to manage the capital premium to fuel switch and electrify
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The property must be in a region that supports electrification or is on a trajectory to do so
In 2021, we developed a decarbonization tool that models financial metrics, including capital budgets, inflation rates, interest rates and more, as well as utility performance and carbon emission reductions at both the asset and portfolio level. The tool helps us to identify strategic investments, inform our decision making and capture opportunities to reduce carbon emissions. This tool is available on our website for all to download.
Offsetting Residual Emissions with Carbon Credits
We purchase carbon credits to offset any residual operational carbon that remains once the property’s decarbonization plan is complete. For emissions we cannot eliminate through energy efficiency initiatives, KingSett purchases carbon credits from reputable sources, such as Gold Standard, that verify the emissions reduction.
Decarbonization Milestones
2020
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Certified 40 King Street West ZCB – Performance
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Internal whitepaper published on decarbonization retrofits
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Commenced carbon study of Fairmont Royal York
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Decarbonized Arthur Erickson Place’s domestic hot water system with CO2 heat pumps
2021
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Developed internal Decarbonization Modelling Tool
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Set CREIF short- and long-term carbon reduction targets of a 47% reduction by 2030 and 67% reduction by 2035, in alignment with SBTi
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Finalized Fairmont Royal York carbon study
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Broke ground on Valhalla Village Phase 1 geothermal system
2022
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Secured financing from the CIB for Fairmont Royal York decarbonization
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Decarbonized 100 Yonge Street using a market-leading heat pump and heat recovery system
2023
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Certified 100 Yonge Street to ZCB – Performance
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Decarbonized Fairmont Royal York and certified to ZCB – Performance
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Certified Arthur Erickson Place to ZCB – Performance
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Publicly launched KingSett’s Building Decarbonization Modelling Tool
2024
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Connected Atrium to Deep Lake Water Cooling system
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Achieved ZCB – Design certification for Valhalla Village – Phase 1
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Secured $47M financing from the CIB towards decarbonization projects for seven assets
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Certified 1235 Bay Street to ZCB – Performance
2025
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Use SBTi methodology to quantify the total carbon emissions for KingSett’s AUM, potential targets and timelines
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Finalize decarbonization strategy for Bayshore Shopping Centre
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Finalize design of Valhalla Village – Phase 2
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Execute studies to decarbonize 2 Bloor Street West, Midtown Mall and Burlington Centre
2026 - 2028
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Complete final phase of net-zero strategy at Arthur Erickson Place
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Complete decarbonization of 2.9M sf of Toronto core office properties
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Achieve ZCB – Design certification for Valhalla Village – Phase 2
Climate Risk Management
We are committed to strengthening the resilience of our assets against both physical and transition climate-related risks.
By diversifying asset ownership, fund structure and strategy, we've built a product that unlocks value for our stakeholders while ensuring our assets are equipped to withstand various shocks and stressors. Our approach includes responsible capital allocation, managing operating costs, measuring and reducing carbon emissions, and striving to create healthy, comfortable buildings.
We support this by:
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Engaging extensively with stakeholders
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Adopting decarbonization carbon targets and certifications
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Investing to improve physical and transition resilience
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Assessing alternative low-carbon and reliable energy sources
Identifying, Assessing and Managing Climate Risks
Climate-related risks are the potential negative impacts associated with the transition to the low carbon economy and the physical impacts of climate change, including extreme weather and longer-term shifts in climate patterns.
We actively manage these risks across our assets to increase their long-term value and resilience. This includes conducting thorough assessments to identify how we can manage and mitigate the most material risks to our business. During acquisition, climate risks are integrated into our due diligence checklists, risk vulnerability assessments and reviewed by our Investment Committee. In ongoing asset management, we work closely with our third-party property managers to manage and mitigate climate-related risks.
This process includes:
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Setting and tracking environmental KPIs for all properties including carbon emissions, water use, waste intensity and building certifications
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Implementing a Climate Resilience Policy for each asset and re-development project
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Reviewing flood plans and procedures at each property, including a Flood Emergency Response Plan
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Integrating climate resiliency features into capital planning and budgeting
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Assessing low-carbon energy sources for properties in Alberta and Saskatchewan
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Elevating climate risks and associated financial impacts to the Sustainability Committee
In 2023, we conducted a formal climate risk assessment of our CREIF portfolio for exposure to material climate risks that are relevant to our business.
We provide an overview of our material climate risks below, an assessment of our exposure to each risk and an explanation of the risk and its potential impacts. Our exposure to physical climate risks can significantly vary depending on asset type (residential, industrial, office) and geographic location.
Transition Climate Risks
Exposure
High
Risks and Potential Impacts
There is significant momentum in jurisdictions around the world to regulate climate disclosures for public companies. If this happens, KingSett will need to ensure its climate disclosures keep pace with peers, investor needs and tenant requirements.
This could result in a higher cost of compliance to meet mandatory climate disclosures and potential loss of revenue from investors and tenants if our disclosures are not adequate.
Physical Climate Risks
Exposure
High
Risks and Potential Impacts
Most multi-residential and industrial properties in Ontario, British Columbia and Quebec are highly exposed to rain, wind and ice storms.
Modelling Climate Resilience
Climate resilience is the ability to predict and respond to climate-related shocks and stressors. We use climate scenario analysis to assess KingSett’s resilience to climate-related risks, focusing on our CREIF portfolio. Using the Representative Concentration Pathways (“RCPs”), we examine the potential risks and opportunities across a range of plausible climate futures.
The RCPs describe four different scenarios based on different time horizons, temperature increases (including one capped at 1.5ºC) and policy assumptions. Across these scenarios, average temperatures, precipitation, and — over time — air pollutants emerge as significant risk factors.
Scenario analysis informs our planning and resilience strategies, helping us identify capital investment needs. To improve our climate resilience, each property undergoes a five-year assessment (where feasible), tracked with our data management system. From rising temperatures to flood risk and regulatory shifts, we address these challenges through our focus on decarbonization, capital investments and significant asset renewal — safeguarding our investments and fostering sustainable growth.
Performance
Data collection and analytics is not only table stakes for managing commercial real estate, but core for unlocking value across the real estate lifecycle. KingSett tracks its energy and water use, waste generation and carbon emissions to drive operational efficiency, identify potential projects, reduce negative environmental impacts and measure our progress against internal and external targets. The progress we’ve made since tracking data in 2016 is due to our innovative approach, focus by our teams and collaboration with our stakeholders.
By concentrating on enhancing the performance of our properties, we ensure they are positioned to deliver significant economic, environmental and social benefits when major systems are up for replacement. Doing so helps ensure our assets are renewed to better meet current and long-term climate risks and opportunities.
Energy Intensity (ekWh/sf)
234 eGWh
Absolute energy consumption in 2024
↓1%
Energy intensity vs. 2023
↓23%
Energy intensity vs. 2019
↓17%
Energy intensity vs. 2019 by 2027 on track
CREIF’s office portfolio continues to maintain significant performance improvement compared to previous years because of most decarbonization and deep energy retrofit projects occurring in that asset class. This accounts for almost all of the portfolio's energy savings, 72 million ekWh, since 2016. While multi-residential has seen the largest increase in energy use since 2016, it is wholly due to new developments (TWO St. Thomas St. and 99 Gerrard St.) becoming operational in 2018 and 2019.
Notes
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Energy intensity represents a like-for-like comparison of 91% of the CREIF portfolio by GLA, including new developments.
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Energy data represent absolute consumption and is not normalized.
Building Certifications
Building certifications offer an externally recognized and verifiable framework for evaluating and showcasing a building’s environmental performance and management by using established and credible frameworks recognized by the market.
KingSett is committed to adopting third-party building certifications to validate our properties’ positive impact and demonstrate their tangible benefits to tenants.
79%
Office properties certified LEED O+M Gold or higher (by GLA)
3.6M sf
Zero Carbon Building – Performance certified across all Funds
Sustainable Development
New developments and site intensification projects have a significant impact on the environment and surrounding communities, which is why we have integrated sustainability considerations in each step of our development and redevelopment process. KingSett engages in all steps of the development cycle, from site consolidation and design development to entitlement and construction. To date, we have completed $4 billion of development projects, with another $1 billion currently under construction, $2 billion in the pipeline, and $2.4 billion in entitlement opportunities.
We strive to develop and redevelop real estate in a way that benefits all stakeholders. By focusing on healthy, comfortable, and efficient buildings, we seek to create lasting value for our investors, tenants, and the communities we serve.
Next Steps
Achieve ZCB – Design certification at West Square Phase 2
ZCB – Design Standard Certified
West Square (formerly Valhalla Village) Phase 1
91%
of all KingSett assets have a tenant fit-out program with sustainability-specific requirements
1.3M sf
in development pipeline designed with geothermal and/or air-source heat pumps
50 Wilson Heights
The redevelopment at 50 Wilson Heights Boulevard will deliver 1,484 new homes, including 35 percent affordable rentals, a childcare centre, parkland, retail, office and community spaces. The site is one of 17 identified for development under HousingNowTO, an initiative aimed at adding much-needed affordable and market housing supply to the City of Toronto by activating underutilized city-owned sites for development. This project demonstrates how private, government, and agency sectors can effectively collaborate to address the challenge of affordable housing in Toronto.
West Square (formerly Valhalla Village) Phase 2
West Square Phase 2 is a two-tower rental development located in Toronto’s Eatonville-Bloorlea neighbourhood. The project is being designed to meet the Zero Carbon Building – Design Standard and features a geothermal energy system that uses the ground’s natural temperature to efficiently heat and cool the buildings. This system eliminates the need for natural gas-powered equipment, helping to significantly lower greenhouse gas emissions, a critical factor in reducing a building’s overall climate impact.