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Avoid, reduce, remove, align

Finding climate transition investment opportunities in real assets

In this article, Luke Layfield and Zoe Austin explain four key pillars that can help real asset investors align their strategies with the climate transition and uncover opportunities to deliver attractive returns.

Read this article to understand:

  • The opportunities in climate transition-aligned real estate and infrastructure projects
  • Why removing emissions is essential to meet the world’s climate objectives
  • Options for investment in emerging climate technologies 

Climate change is humanity’s most daunting challenge. As global temperatures climb, the urgency of aligning greenhouse-gas (GHG) emissions with the pathway delineated by the Paris Agreement intensifies. Real asset investors can play a role in this process.

Buildings and infrastructure networks are major contributors to carbon emissions. Currently, 38 per cent of global energy-related greenhouse-gas emissions are attributable to buildings and construction (Figure 1), and 85 per cent of today’s buildings will still be in use by 2050.1,2 This underscores the need to decarbonise the built environment, to minimise the emissions real estate produces and improve the energy efficiency of buildings.

Figure 1: GHG emissions attributed to the built environment

Source: RIBA, May 4, 2022.3

By implementing a climate transition-aligned strategy, investors in buildings and infrastructure can make a tangible difference to emissions pathways while also identifying opportunities to generate long-term risk-adjusted returns.

Our Climate Transition Real Assets strategy adopts an approach based on four categories: we seek to avoid emissions, reduce emissions and remove emissions from the atmosphere, as well as align our portfolio to the broader climate transition through investments in cutting-edge technologies.

This approach helps us segment and contextualise how we view the broader private-market landscape, in which different assets have different roles to play. For example, infrastructure investments can be directed towards projects that avoid emissions, such as communications or electric-vehicle (EV) charging networks, while enhancements to existing real estate can reduce emissions through decarbonisation initiatives.

To remove emissions, carbon sequestration through nature-based measures, such as planting forests or restoring degraded ecosystems such as peatland, can be effective.

While the bulk of our investment is in directly owned infrastructure, real estate and forestry across Europe, we also make investments in early-stage companies to obtain exposure to climate solutions technologies that could spur progress on climate change. All these categories are essential to our strategy, as they address various stages of the emissions lifecycle and thereby tackle different aspects of the problem.

By investing this way, we also hope to achieve key financial outcomes. As the drivers of returns across these asset classes are often different – the risk drivers of fibre broadband are very different from those of afforestation or real estate development, for example – a multi-asset approach can bring benefits in terms of diversification, illiquidity premia and uncorrelated returns.

In this article, we explore each of the four categories in turn.


“The cleanest, most sustainable kilowatt hour is the one not used,” according to Marianne Osterkorn, executive director at the Renewable Energy and Energy Efficiency Partnership (REEEP).4

The “avoid” part of our strategy focuses on preventing emissions from occurring in the first place

This quotation sums up the “avoid” part of our strategy, which focuses on preventing emissions from occurring in the first place. Utilising renewable energy over fossil-fuel-based power sources, and opting for teleconferencing or other communications options over in-person travel, are two examples of how emissions can be avoided.

The Carbon Trust defines avoided emissions as “greenhouse-gas emissions that have been avoided by using a specific product or service, comparing it to a situation had the product or service not been used”.5

To avoid emissions, our focus is on investments in low-carbon infrastructure, informed by the themes in Figure 2.

Figure 2: Three investment themes for avoiding emissions

Energy transition

Decarbonisation of transport

Digital infrastructure

Source: Aviva Investors, May 2024.

The first is the energy transition. The key area of interest here is renewable-energy projects. Adjacent to this, we are exploring sectors such as battery storage, which can help address the problem of “intermittency”: the fact solar and wind power can only be generated when the sun is shining and the wind is blowing makes it vital to store the energy generated at those times.

Here, companies like Innovo Group are making a difference by developing solar photovoltaic (PV), onshore wind and battery energy-storage projects.6

Approaches like this help address the inefficiencies of centralised energy systems which rely on thermal power created from burning fuel like coal or natural gas, or dividing atoms in nuclear energy generation. When energy is converted from one form to another, then moved around, significant energy is lost from the original point of production. By the time electricity reaches the end-user through the grid, around two-thirds of the original energy may have been lost.7

Around two-thirds of the original energy may have been lost by the time electricity reaches the end-user

The second theme is the decarbonisation of transport. Transport-related carbon emissions, particularly from road vehicles, are a major contributor to climate change. Through investments in EV-charging point operators (CPOs), we aim to contribute to the transition away from internal-combustion-engine (ICE) vehicles and enable the roll-out of EVs.

The provision of EV-charging infrastructure is a key component of the energy transition, and its availability will impact companies’ carbon calculations (at least in cases where Scope 3 emissions – those associated with the broader value chain – are factored in).

There is also a social dimension to this. As the transition to low-carbon transport progresses, it will be vitally important that these options are accessible to everyone. With this consideration in mind, companies such as UK-based CPO Connected Kerb build and operate public EV-charging networks to cater for people who don’t have private driveways and are therefore unable to install private chargers at home.

The third theme relates to digital infrastructure and other sectors that enable the transition to a low-carbon economy, supporting the data needs of smart cities and buildings, including data centres and telecom towers. For instance, our investment in fibre broadband should support high-speed internet connectivity, facilitating remote work and thus reducing the need for commuting; this in turn should help lower emissions from transportation.

For every £1 billion invested into these kinds of solutions, we aim to avoid over four million tonnes of CO2 by 2040 – equivalent to three million flights around the world (Figure 3).8

Figure 3: Avoiding CO2 emissions: Our target for each £1 billion invested

Avoiding CO2 emissions

Source: Aviva Investors, Accenture, 2022.

The overall objective is not only to avoid emissions, but also target attractive returns from growing sectors with strong market demand. Through a multi-asset approach, we aim to identify infrastructure equity investments in areas with high barriers to entry and appealing inflation-linked cashflow generation.

The overall objective is to avoid emissions and ensure attractive returns from growing sectors with strong market demand

But we also have flexibility; we do not necessarily have to own assets like wind farms, solar PV arrays or completed fibre broadband networks directly ourselves. We also have opportunities to stand alongside green infrastructure developers in partnership at the earlier stages of platform or network roll-out.

There are risks involved – we are particularly mindful around planning bottlenecks for new projects and the impact of cost-of-living challenges on the adoption of green solutions – but we are concentrating on areas where we believe structural tailwinds will continue to be supportive over the longer term.


The “reduce” part of our approach refers to actions that can be taken to decrease GHG emissions where avoidance is not possible. For example, it might mean enhancing fuel efficiency in vehicles, or improving energy use in buildings. This aspect is crucial because, while not eliminating emissions entirely, it can “buy time” to enable the development of more sustainable solutions.

We employ a “brown-to-green” strategy: this means we aim to upgrade buildings to make them more energy-efficient

We employ a “brown-to-green” strategy: this means we aim to upgrade buildings to make them more energy-efficient. A prime example is Curtain House, a 50,000 square-foot former Victorian warehouse in East London’s Shoreditch, which we are redeveloping into high-quality office space.

This Grade II-listed building was not efficient from an energy standpoint. But we acquired it with a very clear business plan to transition its fortunes – both financially and environmentally.

Environmentally, the refurbishment targets an upgrade of the building from an Energy Performance Certificate rating of E (the lowest rating you can now legally let a commercial building in the UK) to a best-in-class A. Key interventions include enhancing thermal efficiency by upgrading the single-glazed windows and retrofitting insulation, while respecting the building’s heritage and the constraints of its listed status; replacing the gas heating system with electric heat pumps; and introducing rainwater harvesting and natural ventilation systems. The upgraded building will use half the energy of a typical UK office and save approximately 90 tonnes of CO2 per year – equivalent to the emissions of 90 flights from London to New York.9

Another climate benefit of refurbishing a building, rather than razing the existing structure and building from scratch, is the embodied carbon that is saved and retained by greening an existing brown building rather than tearing it down to build something new – in this case, around 3,000 tonnes.10

Creating an efficient building should help investors achieve a premium in rents

There are also key financial considerations. Creating an efficient building should help investors achieve a premium in rents, as tenants increasingly demand buildings that are cheaper to run and more comfortable to work in, and which can help them meet their own net-zero targets. Research from CBRE shows a correlation between energy-efficiency in office buildings and rental performance (although the research finds the link is not yet evident in all sectors).11

There are nuances. Currently, the market can overpay for brown-to-green development opportunities, despite the fact the renovation process can be challenging and involves planning risks; a deep understanding of what’s required to decarbonise a building and create high-quality, energy-efficient space is essential for a successful project.


Removing CO2, through methods like afforestation and carbon capture, is important because it addresses the accumulated GHG emissions already in the atmosphere. After all, even if all new emissions were stopped today, the existing concentration of CO2 would continue to impact the climate system.

Scaling up CDR is as critical as reducing emissions if we are to respect the aims of the Paris Agreement

According to the latest Carbon Dioxide Removal (CDR) Report from the University of Oxford, scaling up CDR is as critical as reducing emissions if we are to respect the aims of the Paris Agreement.12

CO2 removal is a key component in all scenarios that achieve the Paris Agreement’s temperature targets – limiting warming to well below two degrees Celsius above pre-industrial temperatures, and ideally 1.5 degrees – and complements efforts to reduce emissions, as shown in Figure 4. However, the report identifies a significant gap between the CDR being planned and the levels required in scenarios to meet the Paris temperature goals. This “CDR gap” varies depending on the chosen strategies for transitioning.

Figure 4: Carbon dioxide removal (GtCO2/yr), in 2020 and in three Paris-consistent scenarios

Carbon dioxide removal

Source: ResearchGate, January 2023.13

From an investment point of view, infrastructure and real estate can do much to avoid and reduce carbon emissions, but however much we decarbonise the built environment there will be residual emissions which will need removal through offsetting – compensating for those emissions by making equivalent reductions of carbon in the atmosphere.

Investors can choose to offset emissions indirectly, by buying carbon removal credits, whereby they finance projects that have been verified to remove or avoid future carbon emissions. But real asset investing also offers another way to offset remaining carbon emissions, through direct investment in nature-based solutions.

We invest directly in afforestation and sustainable forestry, based on the planting of diverse native tree species, to remove emissions and generate carbon credits. One of our major projects is Glen Dye Moor in West Aberdeenshire, a site covering 6,300 hectares, where we intend to plant five million trees and are undertaking restoration of degraded peatland.14 Peatlands are remarkably effective at sequestering carbon, even more so than forests.15 However, when peatlands are damaged or drained, often due to human activities, they become a significant source of carbon emissions.

Glen Dye Moor
Glen Dye Moor

Sustainable forestry can generate long-term returns, as well as carbon credits that act as a hedge against rising carbon prices (by generating our own credits, we won’t have to buy them in ten, 30 or 50 years). The investments we have made in this area will aim to sequester around 1.6 million tonnes of carbon from the atmosphere over the hundred-year lifetime of the projects, generating credits we will retire to offset emissions elsewhere in the fund.

Our focus is primarily on creating high-integrity carbon “removal” credits from new afforestation

Our focus is primarily on creating high-integrity carbon “removal” credits from new afforestation. Some “avoidance” credits will also be generated by the peatland restoration work in our investments; however, we view this this as one of the highest-integrity avoidance activities. We have chosen the UK for our first investments as it is internationally recognised for high standards of sustainable forestry, peatland and carbon management. Our peatland and woodland carbon credits are verified by the Woodland Carbon Code or Peatland Code schemes and follow a similar three-step process as detailed below.16,17

First is registration: the relevant registry assesses the validity of the project proposal and accepts (or rejects) its development; accepted projects then appear on the registry. Second is validation: once trees are planted or peatland is restored, an independent third party validates the project and determines the predicted number of carbon units the project will generate over its lifetime. These are known as pending units. To be validated, the project must be legal, permanent and prove additionality. And third is verification: after planting or restoration, an independent third party verifies the project at five-year intervals. At these points, the amount of carbon that has been sequestered in the five-year period is converted from pending units to carbon units.


Finally, we invest indirectly into private equity solutions to “align” to the climate transition (although this forms a smaller part of our overall allocation than the other categories). This means investing in emerging climate technologies that are being developed to help speed the transition.

The value lies in their ability to diversify our portfolio and provide early insights in infrastructure or real estate investments

To date we have invested in three venture capital funds focused on climate tech, each addressing the transition to a sustainable economy in slightly different ways.

The value of these investments in early-stage companies lies primarily in their ability to diversify our portfolio and provide early insights into potential future investments in infrastructure or real estate; they may also introduce us to new technologies that can help us to decarbonise our existing assets. Another key aspect is the potential for relatively high returns on these investments, although the risk profile is also higher and therefore needs to be carefully considered.

In conclusion, our exploration of opportunities in real assets through our strategic “avoid, reduce, remove, align” framework aims to actively contribute to efforts to tackle carbon emissions and deliver financial returns. We believe this framework offers a pragmatic yet forward-thinking blueprint that endeavours to align climate transition focused investment with robust financial outcomes – and ensure our real asset portfolios not only endure but thrive in a rapidly changing world.

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Important information


Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

Where relevant, information on our approach to the sustainability aspects of the strategy and the Sustainable Finance disclosure regulation (SFDR) including policies and procedures can be found on the following link: https://www.avivainvestors.com/en-gb/capabilities/sustainable-finance-disclosure-regulation/

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK this is issued by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.