COMMENT Commercial buildings are a critical building block in our UK cities. They can define a city aesthetically, spatially and economically. They can also have a huge impact on the environment. As we prepare for COP26, all business sectors are coming under closer scrutiny and with the built environment being responsible for around 40% of global carbon emissions, the commercial building sector is no exception.
So how is the commercial property sector responding to the challenge of climate change? Is the sector being ambitious enough? How are commercial buildings performing and how much further do they have to go? And how can commercial property contribute to cities’ endeavours to tackle climate change?
In terms of ambition, the Better Buildings Partnership Climate Commitment has been highlighted as a market transformational initiative. With 26 signatories covering more than £350bn in assets, it commits those signatories to the delivery of net zero carbon buildings by 2050.
Perhaps that doesn’t sound too groundbreaking but, on closer inspection, the scope of the commitment covers all aspects of property investment (direct, indirect, joint ventures and debt), it includes both embodied and operational carbon and whole building carbon, including Scope 3 emissions and, most significantly, tenant emissions. These ambitious words are backed by action – signatories are required to publish their net zero carbon pathways together with a delivery plan that sets out how they plan to meet their targets.
These pathways reveal some healthy competition amongst property owners keen to position themselves at the forefront of climate action, but they also highlight some of the challenges ahead. The signatories’ carbon footprints expose the critical importance of engaging with occupiers who, in some cases, can be responsible for up to 70% of a portfolio’s emissions.
Mind the gap
There are also gaps in knowledge, for example on embodied carbon, and a gargantuan skills gap which, if the demand for places on the BBP ESG training course is anything to go by, commercial property owners are rushing to fill. The emergence of sustainable finance as an influencer and an investment opportunity can also be seen amongst the leaders, who are using their own internal prices of carbon to drive investment decision-making, set up decarbonisation funds and attract corporate and project finance.
In terms of performance, the latest findings from the BBP’s Real Estate Environmental Benchmark show that property owners are making progress. The annual survey of operational performance covering more than 1,000 assets (with the majority located in the UK’s major cities) reveals that, in the past 10 years, energy intensity has improved by 27% and carbon intensity by 61%.
But before we pat ourselves too hard on the back, the same survey also shows there is still a huge gap between how these buildings are performing now and how they will need to perform if they are going to reach “net zero” by 2050 (or before), with 97% of offices currently falling short of the UKGBC targets. There are some encouraging examples of net zero new buildings emerging but it’s much easier to start with a blank slate than it is to correct the blots on a copy book. For existing buildings, it is energy efficiency that will be the workhorse hero of the transition to net zero.
There are also some good examples of cities that are introducing policies to ensure that new commercial buildings deliver on their energy efficiency promises. The GLA London Plan has introduced new requirements for commercial buildings to report on their performance post-completion, while the recently published Roadmap to Net Zero Carbon for new buildings in Manchester proposes that all new development should be net zero carbon in operation from 2023 (without the use of offsetting), recommending the use of existing standards such as NABERS UK to verify that new buildings are demonstrably net zero carbon in practice.
Untapped potential
This focus on energy efficiency is critical, but buildings are also part of the urban ecosystem and it is here where there is significant untapped potential for real assets to address climate change. As investors seek to rebalance and repurpose their urban portfolios post-pandemic and invest more widely in urban infrastructure, understanding local communities and occupiers has never been more important. This has spiked interest in concepts such as the 15-minute city, which help us to reimagine a more localised cityscape through the lens of (low carbon) walking and cycling.
The space around buildings is also integral to climate solutions, with green and blue space creating “coolth” to help manage overheating and sustainable urban drainage systems holding and dispersing water in urban areas inundated by increased rainfall. And, for occupiers, the ability to gather in outside spaces and be close to nature has an important relationship to their health and wellbeing. These nature-based solutions are therefore an important ally in the fight against climate change. And with Swiss Re estimating that climate risks could add $183bn (£132bn) to property insurance costs by 2040, there’s a strong accompanying financial imperative.
What interests me is the blurring of the boundaries that this implies. The interwoven urban fabric means the physical and investment boundaries are becoming hazy, with the public and private realms becoming less distinguishable. So responsibility and accountability does not fall on the shoulders of one stakeholder but on many. And it is this that is perhaps one of the biggest challenges we face. Addressing climate change requires unprecedented collaboration and collective action. The creation of new models for the investment in, and management of, our cities and the buildings within them is surely where one of the biggest opportunities lies.
Sarah Ratcliffe is chief executive of the Better Buildings Partnership
