If the headline of this piece caught your attention, chances are it is because it taps into a business-orientated approach to tackling climate change. An approach to which the real estate sector responds particularly well.
The message, loud and clear, at the CREtech climate global leadership summit in Copenhagen last week,was that the quickest way to get the real estate industry behind the decarbonisation of the built environment is to prove the financial benefits.
For all the ideas shared, terrifying statistics discussed and urgent warnings of a “dark, soulless” world for future generations by 2050 discussed at the event, there was a widespread acceptance within the room that the most effective way of getting the real estate sector on board will be to demonstrate financial rewards.
“The message has to be about a return on investment,” said Mazyar Mortazavi, chief executive and president at TAS Impact. “This isn’t about trying to persuade the industry to understand the impact piece. Preaching won’t get us anywhere. Showing the results will. We need an industry mindset shift and most of the real estate industry will not shift in the absence of financial returns.”
This was a sentiment echoed by Mikkel Bülow-Lehnsby, chairman and co-founder of Nordics-based investment firm NREP and sustainable urbanism VC 2150. “The best way to get momentum moving is to make it clear that tackling climate change is the biggest commercial opportunity of our lifetime.”
He added that there is no need to chose between taking on this issue and return on investment – quite the opposite, given the size and weight of opportunity within the sector for those who are able to solve the ESG and climate-related issues that so desperately need to be tackled.
“For me I care about the future of our planet,” he said. “In 2050 my kids will be roughly my age and they could be living in a very dark place. And this is not a worst case scenario, this is an ‘at least’ scenario. But when we are talking to a big part of the real estate sector we need different messaging. So I would say this, if you want to make a shitload of money for your shareholders, investing in tackling climate change is the way to do it.
“For many years there was this notion that if you wanted to do good for the environment, then it had to be bad for business. And I’ve never understood that. Why should that be the case? In the long term, those companies that create problems are going to sit with the liability and those companies that solve the problems have a major competitive advantage. Thinking any other way has always been baffling to me.”
He added that, despite the financial benefits being so clear to him, there is still a big mindset issue across large pockets of the industry and not enough understanding or appreciation around the urgency and severity of the climate crisis. And so, he added, those banging the drum and leading the way must make it easy for everyone else to follow suit.
“People are very busy and they hate change,” he said. “There is a lot of amazing technology out there but a lot of it is either very hard to deploy or it doesn’t really solve a problem. What we need to do is use technology to effectively solve a problem and then repeat the system.”
Bülow-Lehnsby also said that being able to go to the real estate sector with deployable, scalable solutions that made integration and adoption easy is crucial, which is why his VC 2150 rarely invests in an idea. “We put a premium on something being ready to deploy and ready to go now,” he added, highlighting that this is the quickest way to get the industry on board.
Addressing imbalance
Apart from thinking carefully about how ESG and climate change solutions need to be “marketed” to swathes of the real estate industry, speakers at the two-day conference also covered some key issues around decarbonisation that the sector cannot afford to overlook.
The first was the imbalance between mitigation against and adaption to climate change within the built environment. Delivering his keynote speech, Parag Khanna, founder and managing partner of FutureMap, explained that 95% of investment into the development and deployment of ESG solutions is currently funnelled into mitigation, with just 5% focused on adaption. “We need to address this imbalance,” he said. “Not by detracting from mitigation, but by focusing too on adaption.”
This is a reference to the unavoidable fact that, whatever we do to mitigate climate change, the wheels are already in motion. We are moving at such a speed that the real estate sector needs to focus on, and invest in, solutions that will allow us to live with problems that already exist. A prime example is the need to better prepare for the impact of external factors such as severe weather conditions on the built environment.
Giving the closing keynote, world-renowned architect Bjarke Ingells talked about his practice’s plans for the Dry Line around Lower Manhattan. Effectively a version of the High Line to act as a flood and coastal barrier, he explained how the inspiration came to him following the impact Hurricane Sandy had on the lower portion of the island, when huge numbers of people and businesses in New Jersey, New York, Pennsylvania and Connecticut were left without power for weeks.
This kind of meaningfully designed coastal barrier is scalable, he added. A solution that could be rolled out across other high risk coastal areas. Effectively adapting certain areas and regions so that they are better protected against floods and severe weather events in the future.
Sharing best practice
Another major theme of the Copenhagen conference was the need to focus not just on designing the new, but how the industry can improve the ESG credentials of existing stock and rethink how we use and, crucially, reuse materials.
This is something Gensler’s head of ESG consultancy Juliette Morgan discussed in detail in her keynote. The design practice will be pulling together a materials library, as guidance on the best, most low carbon impact material to use. And that library will be made public. Morgan, like so many other speakers over the two days, said that the time for keeping data and information hidden within companies has passed. There is simply no time left to be competitive and to work in silos. Without collaboration and sharing best practice, neither the real estate sector nor the wider world has a hope of tackling the climate crisis in any real way. Will this be an uncomfortable shift for an industry that is used to being closed off to gain, compete or be at an advantage? Probably. Is mindset change a crucial part of successfully decarbonising the built environment? Absolutely.
Another mindset change, added Morgan, is learning when to “do nothing”. Sometimes, she said, this is the most energy efficient choice. If there is a facade of a building that isn’t quite perfect, should it be replaced even if it is going to be removed, reconstituted and reinstated? The answer is probably no. If the only issue is the aesthetic, why change it? “We have to ask ourselves what Earth would do,” she said. “If we imagine we are working for planet Earth as our client, there are lots of decisions I’m sure we wouldn’t make.”
This feeds into one of the most sobering themes of the Copenhagen conference; selfishness. This was not an attack on real estate in isolation. But ultimately the industry, like many others, does need to face up to what boils down to innate selfishness.
Gus Speth, a US-based adviser on climate change, famously put this issue into words in 2016: “I used to think that top environmental problems were biodiversity loss, ecosystem collapse and climate change. I thought that 30 years of good science could address these problems. I was wrong. The top environmental problems are selfishness, greed and apathy, and to deal with these we need a cultural and spiritual transformation. And we scientists don’t know how to do that.”
The irony is that, for all of its resistance to change, real estate does have the power to lead a cultural and spiritual transformation. Whether this is kickstarted by promise of financial returns, comes from a place of genuine concern about the planet we will leave for future generations, or a bit of both – it has the power. It just needs to use it.
To send feedback, e-mail emily.wright@eg.co.uk or tweet @EmilyW_9 or @EGPropertyNews
