COMMENT In the avalanche of speeches, commitments and warnings at COP26, one number continues to stand out for the real estate sector: the built environment accounts for around 40% of global carbon emissions – more than industrial production and transportation combined.
The figure is lower in Europe, at 25%, but even that needs to fall significantly – and quickly – if the world is to hit net zero targets. Not only must buildings become more efficient in their use of energy, and sustainable energy at that, but they must be resilient to the impacts of storms, floods and extreme temperatures.
We are fully behind industry efforts to place the “E” in ESG at the heart of real estate; it simply makes good financial sense. Buildings that are more efficient in their construction and energy use are good for the people who live or work in them, cheaper to run for their developers and owners, and can provide better returns for the investors who finance them.
B Corp certification
Our parent, Octopus Group, is one of the few UK investment firms to certify as a B Corporation – a recognised mark that means it meets the highest standards of social and environmental consideration, transparency and accountability, while balancing profit with its activities’ impact.
For a B Corp, shareholders do not just come first, they are given equal importance along with employees, the community, the environment and customers. And that’s not just a vague promise, it has to be acted on: every B Corp must include stakeholder impact in its binding legal structure. Just to prove this commitment, Octopus is targeting 2030 for net zero, two decades ahead of many competitors.
Powerful motivator for developers
At Octopus Real Estate, we are leading by example too. We recently announced the £175m Greener Homes Alliance, a partnership with Homes England, the government agency. The alliance offers loans to small and medium-sized housebuilders, constructing high-quality, energy-efficient homes. The higher the EPC rating of delivered homes, the larger the interest rate discount we offer to housebuilders. The highest rated (EPC A) loans will come with an interest rate discount of 2%, a powerful motivator for developers to build better.
To help them build more efficient homes, the scheme also includes free advice from sustainability consultant McBains and from our colleagues at Octopus Energy, the country’s leading sustainable energy supplier. The scheme should deliver 750 new, efficient homes, but its benefits will spread further. By equipping smaller builders with knowledge, they can apply new skills, techniques and technologies to other projects for years to come.
Care home strategy
Another way we are striving to achieve our commitments is in our £1bn care home portfolio, which we plan to be net zero by 2040. There are two elements to our strategy: reducing the carbon footprint of our newly developed care homes, as well as our existing care homes. Both approaches require careful assessment and continued monitoring to ensure that our care homes are carbon-neutral from the outset and remain so throughout their working lives.
From 2030, all our new care homes will be net zero, with any residual emissions offset via carbon sequestration projects, such as reforestation or carbon capture facilities. Given that we fund around 30% of all new quality care beds in the UK, the total reduction will run to hundreds of tonnes of CO2 per year.
We are excited about what we have achieved already, but there is much room for opportunity and improvement for us all. This is just the beginning of all our journeys to make real estate one of the better sustainable global sectors.
Benjamin Davis is chief executive at Octopus Real Estate
