COMMENT As we enter 2022, we are a forever changed industry – awakened to the realities of climate and societal change – taking our place as a catalyst for transformation. Without the real estate industry, businesses and governments cannot hit their ESG targets.
If 2020 and 2021 were about setting goals, the next two years will be about how action can be taken. For property investors, that means pointing to real examples of turning brown buildings into net-zero carbon buildings. There is an economic case for this, as long as your time horizon is realistic.
Businesses can see the risk of climate change and social inequality. The pressure from capital, employees and customers is so palpable that many are starting to convert that risk into internal carbon pricing.
Understand the return on sustainability
Putting three new criteria (carbon footprint, climate change, and health and wellbeing) at the heart of your real estate strategy will create economic value. It will result in designing buildings which improve human productivity – a more powerful economic case than improving building efficiency. For every £3 spent on building utilities, businesses will pay £30 on rent and £300 on people.
This is no longer just about the “green premium”: JLL’s research shows that buildings that don’t evolve to meet sustainability standards will not be fit for modern business; the result is value erosion or “brown discount”. These new metrics of real estate value – carbon, climate risk and health – will trickle down to impact due diligence, buyer pool, liquidity, ability to insure and overall access to capital.
People now expect more of buildings. Certification systems will need to adapt to meet the shift in value and incorporate additional elements in the calculation, such as wellbeing and social impact. Yes, this is technical and complex, but more and more occupiers are expecting developers and investors to have an answer.
Transitioning the built environment to being low-carbon will support the health and wellness of surrounding communities, and this aligns with the government’s levelling-up agenda, where local regeneration, repurposing and housing provision will come to the fore. We can be the trailblazers to reboot town centres in a responsible, clean, fair and economically positive way. The long-term return on sustainability needs to be front of mind when making decisions about the future of your buildings.
Have a plan of action
During 2022, occupiers, capital investors and employees will want to see evidence of an execution plan and actions proving that the pathway to net-zero carbon is a real one. However, only 18% of organisations currently have an action plan for their real estate portfolio, according to JLL research.
Solutions are out there to help businesses tackle their real estate, but key to this is scaling them up – start with one building, prove it works and then execute your strategy on a larger scale. You may have to experiment with technology and over-invest at first. But there is good evidence from around the world that it can be done, so no-one in the UK needs to be a pioneer. For those starting on their journey, Green Building Principles: The Action Plan for Net-Zero Carbon Buildings, published in partnership between JLL and the World Economic Forum, provides guidance for delivering the “E” of ESG.
Utilise accurate data
Tracking progress using technology and accurate data is essential if we are going to achieve ESG commitments and know that what we are doing is right. However, do not expect perfect data or you will never start. Just rely on the scientific data you can collect. Take net-zero targets: companies and their stakeholders cannot always be sure that their long-term climate targets are credible or ambitious enough, but the Science Based Targets initiative can assist with this.
Those who wait for the perfect data, case study or research paper before they decide to lean into these structural changes will be left behind. Prove it by doing it.
Embrace radical collaboration
There is much hope that has come out of the past year, both in terms of what needs to be done to reduce carbon emissions as well as what can be achieved. It is likely that there will always be questions around competitive advantage, but climate commitments across the built environment are increasingly shared by investors and occupiers, who are collectively pursuing excellence, but not to the detriment of the planet.
My new position as president of the BPF and the global ESG role at JLL provide me with an unrivalled view of our industry and the possibilities that radical collaboration can bring to collectively engage in policy and open-source ideas – such as the UK Green Building Council’s COP26 virtual pavilion – in an equitable and inclusive way. This is not a competition, but it is a race… to zero.
We are all aware of the negative impact that the built environment is having on the planet, but this only makes our collective responsibility clearer. We are part of the problem. Our work impacts communities across the country – we can use buildings as the vehicle through which people experience a positive environmental and social impact.
This is a call to action for all of us.
Guy Grainger is president of the British Property Federation and global head of sustainability services and ESG at JLL
