The following article was featured in the Environmental Journal on 15 November 2018.
Property has a very important role to play in slowing climate change
We have until 2030 to avert a global warming catastrophe. That was the stark warning given by the Intergovernmental Panel on Climate Change (IPCC) in October when it unequivocally stated that urgent, unprecedented action was needed to keep global warming to 1.5 degrees Celsius, annually, and that if we fail to heed this warning, the result will be more extreme heat, heavier rainfall and consequently drought, flooding and other climate related disasters. The “unprecedented” changes required must deliver net zero carbon pollution by 2030, just 12 years away.
Buildings and infrastructure account for around 35% of resources globally and nearly 40% of energy use and carbon emissions. The message from the IPCC is clear – it’s no longer enough to pass blame to larger polluters, we all contribute to the problem and must, therefore, all act to reach the solution. It is also not enough to aim to meet statutory requirements and no more. Settling for an E rated EPC is not going to cut it, each project that aims for excellence in sustainability sets the true and required expectation that we need.
This is not a problem that will be solved at government level, it’s a societal issue and change will be driven by market forces – consumer spending habits, investor expectations and the demands of the workforce on employers. As awareness for the dangers of climate change grows, so does the sense of corporate social responsibility of the labour force, who now more than ever, are keen to work for companies that make conscious efforts to act as ‘green’ employers. It also remains in the commercial interest of landlords and other private owners of commercial space who, to avoid the increasing demand cost of required improvements to operational efficiencies, can achieve both a competitive advantage over other, more complacent firms, and safeguard their profit margins.
The transition to the low-carbon economy will have a significant impact on asset values and their capital returns. Again, seen as a direct result of consumer trends, owners of commercial property are seeing a trend for improved returns on assets that achieve a maximum efficiency rating. This, coupled with a growing number of assets achieving top-band accreditations, such as A and B ratings, rather than the minimum expected E, could lead to a devaluation of assets of poor efficiency – which look comparatively less attractive to occupiers.
According to the UKGBC, 80% of the UK’s building stock that will exist in 2050, has already been built. As much of it has been constructed with no real thought to energy efficiency or carbon emissions, we must be brutally aware of how we create sustainability in the industry as a whole, not just in future projects. On top of this, highly efficient new-build projects are failing in part to address the issue in real terms, only working to mitigate the predicted emissions growth – rather than reducing the aggregate output. To address the latter, we must face the reality that the majority of existing floor space is accounted for by inefficient stock. With a proper energy management strategy, the majority of this can be brought up to the required standards. We need to see less headlines around the latest FTSE 100 company to open a record-breaking eco-headquarters, and more focus on pressurising all commercial property owners to strive for the highest energy efficiency across their portfolios, which means retrofitting old stock.
Failure to properly evaluate such risk and impacts associated with climate change could also result in legal challenges. This is already happening. A Texan judge recently decided in favour of a group of shareholders who alleged that a fall in the value of ExxonMobil’s shares between 2014 and 2017 was caused by material misrepresentations or omissions on climate-change related risks. In the UK, the activist firm ClientEarth announced in August that it has reported three insurance firms to the Financial Conduct Authority for failure to disclose climate risks in their annual reports.
So, what can the property industry do? Don’t just pay lip service to sustainability policies, actually use them to influence investment decisions. Stop seeing green buildings as a nice to have and therefore something that can be value engineered out at an early stage in the process. Change your thinking about what value is, how it is measured and reported. Collaborate, innovate and be bold. We must all pioneer our future, else risk losing it all.