Executive Summary
To decarbonise our built environment, we must aim for buildings that are True Zero: zero emissions across their lifecycle, without the need for offsets
The built environment is responsible for about 40% of all carbon emissions globally, and about 50% of all extracted materials. So if we are to have any hope of reducing global carbon emissions to a sustainable level, real estate decarbonisation must be a priority.
Unfortunately, this challenge is not getting any easier. Operational energy use in buildings has increased by 13% in the last decade. Much of our building stock is old and inefficient, but 80% of it will still be here in 2050. Meanwhile, construction of new buildings to house the world’s ever-growing population continues apace. Between 2020 and 2060, total building floor space is expected to double – the equivalent of adding a city the size of Paris every single week.
For real estate investors, this constitutes a clear responsibility. But it’s also a compelling opportunity. According to the World Economic Forum, investment in green buildings could unlock $1.8 trillion in value by 2030.
THE BENCHMARK PROBLEM
Unfortunately, in practice, decarbonising real estate portfolios is easier said than done.
Building owners and investors are struggling to navigate the ever-expanding patchwork of laws, regulations and guidelines across different sectors and geographies. Technology can help to some extent (by giving us more/ better data). But this complexity makes it very difficult to measure and compare the carbon performance of real estate assets. This will inevitably constrain the flow of capital into the asset class.
One solution would be for the industry to align on a common benchmark. We think the best candidate for that currently is the Science-Based Targets, which provide sector-specific emissions reduction targets in line with the Paris Agreement goal. If everyone measured and reported emissions against an objective and globally-applicable benchmark like this, it would be much easier to compare the performance of buildings.
FROM NET ZERO TO ‘TRUE ZERO’
Understanding current performance is clearly vital. But the other big challenge is aligning on what success looks like.
As climate regulations have become more widespread, many building owners/ investors have signed up to ‘Net Zero’ or ‘Carbon Transition’ plans, both at asset- and portfolio-level. But different people use these terms in very different ways, which results in confusion, uncertainty and (by extension) inaction.
Some talk about Net Zero purely in relation to operational carbon, effectively disregarding the impact of embodied carbon (which is getting ever more significant as the grid decarbonises). Equally, ‘Net Zero’ can be claimed when carbon offsets have been acquired to ‘net off’ a building’s emissions, even if there has been little or no effort to reduce those emissions. Given the likely extent of construction over the next 40 years, this is clearly not a scalable solution.
For a building to be truly sustainable, it must be able to “meet the needs of the present without compromising the ability of future generations to meet their own needs” (cf. the Brundtland Commission) – i.e. without overshooting the Earth’s ecological limits.
To judge that, we ideally need to understand how much carbon the building will emit across its entire lifecycle, from design to disposal. And instead of relying on offsets, we should be focusing on how to minimise both embodied and operational emissions as far as possible – by reducing energy consumption through smart design, construction and management, then maximising the use of on-site renewables.
In other words, ‘Net Zero’ is not enough. We should be aspiring to ‘True Zero’: buildings that are zero carbon across their whole lifecycle, without the need for offsets.
Of course, True Zero may not be feasible or appropriate for all buildings, at least in the near term. In particular, True Zero embodied carbon will not be achievable at scale until we have more sustainable building materials and technology. But by establishing True Zero as an aspirational principle – the industry’s ‘North Star’ – we can provide greater clarity on what success looks like and, critically, identify the incremental actions that can help us get closer to it.
ABOUT THIS PAPER
In this paper, we share a framework that we have developed to track the carbon performance of our real estate assets. This ‘Spectrum of Decarbonisation’ provides a roadmap towards True Zero, defined using Science-Based Targets. It shows how our assets are performing: ranging from basic compliance with local regulation, right through to what we hope will ultimately become best practice: targeting zero emissions across a building’s entire lifecycle. We use this Spectrum to communicate the progress of each asset towards True Zero, and the actions we can take/ have taken to optimise performance.
The Spectrum draws heavily on existing guidance, including the UK Green Building Council’s. Our goal was not to create a new standard, but to pull together best practices into a single framework, based on a global benchmark, that can help us improve. By doing so, we can also have richer conversations with investors about our overall portfolio/ strategy.
However, this is not a solution in itself. Accelerating the pace of real estate decarbonisation requires two key things: innovation and collaboration. The industry needs to share new ideas and best practice, and work together to drive change. It’s in that spirit that we are sharing our own thinking. We hope it will prompt more conversations about how we can go further, faster.