18 March 2022
There are two numbers every real estate professional should know about climate change: the first is 11.7 billion, the second is zero. 11.7 billion represents the annual CO2 emissions in tons from combined building operations and construction. A figure which, whilst environmental awareness is at an all-time high, shows little sign of decreasing. Zero is what we need to aim for to prevent a catastrophe. It is only through committing to this aim that warming can be stopped and the worst effects of climate change – and the risk exposure it poses to global real estate, valued at $326.5 trillion – can be avoided.
To understand how this can be achieved is to understand that the problem is both systematic and behavioral. Overall, buildings accounted for 37 percent of energy-related CO2 emissions in 2020. Tackling emissions from the built environment is an issue unparalleled in magnitude and urgency. Execution, however, is not easy. This is because solving the net-zero equation is inseparable from the twin pursuits of inclusive growth and economic development. What it requires is a careful and proactive balancing of risk over time. The alternative, that of a delayed transition, would result in vastly increased economic risk.
The challenge should not come as a surprise. Delivering net-zero would mean a fundamental transformation in how corporations asses the value of real estate. It necessitates looking beyond traditional economic indicators. A complex task, it means addressing specific questions of asset performance and management, such as: what technologies need deploying to reduce emission rates whilst staying within carbon budget? How would the transition affect corporations’ markets and operations? What would it mean for the health and well-being of workers? What levels of investment would the transition require? And fundamentally, how can corporations be encouraged to adapt established investment theses?
Resulting from a global political landscape of fragmented environmental policy and decision making, the real estate sector has responded to this demand by innovating systems of green building certification. Achieving certification empowers corporations, stakeholders and asset users. Done well, certification creates seven high-impact returns: improved employee health and well-being, reduced energy consumption, promotion of sustainable transport, reduced water consumption and waste production, resilient strategy, enhanced land use and ecological systems, and reduced pollution. Unsurprisingly, the economic returns that certification can unlock are significant.
Identifying a scheme with the best coverage across these factors requires careful consideration. However, as market-led offerings, the schemes are differentiated. Within these, BREEAM In-Use has emerged as the world’s leading green building certification scheme. Its objective is to mitigate the operational impacts of existing assets on the environment, operating as an international standard that is locally adapted, and can be implemented at portfolio or individual asset level. As a formal third-party certification scheme, it enables clients to measure, evaluate and reflect on the performance of their assets against best practice in a robust, science-based and cost-effective manner. Meanwhile, through a system of recertification, it promotes a culture of gradual improvements, further diminishing transitional risk towards a net-zero economy.
Since Longevity Partners’ founding in 2015, the real estate industry has begun to seriously peruse pathways towards improved ESG performance. However, not all sectors show uniform progression. One market where Longevity is accelerating the transition is the US industrial sector. As Anne Peck, Vice President and Head of ESG and Resiliency at TA Realty notes, “the industrial sector has historically lagged in the deployment of sustainable solutions, largely due to the limitations of a triple net approach.” For most players in the sector, the transitional risk posed to financial success is still regarded as a hurdle. However, as a data-driven assessment producing clear and quantifiable recommendations, BREEAM In-Use is positioned to enable corporations to overcome this barrier. As Peck notes, “with the guidance of BREEAM and its various resources, we’ve been able to achieve sustainable performance upgrades while maintaining our fiduciary duty to stakeholders and retaining a strong return on investment for all assets.”
The keystone in de-risking any significant transition is proactive management of the rate of change. For the net zero transition, this necessitates accurate forecasting of ESG trends. Central to the process for the US industrial sector is the need to demonstrate possibilities for continued sustainable improvement within the market. As Breana Wheeler, US Director of Operations at BRE notes, “at a time when real estate firms can feel heavily pressured to deploy ESG initiatives quickly to be seen as taking action, TA has taken a more deliberate and intentional approach to ensure thoughtful, significant improvement at each of the assets included in this project.”
As evidenced in the US industrial sector, BREEAM In-Use unlocks a means of evaluating asset and portfolio performance that uniquely places control with corporations and stakeholders. Its mechanism for delivery is divided into two parts: part one focuses on asset performance, benchmarking the building, outlining areas of best practice, as well as potential scope for improvement; part two centers on management performance, benchmarking asset management processes, outlining areas of best practice, as well as potential to reach optimal performance.
Central to successful implementation is top-tier client support and expert insight. As a BREEAM In-Use assessor, Longevity is in an unparalleled position. Having doubled annual turnover for the seventh consecutive year,supporting projects for client’s in over 40 countries, Longevity has established global distribution of BREEAM assessors. Further, Longevity is unique in the ESG ecosystem in providing a full-service offering. For clients, this means following optimizations recommended in the assessment process, implementation can be perused in line with a consistent strategy.
To understand how your organization can optimize asset performance through BREEAM In-Use certification, please reach out to Peter Howle, Longevity Partners’ lead for BREEAM In-Use.