From Boilers To Brokers, Pioneering Grosvenor Thinks Hard To Go Beyond Net Zero Carbon Target
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Grosvenor is taking on quite the challenge. It involves replacing 500 gas boilers, changing the mindset of London property agents, persuading the wealthy residents of Mayfair to disrupt their homes, and finding a cost-effective alternative to conventional concrete. But the prize for working the problem out is infinite.
Earlier this year, 300-year-old UK property company Grosvenor promised to achieve net zero carbon operational emissions from its British and Irish portfolio by 2030. It is the first large UK property company to make this commitment, and one of the first globally. It is not an easy task for any company, but especially one that owns 1,500 listed buildings in London; older, heritage properties are much harder to retrofit and make net carbon neutral.
Grosvenor sustainability manager Emily Hamilton told Bisnow how it is going about meeting its aims in practice, and how its initial commitment is just the first step in a bigger drive that will take in not just how it operates buildings, but how it builds them and works with tenants as well.
Given the unique challenges in a portfolio like Grosvenor’s, this can be an exemplar for all property companies big and small.
“We’re a 300-year-old company, and we want to be here for the next 300 years as well,” Hamilton said ahead of Grosvenor’s participation at Bisnow’s London Office Leasing & Development event next week. “Climate change is one of the most important issues in the world, and if you are not reacting to it, you are not future-proofing your business. There is also a reputational risk, in that if you are not addressing it you will lose customers to competitors that are.”
The year 2030 has not just been picked at random — the United Nations said global carbon emissions need to fall by 45% by 2030 to hold global average temperature increases to 1.5 degrees celsius, a level at which considerable damage will still be done to the global ecology.
Grosvenor’s first step is to make sure it achieves net zero carbon operational emissions from all its directly managed buildings. That basically means eliminating emissions from its use of electricity and gas to heat, cool and light its buildings.
Partly this comes through switching to renewable power suppliers, but it also involves retrofitting the Grosvenor portfolio to make sure there is as little energy leakage as possible. This will involve the replacement of 500 gas boilers across its roughly £3.5B London portfolio.
There are some unique challenges, given the portfolio is concentrated in the historic districts of Mayfair and Belgravia. There are more stringent regulations that are applied to listed buildings, Hamilton said. You can’t just put solar panels on the roof; English Heritage need to be consulted on how it may be done. Insulation needs to be found that is thinner but prevents just as much heat from escaping.
“You have to retrofit the property but make it look like it hasn’t been touched, it can’t look like an eco-building,” Hamilton said.
A large swath of Grosvenor’s portfolio is the freehold ownership of big chunks of Mayfair and Belgravia, which include some of the most expensive houses in London. To hit its commitment, Grosvenor needs to retrofit these, too. But it can be hard to incentivise the residents of these properties to let you undertake the necessary works in the conventional way.
“For most customers, you tell them the bills will be lower,” Hamilton said. “Because we have lots of high net worth customers that is not as much of a concern. You have to talk to them about health and wellbeing, and issues like air quality.”
But Hamilton said getting to net zero operational emissions is only one step along the way toward a much larger goal. It is now working out how to get carbon emissions as close to zero as possible in constructing new buildings, maintaining their plants and machinery, and from the activities of its tenants.
“Getting operating emissions to net zero is just a baseline,” she said. “We know how we can get there, and that allows [us] to focus on the bigger issues of embodied carbon [from building and maintaining buildings], our supply chain, and how we engage with our tenants.”
Grosvenor has some very early data that indicates that 30% of emissions over a building’s life cycle comes from the initial materials and construction process, about 30% comes from maintaining the plant and the remaining 40% is from its operation. With that in mind, reducing and eliminating the embodied carbon from the first two factors is of critical importance if the built environment is to help reduce overall global carbon emissions.
Hamilton said the company is looking at its supply chain to make sure all of its materials and processes are as sustainable and carbon-free as possible, a fiendishly complex task given it entails thousands of components, but one which has to be done. Examples can include switching to construction companies that use electric vehicles.
In terms of the materials used to develop new buildings, there are some big, obvious wins, such as using timber frames or recycled steel rather than virgin steel. Switching to cement-free concrete can reduce the embodied carbon from concrete by up to 80% given how much carbon is produced in the making of concrete, Hamilton said. She said the company is looking to use this material at its 1,300-unit Bermondsey build-to-rent development. The cost is coming down quickly, she said, making the material more financially viable.
But processes are almost as important as materials in reducing carbon emissions. If schemes are conceived so that every stage of the process, from the design to the construction to the maintenance, is joined up and has the goal of reducing emissions, then reduction becomes an easier task. It is much easier and cheaper to think it through from the beginning than trying to retrofit solutions 10 or 20 years into a building’s life.
The same is true when it comes to the brokers who lease out Grosvenor’s commercial buildings. Hamilton said the company is working to educate its leasing agents on Grosvenor’s climate commitments, partly so they can communicate this to clients as a selling points, but also so they can find occupiers who get it.
“There are a lot of brilliant leasing agents who really understand sustainability, but some don’t,” she said. “We are working with them to show them how to sell and market our buildings to bring us customers who share our goals.”
Because as Hamilton points out, when it comes to how much energy buildings use, and therefore the emissions they create, tenants play a crucial role. Once a building is operational, Grosvenor is only in charge of the common areas, a small proportion of a building, so what tenants do is vital. She said Grosvenor is updating its leases to make sure tenants share energy usage data, so the two sides can work together to find ways of reducing consumption. It is also bringing in consultants to engage with tenants on topics like managing waste.
The question that has to be asked is if carbon reduction strategies can they be done profitably. Businesses, real estate or otherwise, can’t be expected to take choices that will significantly impact profitability. Hamilton said that in almost all cases the answer is yes.
“With new buildings, you might have to increase construction costs by 1%, but if you look at things over the life cycle of the building then you more than get that back, if you don’t have to go back and replace everything,” she said.
In the case of retrofitting existing properties, it is easier to demonstrate the benefit with commercial buildings than with residential. There is clear evidence that for commercial properties, more sustainable and energy-efficient buildings produce greater demand. With retrofitted residential buildings it is more difficult to demonstrate that increased demand.
“We are just having to say that is a no-regret spend,” she said.
Grosvenor is one of the first companies globally to make a commitment to reducing operating carbon emissions to net zero. But it would also be the first to admit, this is only a good start.