The Property Sector Needs To Be Prepared For What Will Come Out Of COP26
On 31 October, one of the most important global events to tackle climate change will start in Glasgow: the 26th UN Climate Change Conference of the Parties. What gets agreed and signed at this conference will lay down the pathway for the next 30 years of action, for everyone.
“It’s very easy to say that COP26 is a government thing and ask yourself, why should we care?” said Gowling WLG partner Ben Stansfield, who specialises in planning and environmental law. “But what is decided will rapidly filter through. The time gap between what a government decides on climate matters and what businesses need to do is getting smaller. Two years ago, Theresa May established the goal to reach net-zero carbon by 2050 and within weeks people were pledging to meet or beat that target. COP26 will be a very large starter gun triggering action.”
COP26 has published four overriding goals for the event, which lay out what it hopes to achieve. Stansfield described how all actors in commercial property — investors, developers, property owners and tenants — need to be aware of what each goal covers if they are to prepare their businesses for future legislation and consumer expectations.
“If you look at the major sources of carbon emissions, it’s buildings and transport,” he said. “If you’re looking for a way to save the world, you need to either reduce emissions, which is an infrastructure issue, or improve biodiversity, which is a land issue. So whatever you do in commercial real estate, you will be touched by those agendas. Real estate is the heart of everything.”
Goal 1: Secure Global Net Zero By Midcentury
And keep 1.5 degrees global average temperature rise within reach. This is arguably the overriding goal for COP26 and countries are being asked to come forward with ambitious 2030 emissions reductions targets.
“We need to invest in renewables and transition away from fossil fuels to heat and cool buildings,” Stansfield said. “Construction accounts for a large proportion of emissions, but once a building is complete, building owners need to consider its operational CO2 impact — the vast majority of a building's energy use, once it is in use, is associated with heating and cooling, so if that energy can be decarbonised, substantial progress will be made. Real estate has got a huge part to play in keeping temperature increases to 1.5 degrees.”
Construction also needs to move toward more sustainable materials, away from concrete and toward timber that has been sustainably sourced, for example. A recent report from the Royal Academy of Engineering highlighted how reusing materials such as bricks and steel could help reduce emissions — cement, used in concrete, creates 8% of global emissions.
Stansfield also highlighted how the increase in electric vehicles is going to have a big impact on how real estate is designed. Will there be enough places for people to charge their cars?
“We will start to see increasing charge points at train stations and shopping centres,” he said. “This will also be a factor for construction companies — when will we start to see electric diggers and plant in widespread use?"
Goal 2: Adapt To Protect Communities And Natural Habitats
As well as addressing how to create more flood and heat resistant real estate to cope with extreme weather, COP26 will look at how to protect and restore ecosystems. Although the UK’s Environment Bill still hasn’t been passed, it is set to introduce requirements for biodiversity net gain that will impact commercial real estate considerably.
“Protecting and restoring ecosystems is a land issue,” Stansfield said. “There is a tension between constructing on greenbelt land and reusing brownfield sites so as not to damage existing ecosystems, but we need more homes. This is going to be an increasing challenge for the UK to manage, but no doubt the business sector will step up and meet the challenge.”
Stansfield highlighted that a lot of projects are being created to develop the UK’s green infrastructure generally, from carbon capture to creating pipelines that bring water to places experiencing drought from areas where water is abundant. In agriculture, there will be a move toward increasing the diversity of farming, such as ploughing fields in a way that reduces the release of sequestered carbon.
Goal 3: Mobilise Finance
ESG reporting and requirements are becoming more prevalent — sustainable investment now accounts for 36% of professionally managed assets globally, according to the Global Sustainable Investment Alliance. However, as well as sustainable investing, more money needs to be targeted toward making all areas of economies more sustainable, Stansfield said.
“There is a lot of talk about green finance but still much uncertainty about what it really is,” he said. “Lenders might offer better terms for borrowers looking to invest in sustainable projects, but in reality creating a new green infrastructure for the UK will cost a fortune. Funders need to get involved in making all this possible.”
Goal 4: Work Together To Deliver
“In order to deliver the government's goals, everyone in the chain needs to be committed,” Stansfield said. “Construction companies will have to invest in green plant and machinery, developers will need to use sustainable materials, and customers will need to accept that they may have to pay more for a green building.”
While developers and property owners will face increasing pressure from investors as well as legislation to move to sustainable practices, tenants and owners need to be informed about the benefits and savings associated with a green property, Stansfield said.
“People might say that they want a highly insulated, green home, but key issues such as location and cost will always override that,” he said. “There is more to do in terms of providing information to homeowners about the long-term savings associated with green homes — and how quickly upfront costs can pay for themselves, for example due to lower energy costs. Perhaps the government might even think about ways in which those upfront costs can be funded so consumers can afford greener homes.”
While expectations are that COP26 will signal further legislation and governmental pressure to make all aspects of people’s lives as green as possible, the messages that are transmitted are just as important. Creating a change in mindset for everyone might be a continuing challenge, but no doubt the real estate sector can play a large part.
This article was produced in collaboration between Gowling WLG and Studio B. Bisnow news staff was not involved in the production of this content.
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