Brick by Brick: A Guide to Decarbonizing the Built Environment

  • Reducing emissions from the built environment is urgently needed if we are to meet our climate goals.
  • Buildings account for approximately 40% of total global energy consumption and emissions.
  • From transportation to new construction and renovation – here are 10 priority areas for decision-makers in the public and private sectors to focus on.

Having spent my entire career working in real estate, it is both humbling and intimidating to recognize that buildings account for approximately 40% of global energy consumption and emissions.

I suspect decarbonization will have a profound impact on almost every aspect of my personal and professional life – but with creativity, innovation and the use of technology, I believe we can bring about the required transformation. Below, I prioritize a list of issues in our built environment where collaboration between business and government is urgently needed to accelerate progress toward our shared goals.

Global share of building and construction energy consumption and emissions, 2019

Global share of building and construction energy consumption and emissions, 2019.

Image: Global Alliance for Buildings and Construction

Cities account for 75% of global emissions and are often the most exposed to the consequences of climate change. Of the world’s 17 largest cities, 14 are coastal, making them particularly vulnerable to climate-related extreme weather events. “Necessity is the mother of invention” takes on new meaning as cities are pushed to the forefront of the battle to reduce climate impacts and mitigate their consequences. Building construction and operation regulations, as well as planning policies that promote sustainable transportation, are among the key areas where forward-thinking cities like New York are leading the charge.

The pandemic-induced lockdowns have shown us the benefits of reducing vehicle movement. Emissions have fallen by 88% across Europe during the quarantine. Restrictions – and possibly bans – on combustion engine vehicles are being introduced in cities to accelerate the adoption of electric vehicles, often starting with public transport infrastructure. A clean air zone introduced in Birmingham, UK has dramatically changed travel habits (see figure below). The cycle paths set up in Paris in response to COVID are permanently maintained. Carbon accounting must increasingly be at the heart of urban transport policy-making.

The pandemic has also had an impact on the labor market, characterized by numerous job offers and record levels of resignations. Companies’ environmental, social and governance (ESG) credentials are set to play an increasingly important role in attracting and retaining top talent, who increasingly believe that their employer should be socially and environmentally conscious. The buildings they occupy, the locations they choose and the way they allow their staff to work will have a profound impact on the carbon footprint of businesses. This, in turn, will determine whether they are considered an “employer of choice”.

Over the next 40 years, the equivalent of a city the size of Paris is expected to be built every week. Given that concrete production alone accounts for 8% of total global emissions, the way we design and construct new buildings must change dramatically to meet our climate goals. Design improvements, innovative materials, new construction techniques and increased use of technology all contribute to minimizing the “lifetime carbon” impact of new developments. The use of digital twins to regulate energy consumption in buildings is extremely promising. Given that typical buildings exceed their expected energy consumption by 3.8 times, the power of digital twins to diagnose and correct such inefficiency contributes significantly to reducing emissions.

Renovation vs new construction

Perhaps the biggest challenge is the large stock of existing buildings that need to continue to be used, but need to be operated more efficiently. Renovating occupied buildings presents practical challenges of upgrading facilities without disrupting business operations, as well as the more nebulous question of cost allocation and financial viability. Early adopters in the public and private sectors provide role models for others to follow. However, in the UK and EU, government regulation of building standards is already accelerating obsolescence in order to change the balance of the cost-benefit equation. Other jurisdictions will likely follow their example. Financing and undertaking the necessary renovations is a huge challenge, but also offers huge business opportunities for those with the right skills and the right vision.

Legislation may be slow to directly impact the real estate sector, but successive waves of regulatory and market forces are already impacting the banking and financial sectors on which the real estate market is built. Whether in the form of construction loans or mortgage financing, banks’ exposure to climate risk is increasingly measured, monitored and quantified. Funds explicitly targeting “green” investments are becoming commonplace; those who avoid “browns” even more. Sustainable finance is already growing exponentially and will soon impact the cost and availability of debt and equity for every real estate project.

Real estate is inherently geographically fixed, but every location on the planet is exposed to its own unique combination of regulatory and physical climate risks. Occupiers and investors are reassessing their geographic exposure in light of these new risks, which are only now being recognized and properly priced. Rents and capital values ​​are already adjusting at the building level, but climate impacts on value at the urban and regional levels are – so far – less easy to discern. Property insurance costs have skyrocketed in response to recent extreme weather events – this is certainly a major indicator of how the property value landscape is being reshaped by climate change and our response to it. this.

Annual home insurance price increases

Annual increase in home insurance prices.

Image: Marsh Global Insurance Market Index

The impacts of climate change disproportionately affect those parts of the world and segments of society that are least able to protect themselves or recover from climatic events. From loss of home or livelihood to loss of life, millions of people are facing a growing wave of social and economic impacts due to climate change. As the World Bank has so aptly put it: “Climate change is more than an environmental crisis, it is a social crisis.

I believe that we are all part of a human ecosystem, at the heart of which are the towns and cities that form the backdrop of our lives. The real estate industry was responsible for creating the buildings in which we live, work and play; but we cannot solve the current crisis alone. Now, we must urgently reach out to our partners elsewhere in the public and private sector to take up the challenge of decarbonizing the built environment for the benefit of society as a whole.

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