COP26 – scrutinising real estate’s ESG credentialsOwen Mitchell
This week the headlines have been dominated by COP 26, as almost every country on earth gathers in Glasgow in an effort to tackle climate change.
World leaders are aiming to translate environmentally friendly words into action, with real estate one of the key focus areas for change. As outlined by the UN’s Intergovernmental Panel on Climate Change in August, the built environment currently accounts for almost 40% of carbon emissions, making real estate key to reaching net zero goals and driving economic and social equality. The direction of travel is clear: zero carbon real estate will become a necessity, rather than an aspiration.
Over the last couple of years, Environmental Social Governance (ESG) has gone from being a niche term used mainly by private equity funds to becoming a mainstream term used across a range of industries. The real estate sector has already initiated this transformation, by offering solutions to ESG issues through green and smart buildings, green financing, or environmental certifications.
After COP26, we will continue to see huge sums spent on adapting millions of square feet of commercial, domestic, and public sector real estate to modernise and decarbonise portfolios. While this is an essential step (around 80% of all buildings that will exist in 2050 have already been built) it is nevertheless an exercise in changing the past rather than building the future. The true future of real estate for 2050 and beyond will involve a holistic integration of sustainability into every aspect of our built environment – from pre-design and funding to construction, use, management, and even the end of an asset’s life.
There is concern that tried and tested industry methods will be re-presented with a sprinkling of greenwashing. Although schemes may be called “green-this” or “eco-that”, beneath the surface there may be little change, if any. To thwart this, governments must approve developments with policies properly aligned to its net zero targets; as well as create economic incentives to change the systems we use. Many fear that without clear regulation and enforced carbon reductions, the built environment industry will continue to tread the path of least resistance until it’s too late.
COP26 represents a key opportunity for the government to implement these incentives in the form of new legislation, thus ensuring the UK resumes its role as a global leader in the quest to achieve net zero by 2050.