The role of real estate in the race to net zero

ASI’s Grandage says the net-zero buildings of the future are already here


Dan Grandage, global head of ESG for private markets, Aberdeen Standard Investments

The real estate investing industry needs to be increasingly aware of and committed to becoming more sustainable. And scrutinising materials, decreasing impact and studying carbon balance sheets will help.

An estimated 20% of the total greenhouse gases created by countries such as the UK and the US is generated by heating, cooling and powering the country’s homes.

In the UK, there has been progress on reducing the CO2 emissions of the average household. Improvements in waste recycling, more efficient household appliances and lightbulbs, plus the increasing use of green energy, have all brought total emissions down. But there is still considerable work required to reach the ambitious targets for 2030, and beyond to the net-zero target for 2050.

The Climate Change Committee has recommended gas boilers begin to be swapped for heat networks, and oil and electric heating is replaced by electric heat pumps. Solar and wind power both need to play a larger role in powering households; better insulation and heat shading are also features that demand rapid improvement.

Both government and private funding will be required to adapt existing buildings and make sure new builds are fit for purpose and meet rigorous new sustainability standards like those outlined by BREEAM – the world’s leading sustainability assessment method.

What needs to change

When investors own property, or build it from scratch, they now need to be taking every opportunity to build in improvements. 

First of all, materials must be scrutinised. Where have the concrete and steel for construction been sourced? Are suppliers working to high environmental standards? How can the embodied carbon within these materials be reduced? Wood is increasingly being used as a structural element because, grown responsibly, it can help substantially minimise the carbon impact.

Building construction and refurbishment projects now need to be designed in a way that will reduce the future need for heating and cooling. Highest quality insulating materials are important, so too is design that will allow air to flow through the buildings so both heating and air conditioning requirements will be reduced. The aim now must be to create buildings with the lowest possible impact that can be powered by green energy. This is how we will achieve the net-zero goals of the future.

Once a building project is complete, the overall carbon balance sheet can still be studied. Institutional landlords can measure energy output to find out what more needs to be done in terms of insulating, changing appliances or offsetting. Improved planting and green roofs can aid in not only providing access to nature for building users, but can boost local carbon capture and enhance local habitat biodiversity and mitigate flood risks.

While the priority should always be on reducing carbon as much as possible within the buildings, owners can also look at ownership and management of forestry offsite that can act as a carbon capture and offset residual carbon emissions. In these ways, it will be possible for entire real estate portfolios to be net zero by 2050, in line with the goals of the Paris Agreement. 

The net-zero buildings of the future are already here. There’s no doubt that this will bring value to investors because climate change is going to alter how we think about investments and the priorities investors will look for. ESG factors will change the value of assets: those with strong ESG credentials will ultimately fare better.  

Greater technology, energy-storing batteries, PV solar panels and all kinds of added ‘smartness’ will make our lifestyles increasingly sustainable in the very near future. Change is not just possible, it’s happening right now and it needs to gain momentum.

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