Insights / 12 November 2021

COP26 fires warning gun in the race for Real Estate resilience

COP26 fires warning gun in the race for Real Estate resilience

In our first article on the COP26 UN Climate Change Conference summit now ending we described the event as one of the political generational events of our lifetime, outlining what might it mean for fund and real estate managers, their boards, and the future of their business.

In this, the second part of a summary of the main talking points of the conference so far, we focus on the implications of COP26 for real estate businesses and finance. 

Conversations are focusing on an urgent need for sustainable solutions in real estate and the important role they will play in the wider environmental agenda, with net zero timelines, ESG, green financing, and retrofitting forming part of a new race for resilience in the world of international real estate.

COP26 Concludes

As the COP26 summit in Glasgow ended, world leaders and policymakers focused their attention on the built environment on Friday. The aviation and the auto sectors have traditionally taken much flak from environmental activists but there has been a real uptick and interest in peoples’ homes, which are increasingly regarded as one of the biggest culprits of global carbon emissions. The UK Government recently published its  Heat & Buildings strategy, while the UK Green Building Council has published an ambitious Net Zero Whole Life Carbon Roadmap for the UK Built Environment.

Urban Climate Action

There was a major focus on the ways in which cities contribute to the climate crisis while at the same time facing acute exposures to emerging risks that go with this change.

Urban buildings account for 40% of global carbon emissions each year and the value chains of cities are attributable to 68% of all global annual greenhouse emissions, by UN estimates. The UN also estimates that 1.6 billion people living in cities will be regularly exposed to extremely high temperatures and more than 800 million people living in cities across the world will be vulnerable to sea level rises and coastal flooding by 2050.

The UK Government has responded by launching an Urban Climate Action Programme (UCAP), which will provide £27.5m to at least 15 cities in developing countries across a three-year period. Germany signalled its support for the initiative post-launch, so there may well be more funding added. From an international perspective, cities including Lagos, Johannesburg, Jakarta, Kuala Lumpur, Lima, Bogota and Mexico City will be among those set to benefit from the initial funding, which will be used to decarbonise public transport systems and energy systems, improve climate risk assessments and make waste management more sustainable.

Accelerating the Transition

UCAP will support the cities and regions in developing countries most impacted by climate change to accelerate their transition to net zero. To address emissions from the wider built environment, the UK government is investing £3.9bn through the Public Sector Decarbonisation Scheme, the Home Upgrade Grant scheme, Social Housing Decarbonisation Fund, Boiler Upgrade Scheme and Heat Network Transformation Programme.

Levelling Up Agenda in the UK

Department for Levelling Up, Housing and Communities Minister Eddie Hughes said that net zero provides an opportunity to support the UK Government’s levelling up agenda while ministers also take action to cut the CO2 emissions of all new build homes by at least 75% from 2025 under the Future Homes Standard. A further 31% cut is anticipated through an improvement in building standards later this year.

The UK Green Buildings Council (UKGBC) also launched its Whole Life Carbon Roadmap, with a common vision and agreed actions for achieving net zero carbon in the construction, operation and demolition of buildings and infrastructure. Throughout 2021, UKGBC has been working with a cross-industry team to develop a Net Zero Whole Life Carbon Roadmap (the Roadmap) for the UK built environment. The Roadmap project aims to outline a common vision and agree upon industry-wide actions for achieving net zero carbon in the construction, operation, and demolition of buildings and infrastructure in the UK. The UK’s homes are believed to be the largest contribution to the sectors emissions. Operational carbon from domestic buildings accounts for half of the sectors emissions, when including embodied carbon this rises to almost 60%. The UKGBC estimate that the recommended nation-wide retrofitting of some 29 million existing homes would reduce this by 98% by 2050. The organisation advocates measures that will also look to eradicate fuel poverty, create 500,000 green jobs, and positively contribute to the national levelling up agenda.

The UK is not the only nation that realises it needs to step up its game in a post COP26 world. There were a few key learnings for the world of U.S. real estate. One of the takeaways was “step it up,” said architect Mike Davis, president of the Boston firm Bergmeyer, who was at the conference representing the American Institute of Architects. 

Incorporating Resilience

The Boston firm’s view is that the real estate community can be confident now that exceeding an energy use code or incorporating resilience measures in design or doing a life cycle cost analysis or even doing a development carbon budget is not risky anymore, it’s timely and smart. And state and municipal policymakers can feel confident that the real estate market is ready to move towards a zero-carbon economy, and regulate accordingly.”

“At COP26 so far, we are very encouraged to see how many people are now discussing buildings and the growing understanding of the role that buildings and building energy efficiency can play in both climate change mitigation and adaptation,” Davis said. 

Ready, Set, Go!

Of particular interest will be emerging details for measuring, reporting and reducing embodied carbon. UKGBC, has provided information on measuring and reducing operational emissions for several years and has dedicated much work in recent years to the need to reduce embodied carbon to net-zero by 2050.

The roadmap also includes several major calls to action for policymakers for the delivery of its net-zero-by-2050 scenario for the sector, in which annual emissions fall from 180 mt of CO2e in 2018 to less than 20 Mt of CO2e by mid-century.

One thing that all interested observers and participants in the world of real estate can take from the conference is that the race to resilience has well and truly begun!

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