Teaming up to decarbonize real estate: This is how cities can achieve net-zero

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Guy Grainger, Global Head of Sustainability Services & ESG, JLL

• There is widespread support for a more collaborative approach to achieving net zero for cities.
• Strong partnerships between city governments, real estate occupiers and investors are instrumental to driving the net-zero carbon agenda.
• A more collaborative business model will require a change in mindset among many city administrations, which should see real estate owners, developers, investors and occupiers as long-term partners to achieve environment goals.

Buildings account for 40% of carbon emissions. So real estate investors, developers and occupiers have a key role to play in the race to net zero.

Yet re-purposing existing old buildings, machinery and materials is an expensive game, involving thousands of suppliers, incentivized by low-cost solutions as opposed to low-impact solutions. No single stakeholder group, whether in the public or private sector, has the resources or capabilities to accomplish decarbonization in isolation.

As we tackle the decarbonization challenge, therefore, an ecosystem of partnerships needs to emerge between – property owners, investors and corporate occupiers, and national and city governments, academic institutions, employee groups and community organizations – to work together towards common sustainable targets.

JLL recently surveyed nearly 1,000 real estate occupiers and investors worldwide to gauge levels of industry commitment and to explore the barriers they are facing in their decarbonization journey. The survey surfaced widespread support for a more collaborative approach. Plenty of organizations have set Carbon Reduction Targets but these are not necessarily aligned. In fact, over 80% of respondents agree that a strong partnership between city governments, real estate occupiers and investors is instrumental to driving the net-zero carbon agenda.

5 ways for city governments and leaders to collaborate on net-zero action

1. See real estate players as city-shaping long-term partners delivering decarbonization

The adoption of a more collaborative business model will require a change in mindset among many city administrations, which should see real estate owners, developers, investors and occupiers as long-term partners that can help achieve environment goals, which would otherwise be difficult.

There is strong potential to leverage the intelligence, skills, innovations and financial acumen of the real estate sector to achieve environmental goals. From San Francisco’s Zero Emission Building Taskforce to Melbourne’s 1200 Buildings Program, more cities are spearheading collaborative initiatives.

There is certainly a strong appetite among the real estate industry to confirm its environmental credentials and support climate action. Many forward-thinking investors and corporate occupiers are partnering to become collaborative stewards in the race to net zero. For example, the Better Building Partnership’s (BPP) Climate Commitment, a collaboration between the UK’s leading commercial property owners, is working to improve the sustainability of commercial buildings.

Expectations are high among both real estate investors and occupiers about the role that city governments should be playing to drive the decarbonization agenda. While some cities such as New York, Los Angeles, Paris, Copenhagen and Melbourne are noticeably taking action, there is a sense that administrations more broadly are not doing enough.

Our survey shows that only 29% of respondents strongly agree that top-tier cities are taking sufficiently bold action to mitigate climate risk.

What is the World Economic Forum doing to support the Future of Real Estate?

While investable real estate has grown by more than 55% since 2012 (PwC), the COVID-19 crisis has underscored weaknesses in relation to human and planetary health along with drastic inequalities, leaving a stark reminder of the influence the built environment has on societies and the vulnerabilities that exist in times of crisis regarding how spaces perform.

As the real estate industry looks towards recovery, the need for transformation is clear. Portfolios must be rebalanced, and distressed assets repurposed. Technology must be fully embraced, and sustainability and wellness must be at the core of design and operation. The affordable housing crisis that already existed pre COVID-19 must be systemically approached to ensure access to adequate and affordable housing. If the Real Estate industry is to deliver transformation, it is more important than ever to ensure that policy, financing and business solutions are aligned in delivering better buildings and cities.

The World Economic Forum has brought together CEOs from the Real Estate industry to develop a Framework for the Future of Real Estate to help drive the industry’s transition to a healthier, more affordable, resilient and sustainable world.

2. Create the right balance between regulation and encouragement

As urban environmental goals become more ambitious, city governments will look to a wide armory of tools to deliver a decarbonized built environment. Collaboration with the real estate sector will help define the right balance between incentives, encouragement and advocacy as against regulation, penalties and taxes.

Mandatory regulations will undoubtedly become increasingly important, but where successful cities will win out is in creating voluntary partnerships that are effective at generating multistakeholder buy-in and encouraging stakeholders to proactively contribute to sustainability goals.

For example, through its ‘Energy Leap’ initiative, the City of Copenhagen is partnering with the largest building owners to reduce energy consumption in buildings and implement active energy management.

3. Share knowledge

City governments, in partnership with leading real estate investors and occupiers, universities and local green building councils, have an important role to play in educating and disseminating know-how, particularly to smaller companies and individual owners.

In a scenario where the installation of heat pumps is seen as a solution, new skills will need to be developed. This would require funding and strategic foresight. Most companies are still at an early stage in their decarbonization journey and, while committed to the task at hand, they often lack the resources and knowledge to act.

There are already good examples of education programmes on net-zero building construction and deep energy retrofitting that include the New York City Retrofit Accelerator, the City of Vancouver Zero Emissions Building Centre of Excellence (ZEBx), the UAE’s Net Zero Centre of Excellence and the Net Zero Building Technology Accelerator in Los Angeles.

4. Tackle the retrofitting challenge

New buildings alone will not solve the issue. 50% of the world’s raw material consumption is in the development of buildings. Retrofitting existing building stock to net-zero carbon is central to decarbonizing the city’s economy. Of the almost 40% of global greenhouse gas emissions that stem from the built environment, 11% comes from embodied carbon.

The retrofitting challenge for cities is huge but, encouragingly, in speaking with a number of leading investors, there is an understanding of the tremendous potential in unlocking the retrofit challenge. City governments need to be integral to building this momentum.

5. Scale up technology

A key enabler in driving the transition to net zero is technology. But it can’t solve everything: people need to first embrace it.

Data is the single biggest catalyst for green progress, as enhanced data capabilities provide opportunities for continuous improvement based on real-time analytics and automated decision-making.

Data and technology are also essential for transparent reporting and to effectively hold companies to account. Partnerships between governments, academia, the real estate industry and the prop-tech sector are needed to fund more R&D, to help scale up the latest technology, innovations and green solutions as they become broadly available. Without this harmonization, the real estate technology landscape risks remaining fragmented.

Bridge the gap between ‘intent’ and ‘action’ through teamwork

Whatever the route to decarbonizing the built environment, this decade will be critical to lay the groundwork for a low-carbon future. And that requires teamwork. There are no prizes for waiting. By leaning into the ecosystem of partnerships and open-sourcing best practice, we can learn from each other. We all need to get better at bridging the gap between ‘intent’ and ‘action’. This is not the time to take credit for words or for targets, the only measure can be action. And be in no doubt, this is the vital decade of action.