A Green Bill of Health

While we are in the midst of the pandemic it's not easy to look ahead but there seems to be one message coming from those whose job it is to do so. The coronavirus has hammered the economy and created an extremely volatile market, but, in the words of Steffen Hoerter of Allianz Global Investors, the impact of the climate crisis "will be much worse and, unlike the virus, it will not go away."

A Green Recovery

 The Technical Experts Group (TEG), an advisory group to the European Commission has said this week that the EU should use future legislation to ensure that its trillion euro recovery package is in line with its climate policy. The rules, called the sustainable finance taxonomy, and which will force providers of financial products to disclose which investments are green were drafted by the TEG and intended to come into force in 2021. However, the TEG is now calling for these rules to guide the economic recovery of the bloc.

In addition to the demands being made of the EU, the UK and Germany co-sponsored the 11th annual Petersberg Climate Dialogue from 27-28th April. This took place as an international online conference. Environment ministers, civil society leaders, international stakeholders and businesses from over 30 countries met to discuss how to make progress on cutting greenhouse gas emissions but the main focus was on the organisation of an environmentally sustainable economic recovery after the acute stage of the pandemic has passed.

Opportunity

As well as being a politically acceptable outcome, the International Renewable Energy Agency has made a call for action on world governments to ensure a rapid and sustained economic recovery that aligns with climate policy. They estimate that renewable energy could power an economic recovery from COVID-19 by spurring global GDP gains of almost £80 trillion between now and 2050. They found that accelerating investment in renewable energy could generate huge economic benefits while helping to tackle the climate emergency.

Domestic Responsibility

The UK government has acknowledged its position in helping shift the economy, including the built environment, to a more environmentally friendly position. The Minimum Energy Efficiency Standards which set the minimum level for the environmental performance are in place and as of April this year it is now unlawful to let a residential property in the UK with an environmental performance certificate rating lower than E. This is the same for all new commercial leases and will affect existing commercial leases by 2023. There is a strong likelihood that this minimum standard will strengthen, indeed the government is already consulting on increasing the minimum standard to a B by the year 2030.

Acceleration towards sustainability

While there are various measures in place to assist with the shift towards a more sustainable real estate sector Alok Sharma, the Business Secretary, conceded in his speech to the Petersberg Conference that our economy needs to decarbonise approximately three to five times faster over the next decade than we have managed in the last two decades. The building sector contributes 30% of greenhouse gas emissions and uses 40% of energy worldwide. Real estate is going to face some big changes very quickly. Landlords, Tenants, Investors and Developers all have clear options open to them when it comes to reaching for greater sustainability. Landlords and Tenants can put green leases in place, which will allow them to cooperate on carbon reducing, and often money saving initiatives. Developers can consider modular building, and embracing the circular economy, where waste is designed out of a project in the initial stages to ensure that the development is as green as possible. Investors can look to green finance for any development that meets certain minimum sustainability requirements. 

COVID-19 has entirely changed our way of life in a very short space of time, but it has also given us space to pause and think about how we can learn from this crisis to adapt to face the climate crisis. With the UN Council of Leaders Climate Conference, which was due to take place in Glasgow in November, postponed until next year, there is an urgency and impetus affecting the current decision making. We cannot forget of course, that before life as we know it was paused due to the virus, we were all transfixed by the record fires in Australia and the record floods in the UK. Climate caused natural disasters are becoming more common and our entire society needs to change to mobilise to prevent these. In terms of real estate that can mean ensuring that new developments are carbon neutral, using green finance to fund property investment and construction, planning sustainable refurbishment and adaptation of current building stock. Once we design to eliminate waste and begin to green existing buildings to ensure that they are resilient to the changing future it becomes a picture of economic and social opportunity rather than risk and vulnerability.