COP26 in Glasgow was an opportunity for the real estate industry to showcase its commitments, and to engage in dialogue with governments from around the world on the opportunities, as well as the challenges, that net zero brings.
But as attention turns to this year’s COP27 event in Cairo, what is the legacy of COP26, and what progress is needed before it?
November 2021 saw the first formal Built Environment Day at COP since Paris in 2015. The conference was teeming with representatives from the property sector focused upon addressing the sector’s significant contribution to global emissions, approximately 40% globally.
Among the commitments brought forward, the World Green Building Council announced 44 new signatories to its Net Zero Carbon Buildings Commitment, which aims to halve emissions in the built environment sector by 2030 and achieve net zero carbon emissions by 2050 at the latest. The businesses and organisations that signed up represent an annual turnover of more than $100bn, reflecting the weight of support behind the industry’s net zero goals.
However, the text produced through intergovernmental negotiations at COP26 does not once mention the role of business in the global effort to slash emissions and combat climate change. Despite this glaring omission, attendees left with the conviction that net zero is fundamental to future business strategies. Net zero objectives bleed into every level of the corporate value chain. For real estate, we are clearly seeing the effects.
As Knight Frank’s Active Capital 2021 report found, prime central London offices with a BREEAM New Construction ‘Excellent’ rating enjoy a 10.5% premium on sales price compared with equivalent unrated buildings. This is mirrored globally. Prime office buildings in Melbourne and Sydney with a NABERS rating of 5+ enjoy a 17.9% premium on sales price compared with equivalent unrated buildings.
The question, in light of the COP26 text’s omission of the role of business, is how the industry can work with government to further collective net zero goals.
Government naturally seeks policy levers by which it can drive change quickly and visibly. A key lever for decarbonisation in commercial real estate has been the Minimum Energy Efficiency Standard. This legislation had a marked impact on behaviour and attitudes, with targets now accelerated to a minimum ‘C’ by 2027 and ‘B’ by 2030.
The challenge is finding more ‘levers’ by which government can work with the private sector to meet net zero targets. While the sector is exploring new opportunities with natural climate solutions, for example, these often straddle multiple government departments, making them difficult to progress at policy level.
In our markets, we see increased focus upon the investment opportunity presented by natural capital projects, particularly land use focused upon carbon sequestration. This is an obvious example of where forward-thinking policy could unleash substantial capital and accelerate a wide range of new projects.
With the official COP text silent on the role of business, it will be for industry to take the lead on progressing toward the UK’s net zero goals. The market is demonstrating how sustainable buildings and places create value, and in many ways private sector innovation is overtaking policy, with governments around the world playing catch-up.
David Goatman is head of energy, sustainability and natural resources EMEA at Knight Frank
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