On February 29th, the ULI Sustainability Council convened a star-studded panel discussion on ‘L’Appel de Paris’ – the historic international climate change agreement – and its implications for real estate. The meeting followed up last November’s extremely successful event which focused on expectations (in both the public and private sectors) going into the COP21 negotiations.
We were privileged to have Sir David King as the keynote speaker, the UK Special Representative for Climate Change, formerly the Government’s Chief Scientific Advisor and the Founding Director of the Smith School of Enterprise and Environment at Oxford. With the Paris negotiations having achieved a landmark deal to keep global temperature rises well below 2° above pre-industrial levels, including the surprise ambition to keep that limit to 1.5°, the ever-present question in the room was, ‘how optimistic can we allow ourselves to be?’
The ensuing discussions centred around the importance of making sustainable practice a business and economic development opportunity rather than a burden, the challenges of translating international objectives into reality at the sharp-end of industry practice, and the complex (oftentimes misaligned) relationship between civic engagement, business demand for change, and the public policy.
Sir David gave an inspirational address that highlighted themes of opportunity and innovation. He identified the shift in attitudes to climate negotiations since Kyoto, saying that individual nations were far more motivated by having responsibility for their own emissions reduction pathways, rather than having prescriptive arrangements imposed upon them. This new ‘bottom-up’ approach, he emphasised, held great potential for creatively engaging with the opportunity presented by the decarbonisation of the world economy.
Sir David went on to emphasise his view that the UK government has made extensive efforts to fuel green investment, to create a favourable policy atmosphere for the development of low-carbon industries, and to exert its significant international influence to encourage other nations to follow its example. Later, members of the discussion panels, as well as members of the 70-strong audience, highlighted the critical need for more stable, consistent and clear policy requirements domestically.
Of particular relevance to the ULI’s mission, Sir David highlighted the vital importance that land use change and management would play in ensuring the aims of the Paris Agreement were realised. As well as future-proofing new buildings and retrofitting existing ones, the development of carbon sinks must also be a priority, via deforestation prevention and afforestation agreements such as that forged by the New York Forests Declaration. The multi-functional role of the built environment, including real assets and wider urban infrastructure, was highlighted; as yet, the significant potential that exists within cities to both mitigate and adapt to climate change has been largely uncaptured.
Innovation and opportunity were also watchwords in the first of our two panel discussions, focussing on policy’s relationship to industry. However, it was also demonstrated that there remained work to be done imbuing the enthusiasm of the international agreements all the way to the grassroots level. Terri Wills, CEO of the World Green Building Council, reminded those gathered that COP21 was the first such conference to devote a whole day to the role of buildings in climate change mitigation – a landmark in the developing conversation between governments and the private sector. This role is especially pronounced in areas of the world like India where two-thirds of buildings that will exist in 2030 have yet to be built, meaning there is an imperative for developers to embed best practice into projects coming forward now. Key to progress in developing economies, argued Sarah Millar, head of International Climate Change Engagement at DECC, was debunking the myth that sustainable development hampered economic progress. She praised several CEOs who had already contributed by approaching third world governments with viable low-carbon development strategies.
On the other hand, Sebastian Charles, a specialist in Environmental Law from our hosts, K&L Gates, emphasised that in his experience, despite important steps forward, best practice in the industry remained non-universal. More work remains to be done in transforming the good work of a few exemplars into industry-wide consensus. A constructive question was raised from the audience on that score. Given the urgent need to de-carbonise the world economy by around mid-Century, new infrastructure projects must be pursued sustainably if they are to remain valuable investments in the long-term. Could, therefore, proponents of sustainable real estate practice harness this need to the World Bank’s recent proposition that building infrastructure, including energy efficiency if we think of that as a priority infrastructure opportunity, was an important bulwark against future financial crashes, and in doing so make governments see the financial sense of sustainable projects?
Making sustainability financially attractive would also emerge as a core theme of the second panel discussion. Louise Ellison, Head of Sustainability at Hammerson, told the Council that sustainable practices could still be seen as a challenge beyond the resources of smaller companies. This was particularly the case in times when government policy did not remain stable and predictable. Communicating the positive financial impacts of sustainability projects – such as Hammerson’s recent transition to LED lighting at the Bullring Shopping Centre in Birmingham – must be key in encouraging participation from smaller businesses. Greg Lowe, Executive Director of Capital, Science and Policy Practice at Willis Towers Watson, briefed the Council on an information dissemination project which could make sustainability visible on the balance sheet in just such a way. The ‘Task Force on Climate Related Disclosure’ recently created by the G20’s Financial Stability Board will recommend disclosure standards and publicise information on three different types of climate related risk. These include direct “physical” risks, such as floods or heat waves, but also “transitional” risks – the risk of legislative or technology changes bringing tougher energy regulation or new technologies that renders an asset less profitable – and “legal liability” risks in the event of either of the foregoing. Such an endeavour will no doubt have a transformative effect on risk assessment and on the role of insurance premiums in contributing to a sustainable real estate sector.
As the event drew to a close, a few key themes seemed evident. ULI’s last COP discussion emphasised the private sector’s role in keeping governments on track to deliver climate pledges. This meeting reiterated that the private sector could not be expected to make headway if governments did not provide a stable policy environment for long-term investment. The contributions of King, Wills and Lowe showed how there was significant innovation in sustainable practice already coming through, and the new bottom-up approach to climate commitments seemed to be proving effective. However, Charles and Ellison consistently reminded the Council that there was a long way to go to translate the good work of the few into the common practice of the many.
Making sustainable practice not just an ethical policy but a competitive advantage for leaders and an imperative for the viability of those that follow will be key to the success of its implementation, and publicising financially successful projects like Hammerson’s will prove vital in that endeavour.
In wrapping up the discussion, our moderator, Jon Lovell (Chair of the Sustainability Council and co-Founder of Hillbreak), commented that the ULI has an important role to play. In particular, he highlighted the need for conversations and actions to be better connected; between corporate boardrooms and the ‘coal-face’ of business activity, between sustainability and risk departments, and between international policy agreements and the sharp-end of industry practice. This, surely, is where ULI can be uniquely effective.
Sir David King’s Presentation (click on image below)