I’m not the first person to question whether the property industry is doing enough to tackle climate change, and with the evidence clearly calling us out as a significant contributor to the problem, those who choose to look the other way do so at their peril.
Recent growth in public awareness of the realities of climate change is unprecedented – to the extent that you could argue public opinion, be it from consumers, customers or investors, rather than regulation, is determining the speed of change in tackling the problem. There is a real feeling of social pressure, and ignoring public sentiment is always a commercial risk.
In just the past six months, we have seen the UK government declare a “climate emergency” and announce that greenhouse gas emissions will be cut to net zero by 2050. Following the London protests in April, Extinction Rebellion carried out further protests in five UK cities in July, markedly coinciding with all-time record temperatures across Europe.
Moral imperative
We should be grateful that there are those who stand up and protest. But what about the rest of us? With so much at stake, we all have a moral imperative to act, whether that is personally or through our profession.
Yet there is still to be a revolutionary change, and we’re not alone in our sector in focusing on mitigating the damage already done, rather than proactively pursuing a net zero, or better, position. This is partly as a consequence of the established methodologies for measuring value and making investment decisions.
In reality, though, how sustainable or secure are our existing income streams over the long term? Eventually, we will need to take a more holistic approach to value, and that will mean finding ways of quantifying or valuing the upside of our net zero carbon ambitions, as well as properly accounting for what are currently externalised costs (for example, social or environmental), to produce more accurate net valuations.
This is an issue that reaches well beyond the real estate sector, and there must be a role for business, regulators, academia and government in establishing sustainable solutions. For our part, we need to start designing and developing with the whole lifecycle of an asset in mind, not just an ROI on day one. We also need to align our buildings to the changing ways people use them.
Positive influence
We shouldn’t restrict ourselves to what we can influence directly, but rather look to where we can have the greatest impact and use our convening power, both through our supply chain and by supporting our customers and consumers in making their own low-carbon changes, including the use of green travel options, low-carbon energy, etc – all to drive positive change.
We need to start designing and developing with the whole lifecycle of an asset in mind, not just an ROI on day one
So can a net zero carbon ambition become a commercial reality? Speaking frankly, I am not sure anyone truly knows what that means. Some things, however, are clear: we’re going to have to make some big calls today that have payback periods dated far into the future, and it’s going to require industry collaboration.
But we can start more manageably, by having board-level discussions about sustainable income streams and what climate-conscious investment could look like. A few years ago, we began looking at how we could assess the broader, not just financial, impact of our activities, to make more rounded decisions and start helping inform our own path to being climate resilient by 2030.
None of this is easy, but by finding ways to integrate responsible business behaviours into our own business models we will become more resilient and sustainable. This in turn will attract and retain the trust of our customers and employees – something that we can all agree remains a priority.
Paul Clark is chief investment officer at the Crown Estate
