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Striving for net zero should be a legal imperative

Now, more than ever, the property industry needs to constructively engage with policymakers to identify and address the impediments and barriers to climate action, says Ben Caldecott.

“Now is a very good time to do it because of the political cycle,” he stresses.

An expert in sustainable finance, Caldecott is a member of the Climate Change Committee, the UK’s climate watchdog.

He was appointed to its adaptation committee back in 2022, bringing on board expertise and a belief in the need to accelerate the adoption and use of climate and environmental data and analytics by financial institutions. He is the founding director of the Oxford Sustainable Finance Group at the University of Oxford and the founding director and principal investigator of the UK Centre for Greening Finance & Investment, established by UK Research and Innovation in 2021.

Key to note is that he has been vocal about his personal belief that it is time to introduce legal obligations to ensure companies achieve net zero as quickly as they reasonably can – voluntary climate pledges simply won’t hack it. New legal obligations would be assessed against regularly updated benchmarks and enforced through the courts and arbitration panels, he argued in an article for Business Green. And they should go hand in hand with steps to encourage widespread adoption of transition plans by all large companies, quoted or not.

Time for policy

Caldecott says he shares the frustration of many in the property industry at the lack of intervention from policymakers to steer the sector – to net zero and to the adaptation necessary to deal with the physical risks of climate change. The growing weight of reporting requirements on the listed sector is shifting the dial; providers of capital are increasingly factoring climate risk into lending and pricing decisions; and the massive impact on individuals and businesses of the energy inflation price shock is driving demand for energy efficient buildings.   

But it’s not enough, he says.

“We’ve been very clear that there needs to be a significant improvement in what government is doing in relation to encouraging decarbonisation and resilience in property. That is a necessary condition if we’re going to meet our legally binding climate targets in the UK,” he says.

For the property sector, opportunities have been missed, he says. He cites the short-lived Green Deal, the pay-as-you-save energy efficiency finance mechanism for residents and businesses. Aimed at delivering retrofits quickly and on a massive scale, it was launched in 2013 and scrapped two years later. For commercial landlords the concept was always inherently tricky given the complexities of the landlord-tenant relationship. Caldecott stresses other flaws – loans capped too low, interest rates too high. In Germany, by contrast, government has stepped in to lower interest rates for energy efficiency loans.

“You need to lean in more with those sorts of instruments to encourage the investments that we need to see happen,” Caldecott says. He suggests this could be something for the new National Wealth Fund, set up to attract billions in private investment into technologies of the future.

“There have been some false starts and some lessons. We’ve got to recognise the opportunity of this. Making the changes and improvements that we need will create employment opportunities, help to create and sustain new business lines and new businesses and improve the macro economy as well,” he says. “There’s a strong rationale, there’s a need. We could hit the ground running. We need to.”

Meanwhile, the CCC is pushing for greater strategic focus from government on adaptation. “A lot of this sits within the Environment Department, but Defra doesn’t hold the purse strings, nor is it right in the centre of government. Adaptation needs to be embedded as a cross-cutting issue and not one that is siloed,” Caldecott says.

He would like to see the same kind of institutional innovation as the launch of Mission Control, the new control centre focused on accelerating the transition away from fossil fuel markets to clean, homegrown power by 2030. It is the first of its kind in government and is headed by Chris Stark, the highly regarded former CCC chief executive who lambasted former prime minister Rishi Sunak for his climate commitment U-turns.

Local government’s role

“The other dimension here – and it’s the same with some aspects of mitigation – is that it’s not just central government, it’s also the devolved administrations and it’s also local government,” Caldecott says. “There’s a lot of cajoling that needs to happen for all of this to move rapidly. For real estate, some of that is down to how the planning system can support or hinder these changes that we want to see.”

New approaches need to be adopted fast. “I hope there will be a virtuous circle, that the industry generates its own momentum because people want to repeat and deploy new skills, new technologies, new things they’ve become familiar with,” Caldecott says. “We need to hit escape velocity.”

The question is how far government will intervene to reach it.

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