The heads of ESG at a number of institutional real estate fund managers have reflected on COP26 – and yesterday’s first-ever built-environment day – with a mixture encouragement and a sense of urgency.

Peter Epping, who was appointed global head of ESG at Hines earlier this year, said: “The surprise news yesterday of the US-China climate deal to work together to slow global warming has been broadly welcomed, all be it cautiously, and is a major boost to a conference which seemed to be losing some momentum after a promising opening.

“While the commitment to drive down emissions of both CO2 and methane is clearly a positive step forward, the devil – as is often the case – will be in the detail. This is a recurring theme across the conference; while there is a clear consensus of the urgent need to scale up efforts to reduce global warming, and indeed measures and commitments have been made this week to work towards this goal, the critical point remains – it is not yet enough to keep us within the 1.5C pathway.

He said there was clear “representation of many large and small players” from the real estate industry, which should be expected given the built environment accounts for 40% of carbon emissions. But Epping noticed that “many household names are not present”. He said: “Maybe this can be blamed on the fact that it was the first year with a day for the built environment, and we expect that this will change substantially next year.”

He added: “That said, when the built environment took centre stage at the conference, there were a number of positive outcomes which represent a significant step forward.”

He said it was encouraging, for example, to learn that 44 new signatories had been added to the World Green Building Council’s Net Zero Carbon Buildings Commitment, “which has been ratcheted up by empowering companies to show leadership in the decarbonisation of the built environment, including maximum reductions in embodied carbon, as well as operational carbon, throughout the life cycle of a building, including materials used, the supply chain and construction”.

Epping said: “We saw the UK Green Building Council announce its Net Zero Whole Life Carbon Roadmap, which aims to decarbonise the built environment and meet the net-zero target of 2050.

“In some areas, the recommendations build on existing government policy initiatives, providing further proposals and timelines. Standout recommendations include a national retrofit strategy by 2022 for the residential sector, addressing one of the built environment’s key emitters, with a mandate for creating a clear national homes upgrade programme by 2040.

“The UK government’s new Urban Climate Action programme to support the cities and regions in developing countries has been warmly welcomed and underlines the importance of a truly global, collaborative, joined up approach to tackling climate change, making sure we don’t leave anyone behind. As a global real estate firm with a presence in over 250 cities across 27 counties worldwide, this certainly struck a chord with Hines.”

 “In summary, it is encouraging to see that momentum is gathering more pace, but our industry’s efforts still need to increase and become more broad base so that real estate can make the positive contribution it urgently needs to make.”

‘We’re on the clock’

Mikkel Bülow-Lehnsby, founder and chairman of Nordic real estate fund manager NREP, said: “I come away from Glasgow with a sentiment of hope, but also a recognition that there remains a very long way to go.

“We have definitely witnessed a lot of good intent and ambition, with stronger momentum around serious climate action than ever before, not least from the corporate side. While that’s encouraging, pledges alone will never be enough and we cannot be complacent.”

Bülow-Lehnsby, who participated on panel discussions at COP26 and whose company has pledged to decarbonise its €12.5bn real estate porfolio by 2028, said he came away with three main takeaways concerning the areas of development, regulation and data.

“There is a strong sense of urgency around making the urban development value chain a part of the solution rather than the problem, as it’s now positioned,” he said.

“Corporates are looking at new ways to move forward, leveraging new partnerships and taking real action. But my view is that the industry needs to work in unison in order to have real impact, as the scale of the emergency is so much bigger than any one company can tackle alone.”

Bülow-Lehnsby also said real estate required stronger regulation and the industry needed to call for a common set of science-based standards.

“I was shocked to discover, as revealed by the World Green Building Council this week, that only 1% of new buildings in the world apply a life cycle analysis on all materials used for construction. We apply this to 100% of our assets – that’s a huge gap to bridge in order to make real progress in reducing the built environment’s adverse impact on our planet.

“It’s clear to me that we can’t wait for politicians to set the direction – the real estate industry needs to innovate and hope that governments catch up. We’re on the clock.”

His third point was that data and accountability are “critical”, explaining: “Without better data and stronger evidence-based metrics in place, greenwashing will still be a real threat.

“So long as that threat exists, it will be very difficult to measure progress and set the industry upon the right course to keep the 1.5 degree scenario alive.”

Take inspiration from BOGA

Karen Mahrous, senior vice president and head of ESG at Clarion Partners, said the built-environment day saw “real estate organisations, cities and regions [come] together for an aggressive call to action: to halve emissions from the built environment by 2030 and to reach net zero by 2050.”

Mahrous recently joined Clarion Partners and one of her immediate tasks has been to develop a formal framework to implement the firm’s recently announced commitment to the Urban Land Institute’s Net Zero by 2050 Greenprint programme.

She added: “This call to action includes the commercial real estate development and construction industry in addition to the owners of existing building stock. The path to net zero will require that all new construction evaluate and reduce, or altogether eliminate, their embodied carbon. This is an important, and often overlooked, component of the responsibility that the real estate industry has in the transition to a low carbon future.”

Mahrous also cited the Beyond Oil and Gas Alliance (BOGA), developed by Denmark and Costa Rica, which is seeking to phase out the oil and natural gas industries.

“Oil and natural gas are still largely used in commercial buildings and homes as a primary source of energy. Aside from being a dirty fuel source, leaks in older pipes across the country are a major source of methane emissions, a gas that is a powerful contributor to climate change,” she said.

“This alliance asks subscribers to issue no new licensing for oil and gas exploration in aligned regions, and to allow current licenses to expire without renewal. BOGA would provide resources to help governments and sub-nationals transition workforce and the economy off these fuels.

“France, Greenland, Ireland, Sweden, Italy and others joined Denmark and Costa Rica in committing their participation to BOGA today. Unfortunately, we have yet to see major oil and gas producing countries announce participation in BOGA. As more countries begin to join, buildings in these regions will continue to be pushed towards electrification and end their reliance on oil and gas to align with available energy resources. This is an important step in the push to a more sustainable economy.”

Mahrous said that, “despite the lack of implementation strategies, COP26 has given me a renewed energy for the important work ahead and it has reminded me to think bigger.”

Quoting the Danish Minister on the creation of BOGA, Tomas Anker Christensen, ambassador for climate change of Denmark, she said: “We shouldn’t ask what’s possible, but what’s necessary, and then make the necessary possible.”

UKGBC roadmap ‘the most meaningful development’

Andy Szyman, head of sustainability at BMO Real Estate Partners, said: “We have witnessed an intense two weeks of negotiation at COP26, some of which has been encouraging.”

But he said “the most meaningful development, as far as our business is concerned”, was the launch of the UK Green Building Council’s Net Zero Whole Life Carbon Roadmap, detailing the actions government and industry need to take to achieve net-zero across the sector by 2050.

“This looks to be a significant tool with wide industry support,” he said. “It’s important to recognise that 25% of the real estate sector’s emissions are embodied rather than operational.

“This should therefore be a valuable resource, which we look forward to exploring in more detail to guide our thinking and help us plot our way to achieving BMO REP’s net-zero carbon ambition.”

Szyman said it would “particularly pertinent” for BMO’s recently launched UK Housing Fund, which invests in affordable housing and is “focused on ground-up development with sustainability at its core”.

Aleksandra Njagulj, who recently joined DWS as global head of ESG for real estate, said: “The critical aspect the real estate industry needs to deal with is the existing buildings.

“The key statistic is that 80% of building stock which will be here in 2050 already exists. These buildings must be made more sustainable and more resilient. They must become energy-efficient in order to mitigate climate change.

“We need them to [continue to] provide safety and comfort as we face acute and chronic effects of global warming. It is a momentous task, and we can achieve it only through collaboration of all, asset managers and property managers, tenants and owners, designers and builders alike.”