TEN TRENDS FOR A ZERO CARBON WORLD
The rising tide
Paris, late fall of 2015
Six years ago a landmark summit of the United Nations Convention on Climate Change took place in Paris. Known as COP21, the event resulted in the Paris Agreement – a legally binding treaty signed by 174 countries which sought to stimulate action to combat climate change across the world. Signatories agreed to aim to limit global warming to 1.5°C in order to attempt to mitigate the potentially catastrophic impacts of a worldwide rise in average temperatures.
Since then, progress has been limited but there has been rising public pressure to take action. Demonstrations and protests have been witnessed across the world, demanding more from businesses and governments to tackle the climate crisis. Research shows that individuals are becoming more fearful of being personally impacted by climate change. Widespread media coverage of forest fires, typhoons and flooding is raising awareness of the potential impact of weather events and is highly influential on public opinion.
WAKE UP CALL
Across 10 major economies in 2021, some 37% of people report being “very concerned” about experiencing personal harm from global climate change in their lifetime, up from 31% in 20151.
Consumer and employee concern is filtering through into business attitudes too. A third of the Global Fortune 500 list, including the top four U.S. Fortune 500 companies, have publicly and voluntarily pledged to achieve net zero carbon, 100% renewable energy supply or science-based targets aimed at keeping global warming below 2°C. The UN Race to Zero campaign, the Science Based Targets initiative, CDP’s disclosure and benchmarking services and dozens of other organisations have signed up thousands of businesses who have all committed to action. In doing so, they are bringing countless thousands more organizations with them, by starting to demand that their suppliers also work to improve their carbon footprint.
Recent years have seen an acceleration of the targets set and actions taken by governments. Net zero emissions targets have been formally established by 31 countries and the European Union (which adds a further 27) with deadlines ranging from 2035 to 2050. In total, net zero pledges cover 68% of the global economy2, while over 100 other countries (and 900 city, state and regional governments3) are considering or have proposed such targets4.
Buildings are responsible for 38% of all emissions and 35% of global energy consumption
Given that buildings are responsible for 38% of all emissions and 35% of global energy consumption5, it is inevitable that a substantial focus falls on real estate. Factor in that transport (which has a defining influence on our buildings and cities) accounts for a further quarter of all emissions and energy use, and it is clear that the sector is set for a period of substantial change. Limiting global warming to 1.5°C in line with the Paris agreement will require the built environment to slash emissions by 80%6, placing real estate at the heart of the private and public sector drives towards net zero.
As governments continue to tighten restrictions on where we source our energy and how it is consumed, buildings will need to become more efficient and consume less without compromising on comfort. City and local authorities are at the forefront of efforts to ensure this happens, tending to outpace central governments in terms of legislation (see “EcoLogical”). New developments will need to meet stringent specifications (“Zero in”), while existing substandard stock will need to be upgraded (“Retrofit revolution”). We are already seeing this impact real estate values (“Dollars and sense”) as occupiers are drawn to sustainable buildings that minimise their costs and carbon footprint whilst helping them attract top talent (“(Work)force of nature”).
Capital markets are also being affected, as climate change impacts the risk-reward landscape for investors (“Risk and returns”). Finance providers are beginning to support retrofitting, establish funds to target sustainable buildings and shy away from investments that have not adequately recognized or protected against climate and social risks (“The colour of money”). Innovations in transport technology and energy storage are dramatically influencing the warehousing and logistics sector (“Chain reaction”), with the aftermath of Covid-19 and an impending revolution in personal transportation set to change the urban environment with some exciting implications for the property sector (“Electric avenue”). If we are to move forward sustainably, we need to ensure no-one is left behind and that measures taken to help the environment do not come at an unacceptable social cost (“Just rewards”).
The 26th UN Climate Change Conference, COP26, is being held in Glasgow, UK, in early November. This will build on the work of previous summits and is widely expected to result in a dramatic acceleration of government commitment to action in four key areas:
Achieve a net zero economy by 2050 globally and keep the 1.5°C warming limit within reach through ambitious interim emissions reductions targets.
Adapt to protect communities and natural habitats against the impacts of climate change that are already occurring and those yet to come.
Mobilise finance and realise the commitments from development nations to contribute $100 billion in climate finance annual.
Work together to deliver on climate goals through collaborative approaches between business, governments and civil society.
In recognition of the considerable efforts and progress made to date, as well as the monumental work that lies ahead, we present a special edition of our annual Ten Trends for Real Estate report, focusing on how sustainability, and the pursuit of a net zero carbon society, will continue to shape real estate markets across the world.
1https://www.pewresearch.org/global/2021/09/14/in-response-to-climate-change-citizens-in-advanced-economies-are-willing-to-alter-how-they-live-and-work/ 2https://eciu.net/analysis/infographics/net-zero-history 3https://www.cdp.net/en/data 4As of June 2021; https://climateactiontracker.org/methodology/net-zero-targets/ 5https://riba-prd-assets.azureedge.net/-/media/GatherContent/Future-Architects-Resources/Additional-Documents/Built-For-The-Environment-Reportpdf.pdf?rev=92120c5944834a09a85c26b45a4dccb5 6https://b80d7a04-1c28-45e2-b904-e0715cface93.filesusr.com/ugd/252d09_8ceffcbcafdb43cf8a19ab9af5073b92.pdf