On the heels of the 2022 United Nations Climate Change Conference (COP27), creating a more sustainable future has never been more of a vital topic. The world needs to rapidly adjust how we work in the industry and daily life to help reach a happier and more sustainable future.
Real estate, including its development and day-to-day operational requirements, is a major carbon emitter. In fact, a 2019 report from the International Energy Agency found that real estate drives approximately 39 percent of the world's total emissions. Furthermore, about 11 percent of the industry's emissions are generated purely through the manufacturing of building materials.
Real estate industries and markets across the world are at risk
While the real estate sector is one of the largest contributors to global carbon emissions, it's also a sector at significant risk of climate change. An article published by international consultancy powerhouse McKinsey & Company stated that real estate portfolios were at risk due to the likely exposure to increased flooding and job loss expected from climate transition. With this in mind, real estate owners and stakeholders should also be climate investors. An example of such a company is 2019's best-performing public REIT, Hannon Armstrong, wasn't a typical property investor but a lender to real estate energy efficiency projects.
Mass-scale change towards real estate sustainability in alignment with COP27 is necessary not only for the planet's future health but for the future profitability and success of the industry.
Fortunately, big changes are already in the works.
Private real estate company's emissions initiatives
The real estate industry needs to step up its game, and leading real estate players are already taking action. For example, a major international investment platform, BentalGreenOak, is at the forefront of Environmental, Social, and Governance (ESG), while Steelcase, a global architecture, furniture, and technology solutions company, also places ESG at the forefront of its company values. Another great example is Aldar Properties, which is investing Dhs25m towards retrofitting 13 of its residential communities; these projects will reduce energy consumption and offset a projected 19,000 tCO2 per year.
Creating a more sustainable real estate industry cannot be left solely in the hands of government regulation, however, that does play a part. Private organizations have immense power over how the world advances. Companies operating in all real estate industry sectors need to reevaluate their supply chain, operations, and products through the lens of sustainability.
Through decarbonization, private companies can attract trillions of dollars of committed capital and partnerships with other companies operating under a sustainability mission. For example, a development company focused on decarbonization and ESG will attract tenants with similar values.
Technological solutions to improve real estate sustainability.
Real estate sustainability is being improved mainly through technology.
For example, the Internet of Things (IoT) is making big property and asset management moves. Devices can be installed throughout buildings to help with energy management. These devices and applications allow building managers to monitor emissions carefully and set micro targets. They also help property managers reduce emissions, save money, and identify potentially highly damaging (and costly) issues, such as leaks, before they get out of control.
But improving efficiencies can be even more minor, such as investing in LED lighting, on-site solar, a new HVAC system, or improving insulation. When small changes are made on a massive scale, they can have a significant impact on carbon emissions.
Real estate sustainability is a critical issue every professional needs to be conscious of
Knowledge of real estate sustainability is vital for all professionals who work in our rapidly growing industry. ThinkProp plans to introduce courses and additional material to bring this knowledge to more real estate professionals.