A dress rehearsal for climate catastrophe?

It shouldn’t be forgotten that, as late as the 3rd February 2020, British Prime Minister Boris Johnson stated that the UK would ignore the “irrational panic” around Covid-19. Instead, the country would pursue the economic opportunity of freedom of exchange. Subsequently, the seriousness of the crisis became very clear when Johnson himself was hospitalised by Covid-19. There is a parallel with climate change. Despite many words to the contrary, it has thus far not been treated as a crisis. Why?

The reality, according to Greta Thunberg, is that knowledge amongst world leaders is low. That is why she is compelled to demand solutions for future generations, and a move away from unsustainable "fairy tales of continued economic growth." Climate change cannot be solved only with a green stimulus plan. Whilst so called ‘green investments’ are encouraging, they are not enough to address the obligations in the Paris Agreement.

IEA’s Global Energy Review 2020 projects that global emissions will fall by 8% this year. Analysis from the UN Environment Programme estimates that global emissions need to fall by 7.6% every year this decade, in order to put the planet on the 1.5°C trajectory. This demonstrates the scale of the challenge. As a matter of priority, climate change requires robust stimulus packages to accelerate the clean energy transition, aligned with concrete recovery policies to drive the low-carbon transition.

Financial impact

At its root, the Covid-19 crisis is an environmental crisis in much the same way as climate change. The paradox is that the pandemic has inspired radical governmental action, while climate change, so far, has not. Why? Because it is here and now. On climate change governments have procrastinated. And, as we know, procrastination is the thief of time.

The Economics of Climate Change: The Stern Review was published in October 2006. The comprehensive evidence gathered led to a simple conclusion: ‘‘The benefits of strong and early action far outweigh the economic costs of not acting.” What tangible actions have taken place in the intervening period between then and now?

In a recent WBEF webinar, panellists from PwC in Germany referenced Bank of England work on the vulnerability of real estate portfolios to climate change. The work shows value changes ranging from -15% to -60%. Buildings, old and new, will be crucial to achieving the goals set out in the Paris Agreement. Notably, PwC state:

• In the 2°C scenario, OECD countries must reduce buildings’ emissions by about 60% by 2050. Energetic renovation is a key component to achieve the sector targets. More than 80% of existing buildings need to be renovated.
  
• GDP development and population growth, both roughly 0.9% per annum up to 2040, lead to a significant increase of floor area of residential and non-residential buildings.
  
• The constantly improving performance of renewable energy helps to reduce emissions, leading to a technological shift towards electric heating and ventilation systems.
  

 

Furthermore, they suggest that developing regions have an opportunity to “leapfrog” developed regions, due to a smaller stock of legacy buildings. Also, developing nations have fewer major projects and lower energy consumption per capita. Therefore, great gains can be made, if these countries avoid repeating the mistakes of more developed economies. But developed nations also need to effect dramatic change, at scale and as soon as possible, if we are to remain within a global 1.5° temperature rise.

Sustainability

Climate change is not an elephant in the room. It is a grey rhinoceros – a risk that is highly probable, highly impactful, yet neglected. It arises after a series of warnings and visible evidence.

Numerous companies in the private sector remain committed to attaining climate targets. They recognise that beyond being a moral imperative, Sustainability is now a commercial imperative.

The Climate Group surveyed 100 of the world’s leading private sector sustainability professionals on the impact of Covid-19. 97 said their company’s long-term sustainability strategy remains unchanged. Nearly half need more supportive policies to achieve their sustainability goals, and most would like to see governments prioritizing a green recovery. 85 listed at least one area where government recovery packages should include strong climate measures. 63 said investment must first be directed at decarbonising the economy. 58% believe green strings should be attached to any financial support, prioritizing industries that cut greenhouse gas emissions and create green jobs.

An overwhelming majority felt that climate action is just as important, if not more so, to their business now than before the outbreak. Sustainability matters because the world is on a trajectory to destruction. Action is required now to stop temperatures rising.

What does this mean for real estate?

Louise Ellison, Group Head of Sustainability at Hammerson, believes real estate assets underpin the economy and should be made fit for the future.

Why? Because the climate crisis and its related risks haven't gone away. The question needs to be how we use this crisis to slow planetary warming. Limiting warming to 1.5°C, rather than 2.0°C would significantly lessen impacts for many millions of people. It would also reduce the costs of future mitigation and adaptation efforts.

We recognise the increasing demand for carbon sequestration in the countryside. If humans and nature are to thrive, there is a need to invest in nature-based solutions to tackle the climate and ecological crisis in our cities.

Biodiversity should be embraced. Why? Because there is a biodiversity crisis in the built environment. In the UK, an Environment Bill is on hold because of Covid-19. The legislation would require developers to deliver a 10% net gain of diversity on their schemes. On site biodiversity brings economic, social and health benefits to the environment. The aftershocks of Coronavirus should accelerate the industry's green agenda. I propose:

1. The prioritisation of nature-based solutions and a landscape-led approach (green and blue infrastructure) in development – meaning the landscape drives the layout of the buildings.
   
2. The development of a biodiversity action plan.
   
3. The nurturing of public realm areas where patches of wildflowers and weeds help to sustain insect life.
   
4. The creation of more bio-corridors, including Sustainable Urban Drainage Schemes.
   
5. The incorporation of more greening into our workplace, through plants, food growth and bird song.
   

We need nature and yet every day we threaten its very existence with our actions.

Real estate needs to listen more to communities and people. They should be treated as the customer. This way, developers can build better. Community engagement must not be a PR exercise. Currently stalled schemes should be revisited and opportunities for environmental performance and sustainability gains identified.

Only by taking the time to learn from the Covid-19 crisis can we move past it. Climate change, sustainability and economic recovery are inextricably linked.