Building on net zero: From pledges to priorities in 2022

One might argue that some important advancements were made in COP26 conference towards the goals of the Paris Agreement. Over 130 countries promised to stop and reverse forest loss and land degradation by 2030, with $14 billion worth of public and private funds allocated to support this goal. In addition, around 100 nations pledged to cut methane emission significantly over the course of this decade. On the critical issue of climate finance, most than 450 financial institutions across 45 countries, as part of the Glasgow Financial Alliance for Net Zero, committed $130 trillion towards the net zero transition. It was also announced that by 2023, most UK-listed firms will have to publish net zero transition plans and disclose exactly how they intend to decarbonise. 

High ambition needs cogent and measurable action

However, this isn’t the first-time ambitious commitments have been made while progress has fallen short. Actions need to be carefully measured and transparently reported. A key piece of the puzzle is to set appropriate standards that any advancements in this area could be measured against.

There has been at least some progress on this issue. The UK government plans to convene an expert panel of industry leaders, academics, regulators and civil society groups to draw up a science-based “gold standard” that net zero transition plans will be expected to meet. Meanwhile, the IFRS Foundation has announced the creation of the International Sustainability Standards Board (ISSB), to deliver a global baseline of sustainability-related disclosure standards. The goal is that these standards will facilitate comparable reporting by companies on sustainability and environmental, social and governance (ESG) issues. If done successfully, this will provide investors and capital market participants relevant information about companies’ sustainability and ESG related risks and opportunities. This could drive investment in climate mitigation and adaptation. The challenge of course will be to pinpoint exactly what is being measured and develop appropriate metrics to ensure sustainability and climate-related factors are assessed in a practical and meaningful way.

Promising signals

As far as the built environment is concerned, with the sector responsible for almost 40% of global carbon emissions, a significant transformation across the industry is essential to meet net zero targets. There appears to be a sense of enthusiasm among some key players in the industry. The share of construction companies signing up to the Race to Net Zero campaign doubled in 2021, committing to halving emissions by 2030 and reaching net zero emissions by 2050. Furthermore, around $1.2 trillion real estate assets under management are now part of the initiative, meaning that real estate management companies that have joined this coalition are required to ensure that all properties in their portfolios are zero carbon by 2050 at the latest.

In addition, signatories to the World Green Building Council’s Net Zero Carbon Buildings Commitment have risen in the past year, with around 44 firms representing an annual turnover of $85 billion now pledging to take further actions to reduce and offset operational and embodied carbon emissions across the sector by 2030.

Making room for improvements in practice

Suffice to say, the sector has its work cut out. Recent analysis by the International Energy Agency (IEA) suggests that despite noticeable advances in increasing energy efficiency in buildings in the last few years, the built environment sector is still off-track to achieve net zero carbon by 2050. To meet this target, all new buildings and 20% of existing building stock would need to be zero carbon ready as soon as 2030.

This cannot happen if practices across the industry don’t change significantly and there is substantial room for improvement. This is highlighted in the World Built Environment Forum 2021 Sustainability Report, which shows feedback to RICS surveys of over 4000 industry professionals operating in the commercial property and construction sectors. For one, out of all construction professionals that responded to the RICS survey, over 70% state that they make no measurement of operational carbon emission across the lifecycle of their projects. Meanwhile, more than half of contributors stated they do not measure embodied carbon across projects that they work on. Significantly, even when embodied carbon measurement does occur, there is very little evidence to suggest that it has a meaningful impact on the choice of materials and components. The share of respondents who state that embodied carbon is measured, and this is used to select their choice of materials and components was only around 14%.

Alongside this, minimising waste was seen as the construction industry’s top priority area in the WBEF 2021 report, and rightly so. The buildings and construction sector is responsible for almost half resource extractions and nearly 40% of solid waste. In this case, it is crucial that circular economy practices are implemented across the sector allowing materials and resources is use for as long as possible through recycling and re-use.

Welcoming in the era of retrofit

Adding to the heap of challenges is to upscale retrofitting of existing homes which are responsible for a large chunk of carbon emissions, particularly in the case of the UK and Europe. The UK Green Building Council’s Net Zero Whole Life Carbon Roadmap released during COP26 suggests a whole host of measures that could help, this includes introducing direct government retrofit grants to households, creating tax incentives for green home improvements and introducing minimum energy performance rating for all homes.  But for any of these policies to be successful, greater investment in skills and training to upskills professionals in retrofit and energy renovation is necessary.

COP26 once again placed a spotlight on the substantial subsidies still paid in support of carbon intensive industries. One of the most important tasks for the governments across the world is to shift subsidies away from these sectors. Renewable energy and other activities geared towards improving the environment, health and biodiversity must come into the spotlight. Creating pathways and strategic plans detailing exactly how to achieve the ambitious targets agreed at the conference is crucial. If investors, markets and consumers become a lot more engaged in climate issues, this could provide a nudge and help to build progress, even if policy lags.