Net zero: Navigating the built environment’s route to COP28

Progress on climate change took an undeniably erratic route in 2022. As the built environment presses forward into a new year, Kisa Zehra, Sustainability Analyst at RICS, examines the mechanisms for industry to produce more sustainable practices in 2023.

According to the Global Carbon Project, carbon emissions from fossil fuels hit a record high in 2022. This rather bleak finding is at odds with the stark warnings of the IPCC’s Sixth Assessment report. The report highlights that lowering greenhouse gas emissions will require ‘major transitions’ and ‘a substantial reduction in overall fossil fuel use’. There is little hope that there will be considerable progress on this front in the near term. COP27 ultimately proved futile in its most primary goal to accelerate mitigation actions from the year before as countries failed to come to an agreement on phasing out fossil fuels.

A winding route

There was, however, good news around the crucial issue of climate finance. Governments agreed on setting up a loss and damage fund to help the most vulnerable nations suffering from the effects of climate change. The details around this fund however are still yet to be negotiated.

The spotlight has turned on reforming practices of multilateral development banks (MDBs) and international finance institutions so that they align with addressing the climate emergency. The World Bank’s Global Shield Financing Facility (GS-FF) could be seen as an example, designed to support climate adaptation and resilience and access to disaster risk finance. Even so, E3G’s Public Bank Climate Tracker Matrix shows that development banks are not doing nearly enough. Banks have been active in promoting green finance and issuing green bonds. But they still need to make significant progress on the issue of boosting energy efficiency, delivering renewable energy solutions and ending all support to fossil fuels.

One major challenge is that the negative externalities of carbon emissions need to be appropriately priced so that financial markets can scale up investment needed for the net zero transition. However, information regarding the risks and opportunities of climate change is still not reaching financial markets, leading to significant under-pricing of climate risk. Lack of data remains a huge problem. Research by the OECD suggests that strengthening disclosure practices alongside greater transparency and improved labelling of climate indices, funds and products that contribute to a low-carbon transition is needed. Elements of this can also be seen in the UK Green Finance Roadmap.

Financial institutions can also play crucial role in mobilising capital needed to decarbonise the built environment.

Clearing the carbon fog

Analysis by the UN Global Alliance of Buildings and Construction (UN GlobalABC) shows that carbon emissions from buildings are back to all-time highs following a brief drop in 2020 due to the pandemic. This leaves the building and construction sector off-track to achieve decarbonisation by 2050. In the UK, a recent RICS report suggests a lack of policy action to monitor building emissions combined with an absence of government incentives to reduce emissions as contributing factors. Key recommendations for the UK include setting up a national programme to fund retrofit projects, offering financial incentives for industry and consumers to stimulate improvements in building operations, and making significant improvements to energy efficiency assessments to provide a more comprehensive evaluation of building performance.

While credible policy intervention is paramount, professionals working across the real estate sector also argue that the industry needs additional tools and guidance to decarbonise. The RICS 2022 Sustainability Report shows the results of a global survey of almost 4000 property professionals. Around 72% of respondents globally from the construction sector stated they make no measurement of operational carbon across project lifecycles.  Around half reported that they do not measure embodied carbon on their projects. Significantly, when respondents were asked to pinpoint the principal barriers preventing the sector from reducing emissions, a lack of established standards, tools, databases, and guidance was the most frequently reported problem. Gaps in knowledge and skill shortages across the sector was also noted to be a pressing issue.

The high road

There has been progress to tackle these obstacles. The International Cost Management Standard (ICMS 3) developed by the ICMS coalition provides a globally consistent method for carbon lifecycle reporting. The standard allows for construction cost reporting to be placed in the same taxonomy as carbon reporting. Professionals can use the standard to evaluate total project costs alongside the cost of reducing carbon and make critical decisions in the early stages of construction.

A group of industry bodies have collaborated to develop the Built Environment Carbon Database (BECD) that will allow professionals to log essential carbon data for buildings and infrastructure assets.

The Net Zero Carbon Building Standard coalition is another cross-industry group working on a standard that will provide a single agreed definition and methodology to define what constitutes a net zero carbon building.

An updated global version of the RICS Whole Life Carbon Assessment is scheduled to be released in 2023. This will set out a whole life carbon assessment methodology for calculating carbon at all project lifecycle stages.

A change of scenery

Considering these developments, the sector is on the right track. It is imperative that these tools, guidance and standards continue to evolve to address policy changes and additional environmental and social challenges. Upskilling professionals will prove to be just as important. Training programmes will need to be developed to help built environment professionals meet evolving regulatory and market requirements as well as adopt the latest standards and tools.

The sector must also do more to embed key principles of the circular economy. According to The European Commission (and many others), construction and demolition is responsible for more than one third of all waste generated in the EU. Demolition needs to be disincentivised and retrofitting, recycle and re-use incentivised. Repurposing and adapting buildings to changing needs and improving design choices to prevent waste from being produced in the first place can make a huge difference. The Ellen MacArthur Foundation suggests that creating material passports which clearly define a building’s composition and possible re-use options would also be advantageous.  

Digital tools can help. Observations by the WBSCD indicate digitisation can be a key enabler of sustainable practices within the construction sector by allowing all actors in the value chain to connect and share key data. The RICS Digitalisation in Construction Report highlights the rising use of digital technologies across the sector. However, adoption is being held back by rising costs and a shortage of skilled professionals.

The sector needs additional support, particularly in the face of the current challenging macro environment. This could be in the form of private investment or government funding and incentives. Greater collaboration and more public and private partnerships can create a significant shift. ICMS 3, BECD and the Value Toolkit are examples of important tools that can be created as a result of greater knowledge and data sharing. If the key players across the sector prioritise collaboration, no doubt additional solutions and instruments can be created.