Pathways to net zero for surveyors: five reasons to be cheerful

Claire O’Neill, former UK climate change and energy minister, spoke about the role surveyors play in reaching net zero in the built and natural environment. Here, we share her opening keynote speech from the recent RICS Global Sustainability Conference 2024.

Claire O’Neill is a trailblazer in climate policy and business sustainability. A former UK Climate Change and Energy Minister, she spearheaded the Clean Growth Strategy, launched the Powering Past Coal Alliance, and delivered groundbreaking Net Zero legislation. Now Managing Director for Climate and Energy at the World Business Council for Sustainable Development, Claire drives global action for a sustainable future. She is recognised as one of Bloomberg’s “Green 30,” and she continues to lead the charge for innovative solutions to the world’s energy and climate challenges.

Claire’s opening keynote speech for the RICS Global Sustainability Conference 2024 has been reproduced with her permission.

Pathways to net zero in the built and natural environment for surveyors
 

Since leaving the green benches in 2020, I have gone back to a world I know well – that of business and finance. But I have taken with me three main things from my time in government:

• First, a continued focus on climate change and the energy transition that is at the heart of all decarbonisation efforts.
• Second, a deep understanding of how government really works - and what the public sector and private sector do very well - and very badly.
• And last a profound belief in the role of individual leaders to inspire those around them and to be catalysts for profound change.

By the end of my remarks, I hope to show you how you, and your profession, can be among those agents for change in one of the toughest and yet most important areas for sustainability – the built environment - property, infrastructure and surroundings, where we mostly live, work and play.

As you will know, this environment accounts for 40% of global carbon emissions, over 30% of final energy use and consumes nearly half of the world’s natural resources.  It’s no wonder it has been a focus for emissions reduction, sustainability improvements and resilience planning for many years.

And I must commend the excellent work of RICS in driving sustainable thinking and solutions among your many members in the countries where you operate.

But before we get into the bricks and mortar bit of sustainability that you know so well; I thought it would be helpful to zoom out quickly and ask ourselves. Where are we really on our global sustainability journey?

I was at the Baku COP and was struck that, almost three decades after the first COP, we are wrestling with the fact that greenhouse gas (GHG) emissions are the highest they have been in 800,000 years.

And you don’t need me to tell you how the natural world is responding.

• Record atmospheric – and ocean – heat.
• Sustained heatwaves – and drought – and violent floods.
• Icecaps shrinking. Water stress. Biodiversity loss. Crop failure.

And, according to the Potsdam institute, a dangerous flirtation with a number of planetary tipping points – ocean currents, forest carbon sinks, permafrost levels, that can, if crossed, tip us rapidly into a radically different world. Few of these events are ‘un-survivable’. We are adaptive and innovative, as long as we have knowledge, time and cash to deal with the changes. But it is the inescapable truth that the parts of the world facing some of the worst changes are those that lack one, two or all three of these things - these climatic changes are going to hit the poorest, hardest.  

So, knowing what we know, how are we doing?  Sadly, not well.

There is some good progress – for all flaws in the COP process, it has given us a shared landing zone of net zero targets, and now 88% of global emissions are covered by some sort of national net zero pledge. Pre-COP, the world was on track for 4 degrees of warming by 2100. Now if all pledges are met, we estimate a 2- 2.5-degree warming result by the end of the century. But the key words are ‘if all pledges are met’.  And so far, there is limited evidence of this happening.

To hit a 1.5 degree of warming temperature target by mid-century will take an estimated global annual decarbonisation rate of about 20% a year. Last year it was 1.02%, the lowest annual level in a decade.

Yes, renewables deployment continues to grow rapidly but energy demand continues to outstrip new capacity – and fossil fuel consumption was at all-time high in 2023. In fact, last year, fossil fuels still provided 82% of the primary energy we consumed - down a measly 3% from the time of the first COP, 30 years ago.

And, as we have seen, the combination of geopolitics, market shifts, supply chain constraints and technological shifts mean the world is more complex, changeable and uncertain than ever. And, if this isn’t enough to deal with, we are becoming ever more aware of other sustainability imperatives – the loss of biodiversity, the challenge of water shortages, plastic pollution, growing inequality.

It’s quite a list to tackle!

Let’s look specifically at the built environment. Not only because you know it well, but because just like the broader challenge of decarbonisation there have been great strides in understanding and target setting – the problem has been practical implementation.

As your own Sustainability report says:

 ‘Our findings…  paint a picture of an industry that is well educated about sustainability but deterred from investment predominantly by barriers of cost and return on investment (and) faced with the challenge of turning undoubtedly positive sentiment into meaningful action.’

We know that in the built environment there are three main problems:

• Operational emissions vastly outweigh construction emissions for a typical building’s lifecycle but tend to be underweighted in the financial cost benefit analysis of sustainable investment.
• Approximately 25% of emissions from construction are delivered by high emitting materials and techniques with relatively few low cost, low hassle alternatives. Cement is cheap and strong, and if it were a country, it would be the 4th largest emitter in the world.
• And finally, while the developing world is building new assets at a breathtaking rate, for developed countries like the UK, 80% of the predicted building stock of 2050 already exists so we will need to get much smarter at refurbishment, as well as managing the problem of operational emissions over a life cycle.

These are not insurmountable problems, but we seem a bit stuck. Part of the challenge is the split between the government and private sector areas of competence: who does what best?

Government regulations can be hugely beneficial. Yet, in the UK, we still lack a coherent set of national policies and regulations.  We make progress, but then seem to freeze, and then the government changes.  And, with regulations for infrastructure and the built environment touching multiple government departments, I know from experience how hard it is to get traction and make cross governmental progress.

I do have more hope of rapid progress from this new government, but it will require some bold moves and commitment. Now the focus is all on the energy system, which is laudable, but we need to be clear and focused on whole life carbon and clear about what and where we need to build.

And, in the private sector, in construction we struggle to overcome local market structures, small scale, fragmented project-based companies with layer upon layer of accountability. We end up with a ‘sliced’ ecosystem where companies manage their own risk and costs, and collaboration is minimal.  And in the operational stage, fragmented tenancies and limited benefit sharing can make sustainability ‘the landlord’s problem’. And this limits innovation and the scaled, offtake agreements that innovation in new materials and processes requires.

And finally - and this is really a problem of capital allocation for the low carbon transition globally - while we can all cite the case for lower whole life carbon assessments delivering improved operational running costs, better occupancy and yields, more satisficed tenants, we still find it difficult to create compelling cash flow models to prove these points.

Without carbon pricing (which in my view will never be a wholly regulated global indicator) sustainability is a cost not an investment for almost all capex decisions.

So, having looked rather depressingly at a range of problems, what can we do?
 

Here are five reasons to be cheerful
 

First, regulation is moving in the right direction.
 

In the built environment, we have examples from other countries as to what can work.  The EU’s focus on net zero new buildings is welcome while the long journey of Singaporean mandatory environmental standards is creating superb new and refurbished structures and a green and pleasant city that encourages walking, nature regeneration and great working and living environments in a hot, crowded and resource-poor tropical city.  

And of course, in the UK while we lack that national commitment, we do see some great action from local authorities who are adopting whole life carbon policies that require carbon assessments, or in the case of the GLA, pushing for operational energy intensity data as well as building regs compliance.

With boldness and courage, the UK can draw upon a wealth of global and local excellence and regulate for the long-term future with confidence.

Second, public procurement can build demand.
 

In Singapore, the government has been active in specifying more sustainable development for their own operations.

And I do recall that the success of the NABERS programme in Australia, now in its 25th year, started as a measure of energy efficiency targeting public budlings and now has built out across the commercial spectrum and includes a full spectrum of sustainability measures.

But in many cases the cost benefit problem is especially acute for the public sector, with every up front spending decision scrutinised. We have made the case for many years that public sector investment should lead the way in sustainability but cost first is still sadly the mantra in many countries.

However, in some parts of the world there are hugely ambitious infrastructure and building projects that are backed by deep pocketed governments and sovereign wealth funds - and they can be a game changer.

Take NEOM in KSA for whom I am an advisor. Some of the ambition is well – futuristic. But in terms of sustainable construction, investment in electrification, deep focus on carbon removal – this project could really scale some technologies and de-risk processes – and if only 20% of what they have planned comes off it will still be a major contribution to a new way of thinking and working.

Third, innovation is happening, and investment models are supporting the trends.
 

We are finding that green tech, unlike digital tech, is slow to scale – we have plenty of pilots for green cement, or steel, or carbon capture but very few industrial scale operations.

This is because the tech is often capital intensive, technologically quite risky and only really scales when offtake is firm. Luckily there are some breakthrough buyers. Financial and tech companies, forming coalitions or signing long term demand contracts to really get these technologies moving, and investors prepared to invest for the long term even with a higher upfront cost.

And a hugely important part of the future for these ‘tough to abate’ technologies is carbon removal either at the source or as an offset – and that market is starting to really scale after years of inaction.  And almost most important of all, we are starting to favour action over perfection.  We have had too much ideology, too many pathways and not enough practical problem solvers in this huge global pivot.

Fourth, the sheer size of the investments needed makes the trends impossible to ignore.
 

McKinsey estimates that reaching net zero in 2050 will cost $9.2 trillion in annual average spending on physical assets, and $1.3 trillion of that investment is needed in new materials, systems and retrofit in the built environment.

And that’s just the start. There is huge value in, for example new ways of thinking buildings as part of the grid’s flexible storage capacity. Or integrating nature and natural carbon removal into the built environment. What an amazing opportunity for innovators, problem solvers and leaders to rethink the business of buildings.

And finally, we are starting to see adaptation as an asset.
 

It now seems that we are likely to miss some of the more stringent global decarbonisation targets and that we must focus urgently on adaptation. How do we heat proof buildings? How do we deal with water changes? Do we rethink urban environments?

For too long, having these conversations has been seen as a sign of failure rather than prudent preparation.  This is changing rapidly and again offers a huge opportunity for your profession and ecosystem.

So, finally, let me bring this back to you and your great institution. I want to emphasize one key thing. You have tremendous power.

I spoke about the fragmentation of the construction process – and the short termism in thinking.  We have all experienced this at a large or small-scale during building development. Who do I trust? What’s the real cost and benefit? Who will help me through this?

Well, the good news is that you are often the most trusted part of this quite messy ecosystem – part interpreter, part advisor, part guru, sometimes part agent provocateur. With some courageous thinking and action, you can get the whole flywheel to move more quickly or even shift its direction.

I am delighted, that as part of the solution we have the Royal Institution of Chartered Surveyors sitting at the centre of the system we need to change. With your 130-year heritage, enormous global membership and valued position as a key advisor can be the courageous catalysts for accelerated change.

I look forward to seeing your impact.

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