RICS Sustainability Report 2023: Global challenges and opportunities for real estate & construction

Following the release of the RICS Sustainability Report 2023, a recent webinar saw a panel of experts discuss how well sustainability is being implemented. Here are some of their thoughts.

The latest report

The latest RICS Sustainability Report 2023 was published in December 2023. The results echo 2021 and 2022, showing a consistent increase in demand for green buildings, says Kisa Zehra, Global Sustainability Lead at RICS and author of the report. Reduced energy consumption and fossil fuel use were the most important aspects of green buildings for investors and occupiers, with green certification also a top priority, especially for investors, she says.

In construction, adoption of carbon measurement across projects continues to be disappointing, with a substantial share of respondents stating that they are not measuring emissions. This aligns with the findings of 2021 and 2022 and suggests very little progress is being made. Just under a third of respondents said they measure carbon but, of these, only half (16% of the overall total) said it had a meaningful impact on their choice of materials and components, adds Kisa Zehra. She believes global standards can encourage greater take-up of carbon measurement. RICS has recently published the second edition of its Whole life carbon assessment (WLCA) for the built environment. This applies to both existing and new projects and assets. ICMS 3 is another global framework that can help professionals report on their carbon emissions alongside construction costs.

Encouraging signs

In the UK, large developers are increasingly incorporating sustainability and carbon measurement into both new construction and existing portfolios, says Simon Sturgis, Founder of climate change consultancy Targeting Zero. This has been happening gradually over the past six or seven years, but in the past year the pace has accelerated, he says. A major driving force has been developers responding to a younger workforce demographic, those in their 20s to early 40s, who are more ESG [environmental, social and governance] aware and want to work in sustainable buildings, he adds. ‘Awareness among surveyors, architects, contractors and the supply chain is also growing very rapidly. And people are now realising that you have to be able to offer services that can deliver green buildings or sustainable construction’, he explains. We are also seeing, he says, global project management and cost consultancies offering whole life carbon assessment as a matter of course, suggesting a growth in demand for carbon measurement.

There is also a shift in the UK and elsewhere, such as in France, towards a low carbon retrofit approach, rather than demolishing and building new, Simon says. The rising demand for climate adaptions and green buildings is really encouraging because the greater demand in the market, the more certainty there will be for investment in upskilling, adds Louisa Bowles, Partner and Sustainability Lead at architects Hawkins\Brown.

In the Middle East, especially in Saudi Arabia and the United Arab Emirates (UAE), developers are increasingly committing to sustainability, especially with new projects, says Abdullatif Albitawi, a Director at the Emirates Green Building Council. In the UAE, a burgeoning and greener hotel sector and the desire for schools and universities to become more sustainable, plus support for these sectors from government entities, is also helping in the journey towards sustainability, he adds.

Carbon assessments

Progress on tackling embodied carbon in the UK has been slow, notes Louisa Bowles. The Environmental Audit Committee recommended bringing in regulations to mandate the reporting of whole life carbon for major projects by December 2023, including accounting for embodied emissions. This has not happened, and the government website now indicates it is pushing this back to around 2025.

In the absence of regulation, UK local authorities are increasingly adopting whole life carbon policies that require developers to include carbon assessments on projects. Recently, the Greater London Authority (GLA) updated its policy to ask for declaration of energy use intensity and space heating demands alongside building regulation compliance, explains Louisa Bowles. ‘This allows us to encourage a more thorough energy analysis at the design stage so we can push for carbon reduction, and it also closes the performance gap, allowing the comparison with metered data’, she says. A number of local authorities are now following the pathway set out by the GLA in the absence of specific national regulations. However, there is a risk in devolving policy related to carbon emissions to the local level, as there will not be a unified national approach to reporting requirements or limits.

Encouraging or mandating carbon measurements throughout the design stage so that it becomes a design tool as well as a reporting mechanism would be a welcome step, believes Louisa Bowles. ‘Because what we want to achieve is not just knowing what carbon we are emitting, we need to physically reduce it. And the only way that we are going to do that is by understanding the data’, she says.

Value and costs

In the RICS Sustainability Report 2023, most respondents believe that sustainability features have a significant impact on the capital values of properties, says Kisa Zehra. ‘A sustainable or green building is more liquid because there is more demand for such buildings in the market and it is also more resilient because obsolescence is slower. So it can have an impact on the risk and the liquidity, which is part of the value of the asset’, commentated webinar moderator Frank Hovorka MRICS, RICS Management Board Member and Sustainability Chair.

Cost is a major barrier to greater sustainability, the report highlights. A lack of established standards, guidance and tools also inhibit sustainability take-up; standards such as RICS’ WCLA are seeking to address this. Observations from Louisa Bowles suggest that sustainability intentions are high in the initial design stages but diminish once budgets are finalised. There is a misconception in the construction industry that sustainability is an additional cost, for example, double glazing over single glazing in colder climates, says Simon Sturgis. However, he says that whole life carbon assessment is about the efficient use of resources and, ultimately, this will reduce costs rather than increase them. Making buildings more durable and resilient will also feed into the long-term asset value, he adds.

Sustainability in the Middle East

There are a huge number of upcoming developments in the Middle East region, whether from new demand or reconstruction, says Abdullatif Albitawi. By applying sustainability and best practices to new buildings and the development of new cities, these buildings and cities have become very efficient and environmentally friendly, he says. Sustainability is further enhanced through the use of advanced technologies such as digitalisation and the adoption of models such as circularity. ‘Another advantage in the region is that a high percentage of the population are young, so they have the passion and interest in protecting the planet. And those young people will be the ones who will lead the future and, with the right kind of education and awareness, will do a lot to improve the built environment’.

One of the challenges in the region is for better green regulation. However, Abdullatif Albitawi expects to see improvements soon as regulators catch up with initiatives by the private sector, developers and consultants. While the Middle East attracts experts from all over the world, there is a need to develop local skills and expertise, he says. This is a work in progress, he adds. Another challenge he notes is the availability of sustainable materials, and he cites an increasing interest in embodied carbon in the region.

Next steps

Global standards have a key role to play in furthering sustainability in real estate and construction, creating clarity and consistency. Enhancing skills and knowledge is also crucial to be fully able to apply standards and sustainable practices. Mandating embodied carbon assessment across all construction projects should be a priority for all countries, as well as setting minimum energy performance standards, says Kisa Zehra. ‘This will give clarity to investors and occupiers that this is the future and is what they should be investing in’, she concludes. This debate discussed the ethics of a green economy and the RICS invited Smith Mordak, Chief Executive from UKGBC, to lead a talk on what a post-growth economy might look like for the built environment, and how we as an institution and our members can address the climate emergency, while moving to a fair and sustainable economy.