COP27: 6 developments to support decarbonizing global real estate
The built environment has work to do to be part of a net zero future
COP27, the world’s most important annual climate conference, wrapped up in Egypt last week, with energy security and loss and damage faced by the developing world among the headline topics.
In contrast to COP26 in Glasgow, the built environment did not have a dedicated day, but it was on the agenda every day with more than 140 events across the two weeks.
With buildings responsible for 60% of emissions within cities, real estate is key to a net zero future. But although more companies are making commitments to decarbonize their real estate, it’s yet to translate into tangible action, says Nidhi Baiswar, Senior Director – Global Sustainability and Climate Leadership, JLL.
“Put simply, we are not doing enough,” she says. “We cannot reach our climate goals without taking urgent action to address energy and emissions in the built environment. The rest of this decade will be critical to meet net zero targets. What’s more, the proof will be in the next 12 months when there’s a stock take on what governments and corporates have actually achieved - not just what they say they will.”
According to UN figures released at COP27, total CO2 emissions from buildings and construction hit a new high in 2021. Energy-related emissions from buildings operations rose 5% over 2020 levels - and 2% over the 2019 pre-pandemic record.
Investments in building energy efficiency increased by 16% in 2021, but growth in floor space outpaced efficiency efforts as construction in most major economies returned to pre-pandemic levels and energy demand rose as offices reopened.
Amid warnings that the 1.5C target is under threat, how can real estate up its game in these crucial coming years?
1. Retrofitting is critical – but the pace is too slow
Buildings continue to waste excessive energy, and there’s an urgent requirement to double down on energy efficiency initiatives, electrification, on-site and off-site renewables and microgrids. Retrofitting existing buildings is the quickest and most cost-effective way to accelerate the decarbonization of the built environment.
JLL’s Retrofitting Buildings to be Future-Fit research, which was released at COP27, calculates that over 1 billion square meters of office space will need retrofitting globally by 2050. In the Global North, retrofitting rates need to triple from barely 1% today to at least 3% per year.
2. Support the developing world
The loss and damage fund announced at the end of COP27 for developing countries on the sharp end of climate change has received praise and criticism. It’s just one element of the cross-border collaboration that will be essential to support cities in the Global South in the coming years and decades.
The Global North has a moral responsibility to share best practice, including technology transfer, alignment of regulatory frameworks and sharing innovative financial solutions
However, developing countries also have different challenges such as managing rapid urban growth, poor city planning and haphazard real estate construction. Unlike the Global North, much of its building stock for 2050 has yet to be constructed. This offers a huge opportunity to leapfrog to sustainable construction.
Energy remains an issue with many developing economies increasing their use of fossil fuels in buildings, according to the UN. At COP27, U.S. climate envoy John Kerry unveiled the Energy Transition Accelerator, a voluntary carbon credit market to generate private sector capital for energy transitions in developing countries. The program should be running by the start of COP28.
3. Taking a whole-life carbon approach
New construction must become more carbon-conscious to avoid undermining energy-saving measures and storing up problems for the future. Whole life carbon approaches including regenerative and circular building principles should be embedded into new construction from the start. Alternative materials and decarbonizing conventional materials such as cement, which is responsible for about 7% of global carbon emissions, will also play a role.
At COP27, the cement and concrete industry joined the First Movers Coalition where signatories pledged to purchase at least 10% near zero carbon cement and concrete by 2030.
4. The clean energy transition continues
Investment in renewables has overtaken investment in fossil fuels for the first time, but investment into clean energy still needs to be four times higher to meet targets. As corporate appetite for clean energy continues to grow, more renewable sources are coming online.
At COP27, the U.S. and the UAE announced a strategic partnership to mobilize $100 billion in investment, financing and other support to produce 100 gigawatts of clean energy by 2035. Elsewhere, the UAE and Egypt are creating one of the world’s largest wind farms which is expected to offset 23.8 million tons of carbon dioxide emissions.
5. Action plans needed
Net zero commitments continue to rise across the business world. At COP27, the Net Zero Asset Managers initiative announced initial targets for 86 investors and a rise in the total number of asset managers committing to net zero to 291, representing more than US$66 trillion in AUM.
While commitments are the first stage, companies are increasingly being challenged on implementing their net zero plans and demonstrating progress.
During COP, a UN-convened group launched a major report outlining what defines credible net-zero emissions pledges and pathways for companies, banks and local governments.
Last year, JLL partnered with the World Economic Forum to create the Green Building Principles, providing companies with a clear roadmap to decarbonize their real estate portfolios.
6. Building climate resilience
With the effects of climate change already being felt, the need to protect communities, infrastructure and buildings from extreme weather events, higher temperatures, rising sea level and biodiversity loss is growing.
The UN’s Cities Race to Resilience was officially acknowledged at COP27. Originally launched in July 2021, it has since more than doubled in signatories committing to clear, evidence-based climate actions for accelerating adaptation and resilience.
Decarbonizing real estate is a long-term process yet even with the shorter-term risk posed by economic headwinds and geopolitical tensions, delaying plans is a mistake.
Amid ever more stringent regulations and increasing pressure from customers, consumers, and employees to make tangible progress towards net zero goals, the cost of inaction is becoming visible in the market.
“Building owners who fall behind the curve will increasingly be penalized,” says Baiswar. “Now is the time to be implementing plans that that put buildings on a clear pathway to net zero.”