The Shift to Net Zero Set to Impact all Areas of the Economy
While COVID-19 has naturally commanded everybody’s attention over the past year, much focus is now on how we are going to rebuild our economies and society. There is also a focus to understand the interlinks with our environment and ensure we build back better. 2021 could prove to be a pivotal year in the fight against climate change with COP26 taking place this autumn in Glasgow. It is already providing an opportunity to focus minds on the climate agenda, and to take stock of real estate’s progress on the road to net zero.
A webcast from BNP Paribas Real Estate earlier this year, produced in association with the Financial Times, featured Alexandra Basirov, global head of sustainable finance, FIC at BNP Paribas. “The shift to net zero is going to impact all areas of the economy,” she predicted, “but it’s particularly important for the built environment because the sector accounts for almost 40% of global emissions.” Current construction techniques embed huge amounts of carbon in the structure of buildings, while the day-to-day operation of buildings causes substantial carbon emissions, so the sector faces massive challenges. But Alexandra warned the sector would come under increasing scrutiny with many asset managers and asset owners committing to achieve net zero across their portfolios by 2050 or even earlier.
She highlighted that environmental factors will continue to be an increasingly important consideration when making real estate investments and investors will look at wider measures of performance from their assets. “Assets that fail to take these factors into consideration risk underperforming and even stranded, so there is a need for a greater understanding on the environmental impact, especially the carbon emissions, of the construction, operation and even end-of-life of properties” she said. She also mentioned regulation and policy will increasingly have a greater impact.
She highlighted the use of ‘green loans’ – or sustainable-linked loans – can be an effective mechanism for driving change. Lenders are increasingly using science-based indicators like BREEAM to measure a borrower’s success in reducing energy and water use for example, and can use these to link it to their financings. “Data gathering and monitoring will become increasingly important,” she added.
But sustainability is not only measured in environmental performance, and Alexandra said she expects a growing emphasis on social goals. “Investors are pledging to grow social value and wellbeing,” she said. “COVID-19 has highlighted the growing inequalities across society and the importance of health and wellbeing. Developers, building owners and occupiers recognise that they have a role to play in improving them.”