AS is well known, aligned to global efforts to counteract (or at least limit) climate change, the UK has committed to a “net zero” target for 2050 (Scotland adopting a plan for 2045).

Real estate contributes a substantial proportion of the UK’s carbon emissions annually and so there is a need to address environmental performance as a matter of some urgency. 

Besides political pressures and legislation, investor and funder assessment and market sentiment will drive change. 

Success can be measured both by mitigating risk from the known and unknown future and building resilience to such risks, and by creating positive environmental and social change.

It is estimated that over 75% of buildings that will exist in 2050 are already built, and nearly all of those currently fail to meet net zero emission standards. Whilst the construction of new green buildings is much lauded, it is the work required on existing stock that presents the greater challenge, and opportunity. 

However, there is more to consider than just taking steps to improve indoor air quality, power consumption, water usage and waste management. 

All elements of ESG commitments are relevant. Environmental aspects are relatively easy to identify. 

The “Social” limb includes the health and wellbeing of occupiers (who are looking to employers to deliver a workspace that is more engaging and flexible) and the impact of a building on the local community (for example, creation of public green spaces, no contact building access, and support for local enterprises). 

Governance is harder to measure but includes diversity, culture and reputation and, importantly to meet claims of “greenwashing”, putting in place policies, processes, and targets to deliver transparently sustainable outcomes.
Building owners should be aware of the global standards including: 

  • The Building Research Establishment Environmental Assessment Method (BREEAM) – for conducting environmental assessments of projects
  • Leadership in Energy and Environmental Design (LEED) – certification systems for base build, fit-out, and in-use projects 
  • WELL – for evaluating the attributes of a building that impacts occupant health
  • Global ESG Benchmark for Real Assets (GRESB)  – for setting sustainability benchmarks

It is possible to identify over 30 frameworks and accreditations that can be applied and measured against the ESG impact of real estate, which presents a formidable challenge to those who are seeking to comply.


Greater effort is necessary to make older buildings in cities such as Glasgow, above, meet net zero emission standards

Politicians and investors will require data to measure achievement against standards because there is a global move towards requiring reporting of such information (although that will require a certain measure of agreement on what is to be reported and against what targets). 

In the UK, the Task Force on Climate-related Financial Disclosures will oblige main lenders and property companies to provide analysed data annually. 

It is inevitable that buildings which perform poorly will be marked down in value and be less attractive to occupiers (the brown discount) whereas high performing buildings will attract premium values and lower vacancies (the green premium). 

By way of specific example, if buildings do not meet minimum standards (such as an energy performance certificate rating better than “E” by April 2023) then they will not be lettable at all.

With the legislative imperative, and investor pressure, to enhance real estate stock why would there be any delay? Cost may be a factor – some estimates suggest that the necessary works could impose a financial burden of over £10 billion, leaving to one side possible reduction in income while works are carried out. 

There is also the question of who pays – tenants will not be happy to see a service charge including the bill for installing solar panels that might be more expensive than replacing the entire roof of a building, although might accept the cost of installing EV charging points. 

Despite this potential conflict, both owners and occupiers of commercial space will be sharing data on energy consumption and should be aligned on a desire to improve performance, particularly in the current economic situation.

Of course, residential accommodation is also affected, but attempts to engage owners/occupiers have had limited success to date (over one third of the current public funding for improved building insulation and installation of clean energy heating solutions has yet to be spent). 

The residential letting market in the UK is less institutional than in some European countries and so there may be less available resource to fund improvements, despite the potential to deliver not just environmental but social benefits. Once again, the factor of affordability and return on investment can limit appetite for change.

Disappointingly, at least to those who are concerned about the impact of climate change and those who wish to see improvements in the built environment, the general opinion at present is that targets set for change in real estate will not be met by 2050. Does that mean there will be a collapse in the UK property market and international investment will look elsewhere, leaving swathes of obsolescent buildings littering UK towns and cities?

This seems an unlikely scenario, but perhaps government needs to provide more incentive for improvement by those who own but do not occupy property than just setting (and revising) standards? Maybe the green premium can benefit all of society, if society can afford the investment to generate it.

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