For what it’s Earth: reflections following the inaugural BPF Sustainability Conference 2024

Following the announcement of a UK general election, set for Thursday 4 July 2024, the real estate industry now has a unique opportunity to pro-actively engage with policymakers on sustainability – helping shape future regulation and strategy to support meeting the industry’s net zero targets.

This was a key topic raised at the inaugural BPF Sustainability Conference 2024: From net zero to nature, with attendee and Shoosmiths real estate partner, Liz McKillop Paley commenting:

“The statistics around sustainability remain concerning, especially for the UK real estate industry, with multiple speakers at the conference restating that ‘we are not on track’. The industry is a major contributor to carbon emissions and embodied carbon. We have a key role to play in being part of the solution and must own this by finding innovative sustainability solutions and driving change.”

Targets

The 195 Parties that adopted the Paris Agreement have committed to reduce greenhouse gas emissions, so that global temperature increases are limited to 1.5°C above pre-industrial levels, by working together to adapt to climate change and shift towards a net zero emissions world.

The UK aims to reach net zero by 2050, with interim targets in 2030 (68% carbon emissions reduction) and 2035 (77% reduction). In order to achieve these targets, greenhouse gas emissions must peak before 2025 and decline 43% by 2030.

At the BPF Conference, we heard from Lord Deben, the former Chairman of the Climate Change Committee. He suggested that we do not fully understand the impact of global temperature increases at a level of 3°C, even with many countries already experiencing the harmful effects of global warming.

For example, he explained that UK oilseed rape production will be significantly down this year and a shortage of potatoes threatens Irish potato outputs. The recent flooding across the UK further demonstrates the consequences of rising temperatures, which increases the risk of heatwaves, floods, droughts, and fires. It is clear that more must be done to address the challenge of climate change.

Real estate industry

Sustainability governance of real estate is complex. The industry comprises of a diverse range of assets in a variety of sectors, with differing ownership structures, interests and uniqueness.

Blanket regulation may, therefore, not be the most effective way to assist the industry. Government policy should instead focus on addressing factors, such as cost, viability and responsibility of works.

A robust, clear strategy, that is both viable and jointly developed with industry, is critical to identifying and meeting net zero targets, which can be presented to any future government for adoption.

During the conference, we heard from global asset management firms that estimate $125 trillion of investment is needed to meet the 2050 net zero targets, with $20 trillion required for existing real estate stock. Further work is needed to identify the sources of all this capital investment. However, it is important to remember that this investment and resulting sustainability improvements can have other positive impacts for investors and building owners, including boosting property value and saleability.

The big “how”

There was a general agreement at the conference that significant progress has been made in identifying what needs to happen. Now, there is a real need for clarity and delivery on the big “how”.

The real estate industry must continue to work together on this, pioneering new solutions.

Considering the energy usage of heating and powering residential buildings, the living sector will play a vital role in reaching net zero targets and reducing carbon emissions.

Indeed, the Future Homes Standard, set to come into force in 2025, is an example of a governmental commitment to ensuring newly built homes are future-proofed, including by using low carbon and energy efficient heating systems and other technologies.

Under the Standard, homes will have to produce approximately 75% to 80% less carbon emissions than those built under current Building Regulations. Many housebuilders are already making major progress in terms of adapting to these requirements – accelerating meeting their own net zero ambitions, as well as delivering much needed new, quality and sustainable homes to market.

There is also the UK net zero carbon buildings standard, which is the first cross industry standard that brings together net zero requirements for all major building types based on the 1.5°C trajectory.

The effectiveness of these existing measures must be considered alongside new policies and ideas in the run-up to the general election in July. The real estate industry has the opportunity to present viable solutions, engage policymakers regardless of the political landscape, and, most importantly, advance the changes needed to create a more sustainable, energy-efficient built environment.