Strategists are pondering the most effective climate action levers to keep attention focused on reducing greenhouse gas (GHG) emissions as other events and pressures commandeer priority-setting agendas. The upcoming annual United Nations conference on climate change follows a year when extreme weather took various forms to slash a vast track of destruction and suffering around the globe, yet, there is a sense that many concerned onlookers do not retain the memory or the resolve to guard against the next time once such events are in the past.
In the buildings sector, proactive sustainability proponents acknowledge that there are abundant competing interests as they pursue decarbonization and climate resilience. Speaking in conjunction with the online release of the 2023 GRESB global benchmark results for the ESG (environmental, social, governance) performance of commercial real estate portfolios, Darryl Neate, vice president, ESG, with REALPAC, reported that about one third of the association’s membership of prominent Canadian real estate companies, institutional investors and investment managers have set targets to achieve net-zero emissions.
He hypothesized that current “tough” market conditions — “declining NOI evaluations, increased financing costs, less available capital” — are one filter on the financial lens, but that longer term climate risk is also an important factor. The number-crunchers are considering the annual escalating cost of carbon (in $15 increments to $170 per tonne by 2030) versus the cost to reduce 1 tonne of carbon emissions on a per square foot basis.
“That’s an important metric. I think the CFOs are going to continue putting pressure on: What are the cost curves of net-zero carbon assets? What’s the return profile? How are we going to deploy our capital in the most efficient manner going forward to decarbonize our portfolios?” Neate maintained. “It’s about value and returns more than ever.”
Publicly listed companies are also watching for moves from Canadian Securities Administrators (CSA) and the Securities and Exchange Commission (SEC) in the United States. Both entities have indicated that rules are forthcoming to mandate disclosure of climate-related information, including a tally of Scope 1, 2 and 3 emissions, but those have not yet been enacted.
Alternatively, on the carrot side of climate action levers, a variety of federal and provincial/territorial incentives are on offer. Joining the GRESB results presentation as a representative of one of three benchmark participants to be highlighted as “examples of innovation and action”, Kit Milnes, vice president, sustainability and resilience, with KingSett Capital, cited his company’s partnership agreement with Canada Infrastructure Bank to fund deep retrofits in its portfolio.
“Without external financing assistance, all this would be made much harder so I would highly recommend to any and all of you to understand what programs exist in your market so that you can get some assistance and help on executing these very complex strategies at the asset level,” he advised.
Physical risks could galvanize consensus-building
Physical climate risks were literally burned into the Canadian psyche in 2023 during a wildfire season that saw nearly 185,000 square kilometres of forest alight, hundreds of thousands of nearby residents forced to flee and smoke migrate thousands of kilometres southward. That follows Hurricane Fiona’s wallop to Atlantic Canada in the fall of 2022, and comes along with a rash of severe thunderstorms, tornadoes and flooding. A recent REALPAC poll found that almost 50 per cent of members had experienced operational impacts related to a severe weather event.
“It is turning people’s attention to: What are we learning? What are we experiencing? And what do we need to do differently?” Neate affirmed.
Looking to the broader population and an often fractious debate over the costs and benefits of curbing dependence on fossil fuels, physical risk is identified as a potential prompt for consensus-building that could be divorced from political gamesmanship.
“When you talk about climate change as a health issue, it helps to depoliticize the issue and it helps to bring people on board,” says Dr. Lisa Patel, executive director of the Medical Society Consortium on Climate and Health, which brings together 46 national medical societies that collectively represent about 700,000 physicians in the United States.
Speaking during a recent online presentation sponsored by the American Council for an Energy-Efficient Economy (ACEEE), she focused on two galvanizing climate-related health risks: heat and pollutants from wildfires. Both made plenty of headlines in the summer of 2023, bringing immediate detrimental health impacts and potential long-term repercussions.
Infants, particularly in the first week of life, pregnant women and the elderly are considered most physiologically vulnerable to heat, but other circumstances, such as inadequate access to cooling or strenuous outdoor activity, heighten risk generally. Healthy adults can typically tolerate temperatures up to about 46 Celsius (115 Fahrenheit) if they are at rest, wearing light clothing, drinking water and there is minimal humidity — criteria that were difficult to meet for those who had to be outdoors during prolonged and intense heat waves this summer.
Patel cited the example of Phoenix, where people fainted due to the heat and then sustained burns when they contacted the pavement. Beyond such acute injuries, there is also a risk of chronic kidney damage from repeated exposure to high heat.
Meanwhile, the fine particulate in wildfire smoke can be a trigger for lung conditions like asthma and bronchitis. “We breathe those in and it produces, essentially, an inflammatory cascade,” Patel explained.
Emerging research shows that wildfire smoke can be dramatically more harmful to children than other common air pollutants. Fine particulates can also cross the placenta to fetuses in utero. “Before they even take a first breath, they are exposed to that pollution,” she affirmed.
It’s all evidence offered up as a counterbalance to what she sees as “blowback” on ESG and a resistance to climate change action that is rooted in political and cultural polarization.
“Health is the silver bullet — the winning argument. It is especially resonant with conservative audiences,” Patel maintained.
ESG efforts can ripple down the value chain
Quaiser Parvez, chief executive officer of India’s Nucleus Office Parks, agreed that health is a top priority for building users. Joining the GRESB results presentation to outline the philosophy of operating the world’s largest WELL-rated portfolio (at 20 million square feet), he charted a rising emphasis on indoor air quality since the outbreak of the COVID-19 pandemic, which is in tandem with growing public interest in waste management and reducing GHG emissions. That’s translating into discernible “green premiums and brown discounts” for office space providers.
“We have started getting questioned by our occupiers on our net-zero plans,” Parvez reported. “Increasingly, our occupiers are rising to the fact that 30 per cent of the global carbon emissions come from buildings and they would like to join the movement one way or the other.”
Representing the third company featured in the GRESB presentation, Lilia Kouzmina, head of sustainability with Eastnine AB, based in Sweden, talked about her company’s role in incubating proptech through a multi-sector acceleration bootcamp it organized, then drew analogies to the spinoffs that ESG efforts can engender.
“Think about what we all do every day when we engage with our suppliers, collecting, for example, material emission data. Every inquiry from our side generates multiple inquiries down the value chain, introducing more and more people to sustainability concepts, creating collective impacts,” she said. “Let’s remind ourselves about the ripple effect that we create every day by going after our vision. Our impact is not limited to the scope of our operations or the size of our business, but can go beyond those boundaries to our ability to touch and move others with our vision and determination.”
