“The role of human influence on the climate system is undisputed.”
Dr Valérie Masson-Delmotte, Working Group Co-Chair
The IPCC’s Sixth Assessment Report ‘Climate Change 2021’ makes for sobering reading. Climate change is an immediate threat and no country is immune. Key headlines from the Summary for Policy Makers include:
- It’s unequivocal that human influence has warmed the atmosphere, ocean and land;
- The scale of recent changes across the climate system are unprecedented; and,
- We’re seeing this in every region across the globe.
Later this year, world leaders are coming together for the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow. This will be a critical milestone in making commitments (with clearly targeted and meaningful action plans) to limit temperature increases to 1.5°C.
Net Zero commitments cannot be achieved without a clear focus on the built environment with it accounting for 39% of global carbon emissions. But progress in reducing the built environment’s impact has been variable.
Environmental, Social, and Governance (ESG) considerations in real estate can and are having an impact. Expectations from investors and lenders, tenants, employees and the public are increasingly shaping business operations and the impact they have – on the environment, on employees, on communities.
What it might mean
The IPCC report is a Code Red for humanity. The pressure for companies to consider and act on ESG considerations is now more urgent than ever. This is already a fast moving landscape with new and emerging regulations, and growing investor, lender, tenant, employee and public demands. Judging from the stark warnings coming out of the IPCC report, it’s about to go into overdrive.
Pressure is mounting and it’s likely we’ll see increasingly demands for the following in the coming weeks and months:
- ESG reporting that is evidence based with clear and verifiable data, underpinned by actionable road maps. Vague commitments to reach net zero by 2040 or 2050 with no underlying plans will come under much tighter scrutiny – this is both timely and necessary.
- Introduction of new and expansion of climate related disclosure requirements such as those that align with the Task Force on Climate-related Financial Disclosures (TCFD). TCFD disclosures focus on an analysis of the risks and opportunities associated with the transition to a lower carbon economy, and related to the physical impacts of climate change.
- A greater emphasis on de-risking assets in light of reducing carbon emissions and preparing for a minimum global temperature increase of 1.5°C and the attendant effects. Linked here is managing risks associated with stranded or brown assets, increases in insurance premiums or some assets becoming virtually uninsurable.
- A deeper questioning of carbon offsetting measures as a means to compensate for emissions made elsewhere. This will particularly be the case for those companies that use carbon offsets as a means to ‘balance’ the effects of business as usual.
- A growing emphasis on refurbishment and retrofit rather than new builds by default.
- A greater focus on embodied carbon associated with construction and materials throughout the lifecycle of buildings.
- ESG receiving greater attention at Board and Senior Executive level with a resultant increase in demand for specialists, particularly for those with appropriate sustainability expertise.
- And greater attention paid to the health consequences of our built environments, and how detrimental impacts of climate change can be mitigated.
While much work is happening to reduce carbon emissions in our built environment, we’re only at the start. The IPCC report will given further impetus and urgency to all those working in the built environment to drive down carbon emissions and to mitigate the effects of climate change.
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Keyah Consulting works with companies on their approach to ESG in real estate, and across health and the built environment. If you’re ready to explore what ESG might mean for your business, get in touch.
*Bushfires below Stacks Bluff, Tasmania, Australia. Image by Matt Parker on Unsplash.
