RC109 NovDec 2023 - Magazine - Page 26
ENERGY
LEED certi昀椀cation, achieved through constant
evolution of a certi昀椀cation process that now
attracts attention from CEOs and chief 昀椀nancial o昀케cers, not just real estate specialists.
“The emphasis today has shifted to decarbonizing large buildings,” he explains. “There is
a rapid transition underway from ‘green’ as a
somewhat abstract measure to the measure-
ted to reducing emissions. “This is motivated
by a strong desire to avoid having their real
estate portfolios subjected to a ‘brown discount,’ a relatively new concept that favours
green portfolios built to net-zero standards
over assets perceived to be less sustainable
because they lack built-in protection against
future obsolescence.”
Strengthening Value Through ESG, a CBRE report 昀椀nds:
CERTIFICATION 79%
ESG 60%
NET-ZERO 50%
See green building certification as a “deciding factor in real estate decisions
Support ESG goals (including building to a net-zero standard)
Report customers are demanding products linked to net-zero performance.
*CBRE GLOBAL SURVEY
ment of carbon, both operational and embodied,, which estimates emissions associated
with materials and construction processes
throughout the whole lifecycle of a building.”
Supporting this proposition, a 2022 CAGBC
study found that most large buildings can be
retro昀椀tted to reach net-zero carbon emissions
and still yield a positive net present value.
The new language of sustainability
Gilmour believes that seeing the value of real
estate portfolios through the lens of embodied carbon is beginning to in昀氀uence the language of sustainability. This is in turn driving decisions to invest in net-zero buildings
across the board. “The value of carbon has
become a de facto substitute for currency,”
he suggests. Referencing Strengthening Value
Through ESG, a recent report from CBRE,
Gilmour cites 昀椀ndings that underscore “a
shift towards a more inclusive approach to
the understanding of risk.”
The report indicates that 79 per cent of
respondents see green building certi昀椀cation
as a “deciding factor in real estate decisions,”
and more than 60 per cent of respondents to
a CBRE global survey support ESG goals (including building to a net-zero standard); and
almost 50 per cent report that customers and
shareholders are demanding products linked
to net-zero performance. Signi昀椀cantly, twothirds of respondents say they are commit-
26
RENEW CANADA – NOVEMBER/DECEMBER 2023
One of CAGBC’s most active partners in
the process of future-proo昀椀ng Canada’s built
environment is RealPac (Real Property Association of Canada). Its CEO Michael Brooks
points out that, in addition to supporting
green building certi昀椀cation, the association’s
priorities encourage the setting of targets for
DEI, energy management and reporting on
GHG emissions and ‘sustainability reporting.’ Brooks sees momentum in the practice
of ‘GHG accounting,’ the expectation is that
both the U.S. Securities Commission and
the Canadian Securities Administrators will
soon make emissions reporting mandatory for publicly traded companies. Moving
beyond voluntary reporting will have a positive impact on both new builds and retro昀椀ts,
says Brooks.
As more players aspire to net-zero ambitions, industry observers in the real estate
space are working hard to ensure that the
term doesn’t become synonymous with
‘greenwashing.’ Another CAGBC partner is
JLL Canada. The company uses CAGBC’s
conferences to disseminate its latest 昀椀ndings
and to build momentum to withstand “a major disruption that requires a philosophical
review of how the market behaves and reacts
to new demands and imperatives.”
Recognizing that not all real estate portfolios are created equal, JLL Canada, led by
its CEO, Alan MacKenzie, understands that
capital markets investing thrives on both
fear (when the challenge is to avoid a ‘brown
premium’) and opportunity (where the focus
is on “investing in a green premium).” The
new determinants of real estate valuations,
JLL concludes, are embodied carbon, managing climate risk, and whether buildings o昀昀er
their occupants a healthy environment. All
these factors trickle down to the buyer pool
through due diligence and ultimately a昀昀ect
the ability to access capital. Where once the
focus might have been on meeting the needs
of either investors or the occupiers, the new
normal is to embrace “shared incentives”
that work for everyone. As the industry’s
ability to generate better data continues to
improve, JLL acknowledges that “waiting
for perfect data before making decisions is
no longer an option” and that “leaning into
structural changes is the way to go.”
Other factors at play in the push to decarbonize include changes underway via a new
National Building Code. The 2025 version
will address operational carbon and in 2030
will address embodied carbon and most
provinces have agreed to adopt codes within
18 months – that will be huge,” says Gilmour. As well, lifecycle performance metrics
are being developed globally for all the
inputs required to create or retro昀椀t buildings to net-zero. “EPDs, or Environmental
Product Declarations, are coming,” Gilmour
suggests, adding that extending environmental performance metrics to the entire
supply chain for green building represents a
tipping point for the entire industry.
Net-zero expected to drive positive change
The CAGBC and its partners also praise
federal government leadership through a variety of programs. The most consequential is
its requirement that 75 per cent of all federal
o昀케ce leases be net-zero carbon or climate
resilient by 2030. The Canada Infrastructure
Bank (CIB) has also embraced the concept of
embodied carbon and is investing millions to
expand the capacity of the private sector and
indigenous communities to undertake building retro昀椀ts to encompass small and medium
sized buildings in addition to energy service
companies that are part of the supply chain.
At its recent annual general meeting, CEO
Ehren Cory described the CIB’s increasingly
active presence in supporting retro昀椀ts; the
CIB pursues a strategy of investing capital in
retro昀椀t projects upfront, then exiting quickly
once projects are underway so that funds
can be reinvested. The CIB is a “co-investor”
Cory says. “That is how we partner with
everyone, so that there’s a shared sense of
skin in the game and a shared incentive for
success.”
RENEWCANADA.NET
