Our thoughts on COP27

As COP27 concluded 3 weeks ago. We asked Matt Wilby and Craig Jones to reflect on the key talking points that affect our business and clients.?

A time for reflection?

Since COP26, the United Nations has stated that global efforts to slow climate change have failed. Some may blame geopolitical and economic turbulence for diverting recent attention from climate action. But all will agree that we now need a monumental societal change to stop climate catastrophe.???

The Egyptian presidency structured the COP27 action agenda to focus on implementation. With specific outcomes centred around mitigation, adaption, finance, and cooperation.??

With a much-shared statistic suggests that we can trace about 40% of global greenhouse gas emissions to constructing and maintaining buildings. It was no surprise that cleaning up the carbon-intensive construction industry and reducing energy consumption in buildings emerged as important topics.?

Flagship events focused on the built environment and delivered initiatives to drive cooperation and systemic change. For example, the ‘Summary for Urban Policymakers’ provided an actionable policy guide for city and urban policymakers to decarbonise and build the resilience of urban environments. While ‘Business of Climate Recovery: Accelerating Accountability, Ambition & Action’ sets out steps for accelerating the global decarbonisation of business and delivers roadmaps to address energy performance and whole lifecycle emissions for new and old buildings.??

Despite this apparent progress, the 2022 Global Status Report for Buildings and Construction delivered a stark reminder of where the built environment sector is in delivering its climate change objectives. This year’s report found that the industry is not on track to achieve decarbonisation by 2050 despite a substantial increase in investment and several countries including buildings as part of their Nationally Determined Contributions.??

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A time for action.?

We have run out of time. The World Bank estimates that, by 2040, 130 million people could be pushed into poverty by climate change. ?

The importance of adaption and resilience within the built environment sector has been brought into focus following a spate of climate change induced natural disasters. Closer to home, recent UK weather trends have shown us the need to create a better built environment in the UK. The global energy crisis has equally highlighted the importance of building efficiency.??

As facilitators of development, we must transform how we interact with our planet. Introducing new solutions and innovations to help alleviate the impacts of climate change.??

While we have seen a notable uplift in performance regulations within the UK, leaders in the net zero movement must set targets to exceed the obligations of the Paris Agreement goals. Not simply meeting them with bare-minimum measures while providing financial and technical support to others.?

Following COP27, the UK Green Building Council (UKGBC) has called upon the Government to uphold its position as a global climate leader and set out long-range policies. The recent launch of its coalition to deliver a ‘UK Net Zero Carbon Buildings Standard (NZCBS)’ will provide a “single agreed definition and methodology for the industry to determine what constitutes a net zero carbon building”.??

Speaking on behalf of UKGBC, Chair David Partridge noted, “if the real estate industry and built environment is to seriously address its impact on climate change, a universally adopted Net Zero Carbon Buildings Standard is absolutely essential”.??

The role of building performance will become vital in tackling the climate crisis. Building performance regulations are a necessary and critical means to meet the target. But with only 43 countries implementing mandatory green building codes for residential and non-residential properties in 2020, and most of these are insufficiently net zero aligned, there is a significant gap to drive the necessary rate of change.?

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So what’s next??

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Resilient, long-term thinking:?

Long-term policy development has often suffered at the hands of short-sighted measures. The alignment of cost-of-living crisis support measures and energy security strategies with the decarbonisation agenda would ultimately achieve secure and sustainable economic growth. For the private sector, investment in our existing building stock may cost today. But, the forward-thinking investor recognises the opportunity to mitigate rising energy bills and meet the net zero needs of tenants. As well as the risk of not acting and being left with stranded assets. Over the longer term, it will be essential to develop regulatory approaches that connect voluntary net-zero commitments with more extensive policy-driven efforts.?

Regulation:??

Despite agreeing on climate finance, world leaders did not increase their ambition to reduce emissions. The UK has defined its ambitious targets. However, it is not always clear what a net-zero target amounts to. Increasing the percentage of meaningful targets linked to science-based emissions pathways, with clear interim targets and plans for action, such as the 6th Carbon Budget, will require more governance and oversight. COP26 made suggestions on setting more explicit standards for net-zero pledges and identifying a roadmap to translate these standards into global and national regulations. Still, little progress has been made, yet talk of regulatory mandates lends weight to these demand signals.?

Such initiatives are just the start. The UN clarifies that credible voluntary standards must be bolstered through regulation and ultimately translated into ground rules for the global economy. So what does this mean? Whilst disclosure requirements normally regulate what information publicly traded companies must disclose in public reports or filings with regulators. Government-led environmental certifications will likely bolster and certify corporate recognition programs that demonstrate exemplary performance in setting and achieving environmental goals, which could become an important KPI for attracting green investment.?

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Better initiatives and incentives:??

In many cases, reducing environmental impact is expensive and inconvenient. Businesses are naturally cost-conscious and aim not to spend money they don’t need to. The UK Government is lending financial support to low-carbon innovation. Still, it could be much more robust. Not being so could hinder sustainable growth. As the Government applies the “carrot and stick” approach to sustainability, there is little support in the wake of the COVID-19 pandemic and the energy crisis. Most organisations find the options available expensive and a potential hurdle for cash-poor businesses. The Government should begin to translate net-zero standards and criteria into action that will, not can, contribute to long-term mitigation action through high-tech advances and fiscal incentives.?