Oct 18, 2023 Real Estate

Decoding Carbon in Real Estate: Strategic implications of taking a whole lifecycle approach

In the race to reach ‘net zero’ carbon emissions, much effort has been directed towards reducing the carbon produced in operating buildings.

Siena Golan

Siena Golan

Real Estate Research Analyst
Murray Birt

Murray Birt

Senior ESG Strategist
Aleksandra (Sasha) Njagulj

Aleksandra (Sasha) Njagulj

Global Head of ESG, Real Estate
  • A focus on minimising operational emissions from buildings is unlikely to be sufficient to meet Paris Agreement carbon reduction targets.
  • Emissions associated with the extraction, manufacturing, construction, and demolition of buildings (embodied carbon) represents close to 11% of all global emissions and is therefore an important factor to address.
  • Regulatory and voluntary standards are now bringing embodied carbon into focus.
  • Refurbishment is a key way to keep embodied carbon emissions low while making major reductions in operational emissions.

1. Introduction

In the race to reach ‘net zero’ carbon emissions, much effort has been directed towards reducing the carbon produced in operating buildings. Yet while this accounts for the majority of emissions, between 10% and 20% of a building’s total carbon footprint is attributable to embodied emissions.[1]
Embodied carbon emissions have so far received little attention. Over half the participants in the RICS Sustainability Survey in 2021 stated that they do not measure embodied carbon emissions.[2] No respondents to CRREM’s latest investor survey measure the trade-off between embodied and operational carbon.[3] Now that stricter building codes, greater energy efficiency in design briefs, and a shift towards renewable energy production both on and off-site are reducing operational carbon, the proportional contribution of embodied carbon is growing. Increasingly, investors and developers are likely to be held accountable for carbon emissions on a whole-lifecycle basis.,

2. Why should investors consider ‘whole lifecycle carbon’?

2.1. Tighter regulation
With the Paris Agreement requiring emissions to reach net zero by 2050,[4]municipal, national and international governments are taking action. Guided by the World Green Building Council’s (WGBC) work to bring embodied carbon more into focus,[5] the revised EU Energy Performance of Buildings Directive (EPBD) is moving towards the concluding stages of the EU legislative process. Under the current version of the Directive, new buildings are required to achieve net zero on a whole lifecycle basis and existing buildings must meet certain minimum energy performance standards by 2030. If and when the updated EPBD becomes EU law (the increasingly complex politics around the law may cause some delay), all EU states will be required to pass national laws implementing this legislation. Five European countries (Denmark, Finland, France, the Netherlands, and Sweden) have front run the legislation by introducing laws aimed at reducing whole lifecycle carbon (WLC).Action is also visible at a city level. The latest London and Paris Urban Plans require development proposals to prioritise refurbishment over knock-down and rebuild strategies. London’s Mayor recently rejected the “Tulip” skyscraper development (20 Bury Street) with high embodied carbon intensity cited as one of the reasons for the decision.[6] Supply data for London shows that the market is already prioritizing refurbishments over new development. 2021 was the first in over ten years when refurbishments overtook redevelopments and this trend is likely to continue into 2024.

1. International Energy Agency (2020)

2. RICS, 2021

3. CRREM, 2023

4. This includes both operational and embodied emissions.

5. See WGBC, ‘Bringing Embodied Carbon Upfront’, September 2019

6. Green Street, March 2022

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