Uncomfortable truths are integral to conversations about the climate crisis but at the Urban Land Institute’s C Change Summit, in Copenhagen on October 11, the industry body delivered a message to the real estate industry that may be difficult for it to digest.
Lisette van Doorn, the ULI’s European chief executive, welcomed the 200-plus delegates with an uncompromising view of what it will take for the built environment to achieve decarbonization at scale: “We need leaders to stand behind collective action. This is the only way to move the industry forward at the pace required. We need to collaborate rather than compete in search of the solutions.”
Carbon emissions have gone up since the signing of the Paris Agreement in 2016. In June, the National Oceanic and Atmospheric Administration – which has the longest direct data of carbon dioxide measurements in the atmosphere – found the latest increase in CO2 levels represented one of the largest jumps on record.
Van Doorn said while progress has been achieved in the real estate industry, a “fragmentation of approach” over solutions means decarbonization efforts are being hampered. “We are in danger of slowing down our efforts as we continue to see new climate change initiatives being launched, which either overlap or duplicate work already being done.”
Keynote speaker Jeremy Oppenheim, founder and senior partner of Systemiq, which advises companies on how to make progress towards the Sustainable Development Goals outlined in the Paris Agreement, said of the progress already made by the industry: “Despite the noise, real estate is way off track for net zero.”
To illustrate, he presented a slide of UN data showing greenhouse gas emissions from the built environment today. At the current rate of emissions, the data showed there will be more emissions in 2050 than there are today. “We must achieve the biggest system-wide transformation in human history, and with only 30 years to go,” said Oppenheim, a former World Bank senior economist.
In Oppenheim’s opinion, collective action to “dismantle the current system we have now” is the answer to the crisis. “That is our task… and you guys are right in the middle of it. There isn’t an answer to this problem without the people in this room,” he added.
Dispelling myths
Oppenheim argued against the “myth” that the industry is too complicated to be able to achieve consensus. “The idea real estate is more fragmented and complex than any other is [completely wrong],” Oppenheim said. He cited his advisory work in the retail industry to illustrate the possibility for co-operation.
“Multiple retail brands are coming together to create agreements to ensure suppliers are shifting to renewable energy,” he explained. “The idea you can get those companies, in such an intensely competitive industry, to underpin guarantees together is transformational. Two years ago, that idea was impossible.”
Oppenheim presented a framework for real estate companies to create system-wide change, outlining areas of focus: to ensure strong policy commitments; develop common standards to measure performance; respond to market demand for more efficient buildings and enable technology required to support decarbonisation to be rolled out at scale.
But another vital component, he said was investing in low-carbon property: “Capital is still chasing high carbon assets. Capital is locked into an inadequate ability to price climate risk and opportunity and I see this in every sector.
“There are exceptions – some investors and institutions are rocking the boat – but on the whole, the herd instinct is to under-price climate risk and be overly complacent about stranded assets in every single sector.” He added: “Investors taking risk into their portfolio are going to be haunted by that at some point.”
On this point, there is evidence real estate companies are beginning to worry about pricing climate risk. ULI used yesterday’s summit to launch a survey showing the influence of climate risk on real estate investment decisions, with 61 percent of those surveyed reporting they had walked away from potential acquisitions because of concerns about being stuck with stranded assets. Separately, 54 percent said they had allocated assets for disposal because of transition risk.
Disrupters required
Buildings, Oppenheim said, need to be reimagined from an economic point of view, whereby they play multiple economic roles. “To what extent do buildings become part of the energy system,” he asked. “There are enormous opportunities… this is the moment where planning for the future and engaging in different models is where the return on that investment is highest.”
To illustrate the potential for disruption through reinventing business models, he cited Elon Musk’s Tesla, the shares of which have more than doubled this year as its investments in software and services become a big value driver for the company. “[Tesla’s] $1.5 trillion valuation is not down to it being a car company, he said, but because it was a “disruptive force across multiple systems.”
“There isn’t a Tesla of the real estate industry today,” he concluded. “There isn’t one single company I can describe as the disruptor of the real estate industry, which is unlocking the value that will be available.”
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: 
