Financial Benefits

ESG and Its Impact on the Real Estate Industry

By: Amy Menist
View the original article here

Environmental, social and corporate governance (“ESG”) practices are becoming an increasingly significant topic for businesses and a vital investment criterion for real estate capital sources. Increases in the frequency and intensity of severe-weather-related events are forcing companies to assess property vulnerability and resiliency to proactively manage risk and mitigate the effects of climate change. A company’s corporate social responsibility is just as important because it draws attention to community outreach and talent development. Furthermore, with proper governance in place, management can implement and assess its policies, goals and reporting efforts for their ESG initiatives. Due to these compounding matters, real estate companies now have an increasing responsibility to perform climate-risk due diligence; assess its corporate social responsibility initiatives; and develop, implement and govern its ESG policies. As a result, investors and lenders are beginning to factor a company’s ESG policies into their decision-making processes because they want to ensure the business is developing sustainable plans to combat the effects of climate change; reduce costs; attract tenants; create ways to support the community; retain talent; and properly set, monitor and report on the company’s goals. What exactly is ESG, and how does it influence investor and lender decisions within the real estate sector?

Environment

The environmental aspect of ESG represents management’s responsibility to assess each property’s vulnerabilities, resilience and fortification with respect to its climate and to investigate the environmental impact of operating its properties. While reviewing or developing a building portfolio, it is crucial for management to perform an environmental analysis of each property to determine each building’s vulnerability and/or resistance to severe weather (e.g., hurricanes, flooding, extreme heat or cold, wildfires, tornadoes, blizzards) as well as to consider the environmental and community impacts associated with property development.

Using a variety of tools, management can establish and track key environmental factors associated with property development and operations, including the amount of energy used, the usage and/or possible contamination of water, the amount of waste generated and/or avoided in favor of recycling initiatives, and the building’s impact on air quality and the surrounding ecosystem. By evaluating a property’s environmental impacts, companies can be proactive about mitigating risk and assuring proper protocols are in place—not to mention saving money.

Management also should consider weather forecast predictions and climate migration trends in its analysis because climate change poses both physical and transitional risks that can have a substantial financial impact on a real estate business. As outlined in “Climate Risk and Real Estate Investment Decision-Making,” an article published by Urban Land Institute, “Physical risks, such as catastrophes, can lead to increased insurance premiums, higher capital expenditure and operational costs, and a decrease in the liquidity and value of buildings. Transitional risks—which center on the economic, political and societal responses to climate change—can see locations and even entire metropolitan areas become less appealing because of climate-change-related events, leading to the potential for individual assets to become obsolete.” Accordingly, climate migration presents a legitimate concern to real estate investors because climate relocation will lead to significant shifts in demand for real estate as individuals respond to environmental changes.

ESG initiatives are gaining significant attention among regulators and the Biden administration due to a rise in the necessity of, and public interest in, sustainability. In January 2022, the Biden administration launched a coalition of states and local governments to strengthen building performance standards. This partnership, consisting of 33 state and local governments, focuses on providing “cleaner, healthier and more affordable buildings.” The new commitments to design and implement more efficient building performance standards are intended to “accelerate progress toward reducing buildings emissions, advance climate action and environmental justice, create good-paying union jobs, lower energy bills for consumers, keep residents and workers safe from harmful pollution, and cut emissions from the building sector.” Property owners and operators must closely follow the developments of these governmental policies to stay current with their ESG initiatives.

Additionally, as part of the government’s initiative to strengthen building performance standards, the Department of Energy (“DOE”) and the Environmental Protection Agency (“EPA”) announced technical assistance opportunities to design, measure and manage local building-performance policies. For example, the “Biden-⁠Harris Administration Launches Coalition of States and Local Governments to Strengthen Building Performance Standards Whitehouse Statement” outlines the following:

  • The DOE will share best practices for state and local governments that are adopting building performance standards, including public- and private-sector financing options, and will also provide analytical support to examine how policies targeting emissions reductions in existing buildings can pave the way for minimum new-construction building energy codes.
  • There will be enhanced support from the EPA Climate Protection Partnerships Division. The EPA will support policy development and implementation, including through analysis and recommendations of metrics and best practice toolkits. The EPA will provide insight into current building energy use data as the foundation for jurisdiction-specific analysis and target setting and will enhance ENERGY STAR Portfolio Manager to provide new policy tracking and reporting capability and will assist jurisdictions in its use. The EPA will also provide new tools that calculate localized greenhouse gas emissions to inform reporting, compliance and assessment.

High-performing buildings are not only good for the environment, but they are also good for the bottom line. Although capital is needed to build or retro fit such properties, companies that invest in ESG initiatives often see a quick return because high-performing buildings attract higher occupancy rates, thereby generating more revenue and decreasing the amount spent on utilities, insurance premiums and repairs due to severe-weather-related events. Additionally, there are incentives available at both the federal and state levels that are issued to businesses to help make the initial investment more attractive. Businesses today should assess their building portfolios, evaluate their alignment with industry benchmarks and leading practices, evaluate future trends and possible policy changes, and identify gaps and opportunities. With a thorough understanding of the company’s current position, its plans and stakeholders’ expectations, management can prioritize goals and set efficient ESG targets.

Businesses can develop appropriate strategic ESG plans by using climate risk scorecards, performing property vulnerability and resilience assessments, mapping physical risk, and evaluating benchmarks established by organizations such as the Sustainability Accounting Standards Board, Global ESG Benchmark for Real Assets or ISO 14001, as well as state and local governmental regulations.

Social

Strong ESG policies and procedures can help build trust, attract and retain employees and tenants, and prevent costly mishaps while meeting community needs. Social initiatives, which are often assessed at the partnership and overall company level, represent the company’s corporate social responsibility. Today, the need for companies to evaluate their social actions is great because employees are demanding ESG services and better working conditions. These include demands for ensuring diversity, equity and inclusion throughout the business and governing board; developing ways to attract, retain and promote employees; and implementing an effective code of conduct. Additionally, businesses could further enhance their social responsibility by ensuring all employees have a safe and clean work environment, requiring all vendors and contractors to follow the company’s code of conduct, hiring contractors and vendors whose social responsibility is in line with their own social efforts, and assigning an internal resource dedicated to the ESG initiatives. Businesses today excel from the use of strong social responsibility practices because they incorporate diversity and inclusion, recruitment, talent development and mentorship programs, health and wellness, and create a conducive work environment for everyone throughout the company.

Tenants today are also considering companies’ ESG initiatives as a deciding factor for their tenancy because they want to rent high-performing spaces from a socially responsible company with strong ESG policies. Therefore, it is imperative that management evaluates its social responsibility with respect to the surrounding community. This could include a company publicly displaying its ESG policies, promoting its progress in sustainability efforts, and asking its tenants for feedback. Furthermore, tenants want affordable and accessible space, quality access to/from the property, and equal access to features and amenities within the community including good schools and shopping centers. By management taking into consideration tenants’ desires and opinions, it will help the business improve tenant attraction and retention and, thus, generate more rental income.

Governance

ESG is metrics-based with documented evidence. Consequently, it’s necessary that there are strong governing practices in place to help the company report and oversee its business performance, track progress, and strengthen data management and analytics. Management has a responsibility to implement the ESG policies and procedures as well as maintain and evaluate its progress and standards. Therefore, governing practices need to be in place to enable the company to perform due diligence and collect data and documentation to further improve planning efforts. Investors and lenders expect companies to track their environmental and sustainability metrics at the asset level and provide transparent reports that support the process for making meaningful and effective ESG plans. Through use of effective governing practices, management can perform decisive analytics, track progress, and create accurate and transparent reports on its corporate social responsibility and ESG efforts that showcase sustainability evidence to attract investors, lenders and tenants.

Companies often struggle with collecting data to support their ESG plans. However, data is in high demand because it enables companies to understand where change or innovation is needed. There are a variety of software and tools available that can help management efficiently document, track and assess its ESG progress. New emerging property technology (“proptech”) and proptech companies are designed to help streamline the gathering of data and aid in auditing and reporting for real estate. Using proptech, companies can review real-time data on energy usage, determine if environmental and sustainability opportunities exist, and quantify and standardize resource consumption to maintain safer and more valuable real estate. Through use of proper and effective governing practices, companies will develop a more efficient work environment backed by strong and accurate data, thus fostering a greater likelihood they will successfully achieve their ESG initiatives.

ESG and Investors

ESG is shaping and influencing real estate valuation and, therefore, gaining in importance among capital providers. Investors today use a variety of tools to determine future opportunities, and ESG policies are getting higher on their due diligence checklists. Although not a deciding factor, a business’s ESG plans can significantly impact an investor’s decisions. Through developments in technology and an increased transparency in reporting, investors now have more insight and want to know that businesses are forward looking and have sustainable business practices in place. By assessing a business’s ESG plans, investors can assess the risk versus the rewards as well as potential growth areas. Additionally, investors often believe the more proactive a company is with its ESG initiatives, the more attentive and responsive the company will be in mitigating risks. Accordingly, a strong ESG policy adds value to the investment because it attracts tenants, reduces operating costs and increases capital demand.

Debt and equity capital providers are incorporating the analysis of ESG and climate risk in their transaction due diligence. Recent floods, fires and extreme heat are forcing tenants (and their insurers) to assess property vulnerabilities. As confirmed in EisnerAmper’s article, “Commercial Real Estate 2022 Outlook: Fixing the Horizon to Navigate Through Change,” real estate companies should consider:

  • Hodes Weill’s 2021 Institutional Real Estate Allocations Monitor indicates that 49% of investors globally consider the ESG policies of the investee.
  • ULI’s 2022 Emerging Trends in Real Estate indicates that 82% of survey respondents consider ESG elements when making operational or investment decisions.
  • A recent report by JLL showed that office tenants are considering an owner’s ESG activities when selecting space, focusing particularly on building sustainability and efforts to create a healthy work environment, including quality air flow.
  • A Cushman & Wakefield study found that sellers are achieving 25% higher prices per square foot in Class A LEED-certified office buildings and 77% higher prices in Class B LEED-certified office buildings versus non-certified buildings.

Real estate companies and their management must develop a plan for prioritizing the implementation of ESG policies and initiatives because capital providers look for climate data and disclosures as well as resiliency, proactiveness and a property’s ability to attract tenants. Furthermore, as governmental policies are being implemented and net zero targets are set for 2050, capital providers need to know real estate companies are forward looking and performing due diligence to assess the impact of net zero goals on its assets to achieve new ESG standards. As a result of a growing trend and strong push for a decrease in the carbon footprint worldwide, there is an increase in investor demand for ESG policies that will significantly impact their decision-making process.

Most businesses today are looking to limit their impact on the environment by following real estate trends, moving away from fossil fuels, using renewable energy and developing net-carbon-zero real estate efforts. For property developers, this formidable endeavor includes management mapping out the ideal location using weather forecast predictions and climate migration trends, while also developing properties with the lowest emissions level possible and then offsetting the emissions created by finding ways to reduce and/or reuse waste and utilize renewable energy sources. Resilience is the key because it generates value. The initial investment will be repaid after these companies attract tenants and capital on the revenue side and reduce operating costs.

The need for socially responsible business practices will continue to grow because there are strong demand indicators for ESG and sustainability services. This, it is imperative that real estate companies continue to be forward looking and implement ESG initiatives to protect their assets. Effective ESG policies are directly correlated with stronger financial performance and better risk management because they provide companies the opportunity to mitigate risks and appease investors. Creating sustainable business practices, while preparing for implementation of future regulations, will help companies be environmentally conscious and socially responsible in conducting their day-to-day business, while simultaneously aide them in mitigating risks associated with climate change, improving relationships with investors and increasing overall long-term financial performance.

Here Are 4 Sustainable Office Design Trends To Embrace In 2022

A growing number of firms are adopting bio-based building materials, making it one of 2022’s most prominent emerging design trends.

By: Kate Tattersfield
View the original article here

  • A growing number of developers, architects and interior designers are embracing sustainable alternatives in an effort to curb climate change. 
  • Reducing waste in the workspace design sector is a trending topic right now.
  • The built environment industry needs to look beyond operational efficiency and focus on decarbonising the materials used in its build and fit out processes.

The built environment is responsible for nearly 40% of global carbon emissions, according to research published by the Green Building Council. 

28% of this derive from operational emissions – the carbon omitted by powering, heating and cooling a building – while 11% is a by-product of embodied emissions which are produced through the extraction, transportation, manufacturing, and assembly of the materials used to build, fit out and furnish a building.

Fortunately for our planet and species, there’s an appetite for change, and a growing number of developers, architects and interior designers are embracing sustainable alternatives in an effort to curb climate change. 

The built environment garnered lots of attention at the COP26 summit in November 2021, with over 130 events dedicated to it.

During the summit 44 businesses, including leading architecture firms, signed a net zero carbon buildings commitment, pledging to take increased action to decarbonise the built environment across their portfolios and business activities.

The 2022 office design trends we’ve chosen to highlight are all sustainability-focused. Our list covers a range of office design aspects – from the construction materials used to how design elements are recycled. Check them out:

How are you planning to make your office more sustainable this year? Photo credit: RODNAE Productions

1. Bio-based design materials

Buildings  – from the homes we live in to the offices we work in – have the potential to become carbon sinks as opposed to carbon generators. 

But to limit global warming to 1.5C above pre-industrial levels, the built environment industry needs to look beyond operational efficiency and focus on decarbonising the materials used in its build and fit out processes.

One way to reduce embodied carbon is to manufacture using bio-based materials such as wood, straw and bamboo. Bio-based products typically require less energy and have the potential to capture and store carbon through photosynthesis. 

A growing number of firms are adopting bio-based building materials, making it one of 2022’s most prominent emerging design trends. 

In July 2021, Grosvenor Group, one of the world’s largest privately-owned international property businesses, launched Holbein Gardens, its first net zero carbon office development. 

The firm conducted an early whole life carbon assessment to minimise upfront embodied carbon. Grosvenor Group is trialling new low embodied carbon products including cross-laminated timber in the extension, CEMFREE Concrete, Thermalite aircrete blockwork and reclaimed raised access flooring. 

Redesigning an existing office building is often more eco-friendly than constructing one from scratch. However, it’s important to consider the environmental credentials of the procurement, installation and use of materials. 

For example, using wood in office design isn’t necessarily sustainable if a large amount of carbon dioxide is produced in the logging, transportation and manufacturing processes, and if it ends up in landfill when the occupier moves out instead of being recycled. 

Here’s a list of environmentally friendly building material options to explore and use this year, courtesy of the sustainable and biophilic design company, Barbulianno:

  • Cob
  • Recycled steel
  • Sheep’s wool
  • Reclaimed, recycled or sustainable wood 
  • Cork
  • Straw
  • Bamboo
  • Recycled plastic
  • AshCrete 
  • Ferrock
  • Hempcrete
  • Plant-Based Polyurethane Rigid Foam
  • Enviroboard 
  • Mycelium 
  • Clay brick 
  • Timbercrete 
  • Recycled Rubber
  • Newspaperwood 
An indicative view of Holbein Gardens’ eco-friendly communal roof garden. Photo credit: Holbein Gardens

2. 3D printed office accessories

3D printing involves the creation of a 3D object from a CAD or digital 3D model. It’s a very sustainable design method because it produces very little waste compared with objects manufactured using fabrics, metals and other materials. 

It also reduces supply chain carbon emissions. A study by Michigan Technological University discovered that 41-64% less energy was used to 3D print an object compared with manufacturing it overseas and shipping it to the US. 

3D printing is gaining traction quickly and the office design sector is getting on board. In 2021, the international furniture brand Bene, alongside designers Pearson Lloyd and 3D-print specialist Batch.Works, launched bFriends, a new collection of 3D printed desktop accessories using 100% recycled bioplastic from waste food packaging. 

The products can be recycled by Bene at the end of their life to form a “complete closed-loop production model”. 

Caption: The 3D printing process in action. Photo credit: Bene
Bene’s bFriends stands come in different sizes and are designed to hold stationery, notes, mobile phones and more. Photo credit: Bene

3. Biophilic design

It feels like biophilia’s been on the workspace design agenda for so long that it can’t justify being a trend anymore, but here us out. 

In previous years, discourse on biophilic design was primarily concerned with plants, but 2022 will see a sharper focus on multisensory biophilic design. This includes the use of natural light, natural soundscapes and pleasant scents from the natural world that many believe have the power to energise or invoke a sense of calm. 

Another aspect of biophilic design which is set to gain traction in 2022 is the use of circadian lighting. Like natural light, circadian lighting matches people’s natural biorhythms (or internal ‘clocks’) by creating an artificial ‘sunrise to sunset’ that passes through different illuminance levels and colour spectrums. 

Blue-spectrum light is prioritised during daylight hours and warmer tones are introduced when the body is gearing up or winding down, e.g. at the beginning and end of the working day.

Circadian lighting is intended to amplify comfort and productivity, creating a healthier workplace experience. It can also help us feel happier by bolstering our connection to the natural world in an age where we spend the majority (around 90%) of our time indoors in manufactured environments. 

According to the professional services firm, ARUP, “…the future of interior and exterior lighting design certainly lies in this balance of quality daylight and electric light working together to support our human circadian adaptation.”

Circadian lighting supports our internal ‘clock’ which helps boost wellbeing. Credit: Copernico Photo credit: Holbein Gardens

4. Circular economy 

We’ve already included an example of a circular economy in action (Bene), but there are many more examples besides. 

A circular economy is one that involves sharing, resuing, repairing, recycling and leasing existing materials and items. It’s the opposite of a linear economy, which follows a ‘take-make-dispose’ framework. 

Reducing waste in the workspace design sector is a trending topic right now. In fact, it was a focal point at last year’s Workspace Design Show. 

One way to reduce waste is to avoid design change. Waste in the fit out industry is created because of design change, and design change starts at the very early stages of any project, for instance when the client brief changes.

Office designers can also avoid waste by adopting a circular mindset from the outset and partnering up with circular-based suppliers and partners like 2ndhnd, a Scottish-based company that specialises in procuring, refurbishing and reselling office furniture.

The growing awareness of sustainability coupled with the challenges posed by the pandemic has led to an increase in demand for 2ndhnd’s products. In an interview with Insider, co-owner and manager Ross Dutton explained: 

“We’re being asked more and more often to strip offices of their existing office furniture, which will eventually be refurbished and resold via our platforms, but also to help in the reconfiguration of existing spaces as more flexible spaces are introduced such as breakout areas, sofas and catch-up pods.”

The Future of Green Construction Materials

Architects are working with manufacturers to source new materials that improve health, lower costs, and reduce environmental impact.
View the original article here

Building materials—and what’s in them—have been making headlines, and for good reason. As The American Institute of Architects (AIA) raises the bar in response to climate change, architects and design professionals are partnering with clients, contractors, and manufacturers to source materials that meet new environmental goals, part of a larger effort to improve resiliency for the future.

“Historically, architects haven’t asked what goes into building materials,” says Lona Rerick, AIA, an associate principal at ZGF Architects in Portland, Oregon. “We used to just look at aesthetics, performance, and durability. But in the past decade, there’s been a shift to thinking more holistically about sustainable design and better building materials. Now we’re collaborating with clients to improve embodied carbon and health.”

Greener building materials are key to halting climate change. Currently, buildings produce about 40% of the world’s fossil-fuel carbon-dioxide emissions (CO2). In fact, the United States’ building stock produces more than two billion tons of greenhouse gases per year. But that number can be greatly reduced by limiting the embodied carbon of our building materials. Embodied carbon—the CO2 released during material extraction, manufacture, and transport, combined with construction emissions—will be responsible for 74% of all CO2 emissions of new buildings in the next 10 years. And unlike operational carbon, which can be reduced during a building’s lifetime, embodied carbon is locked in as soon as a building is completed and can never be decreased.

The good news? People want change. According to a 2019 survey by the Morgan Stanley Institute for Sustainable Investing, 85% of U.S. investors now express interest in sustainable investing, while half have factored attributes such as the sustainability of a business into their decision to buy. Overall this shows that people want to improve the environmental and social impact of their investments.

To help clients address climate change, architects need to prioritize lowering the embodied carbon of the materials that produce it most. It all starts with a discussion at the outset. “As the design team, we need to have early conversations with clients about the importance of building materials,” says Frances Yang, AIA, the structures and sustainability specialist at Arup in San Francisco. “We need to show them that materials made with little or net zero embodied carbon can be healthier and sometimes cheaper than traditional products. Once clients are on board, contractors and suppliers will support it, and more people will start to realize that they need to come up with greener strategies.”

Architects can minimize embodied carbon by focusing their efforts on the top three worst offenders—concrete, steel, and aluminum, which account for 22% of all embodied CO2.

Prioritize building materials that reduce carbon

The easiest way to reduce embodied carbon is through reuse—not just of existing building materials, but of existing structures, too. For renovation projects, architects can draft efficient designs that make the most of the current footprint. For new projects, architects can bring in salvaged materials sourced from deconstructed buildings. Most of all, when considering new materials, architects can minimize embodied carbon by focusing their efforts on the top three worst offenders—concrete, steel, and aluminum, which account for 22% of all embodied CO2.

Recently, Yang and her colleagues at Arup designed a project for a Bay Area client that required large amounts of concrete. The client was considering purchasing carbon offsets. But the low-carbon-concrete options Yang researched were cheaper than the offsets and could reduce a greater amount of embodied carbon. By choosing concrete made from granulated blast-furnace slag, a byproduct of steel manufacturing, Yang helped the client reduce both the cost of the project and its impact on the environment.

“Teamwork was key,” Yang says. “At the beginning, we worked with the sustainability and engineering teams to share the benefits of slag cement with the client and get them on board, which then persuaded the contractor to also get behind it. The main thing is to start the conversation early and get everyone’s support. In that instance, we were able to help the client cut 12,000 tons of embodied carbon—making everyone really happy with the outcome.”

Manufacturers agree. “Collaboration and communication between architects and concrete suppliers provides many benefits,” says Alana Guzzetta, the laboratory manager at the U.S. Concrete National Research Laboratory in San Jose, California, which has partnered with Yang on projects over the years. “Communication allows architects to be familiar with the cement substitutions and low-carbon-concrete options available in specific markets, which can be helpful in writing specifications. Additionally, when an architectural aesthetic is required for the concrete, the supplier needs to understand those needs to provide the correct mix. Overall, collaboration between designers, contractors, and suppliers is important for implementing the lowest-carbon mixes that meet performance and schedule requirements.”


The 7 steps to adopting better building materials

Creating a plan to build with healthier resources

  1. Establish the goal and scope: Turn values related to health and transparency into clearly written goals and a scope of work, approachable targets, and roles and responsibilities for the project.
  2. Set priorities within budget: Most projects are constrained by cost, and healthier materials are too often abandoned when an all-or-nothing mentality is adopted. Instead, allow projects to achieve incremental improvements. Some improvement is better than none at all.
  3. Develop measurable targets: This step establishes measurable criteria that define success for the project. The target should reinforce the goals and priorities described in the previous steps. Some rating-systems criteria have targets already defined. For example, LEED requires that a minimum of 20 products used on a project meet the disclosure requirements to achieve one point in the Building Product Disclosure and Optimization credit related to healthier materials.
  4. Define methods and metrics: Once targets for healthier materials—which are less toxic for human or environmental health—are established, the next step is to select tools to measure progress. A wide variety of resources are available. Choosing the right one requires matching the information it provides with the goal and scope of the project. For example, if the objective is to avoid certain harmful substances, a list of materials not to be used in the project (and conversely, ones that can be used) should be the primary reference guide.
  5. Outline roles and responsibilities: Determine who will fulfill the essential roles among the primary parties on the project, including the owner, designer or specifier, builder, and operator. Responsibilities include materials research, selection and specification, tracking progress, procurement, and reviewing contractor submissions.
  6. Ongoing review and documentation: During the design phase, tracking gives everyone the ability to see progress toward the project’s targets and also serves as a useful tool to ensure goals will be met.
  7. Develop a materials manual: A manual of building materials is intended to pull together essential information for the facilities operations team. It should address maintenance, warranties, repair, replacement, cleaning, and general care that may be specific to the products installed on the project. Owners who manage their own buildings may wish to use this as the starting point for a continual feedback loop with the building management team. Overall, this can be a great opportunity for architects to develop a closer working relationship with a project manager—a key factor in reducing embodied carbon.

Help clients source better building materials

Another way architects can help reduce embodied carbon is to source materials that have been verified with environmental product declarations (EPDs). Similar to nutrition labels, EPDs are documents that communicate the environmental impact of a product over its entire life cycle, conveying the carbon footprint of materials at a glance. Today, architects can easily check the EPDs of products by using the EC3 Embodied Carbon in Construction Calculator (EC3). Created by the Carbon Leadership Forum, the EC3 is a free, open-access application that helps architects and contrators source sustainable materials in categories like concrete, insulation, gypsum board, and carpet. “Increasingly, we’re writing into our specifications that suppliers must have an EPD if they’re providing a product,” Rerick says. “We need to see that to prove that the builder has lowered the global-warming potential of that product below a certain baseline.”

Recently, Rerick and her colleagues at ZGF Architects were hired by a major tech company to design a new campus in the Pacific Northwest. The tech company is working to become carbon-negative—removing more emissions from the environment than it contributes—and is starting by focusing on construction materials. Using the EC3 tool, ZGF and the other project teams helped the company reduce its carbon footprint while also enriching the EC3 database with additional EPD-approved materials. The size of the project greatly increased the data available to architects everywhere. “The EC3 database is now even more of a game changer, because we have a deeper resource to compare all these different EPDs,” Rerick says. “It enables us to set better targets for lower embodied carbon and then reach them.”

In addition to the EC3 tool, ZGF uses a digital calculator of its own design to further reduce the embodied carbon of projects. Available for free online, the Life Cycle Analysis tool enables architects to enter the ingredients of concrete mixes and quickly see the carbon impact—an innovation that should help improve the industry for years to come. “By creating a database and material-specific baselines to target for products with EPDs, the Carbon Leadership Forum is reducing uncertainty about them,” Rerick says. “This project is helping to accelerate the demand for EPDs among both clients and manufacturers.”

The 5 Key Takeaways of the AIA Materials Pledge

Guidelines for selecting sustainable materials:

  • Support Human Health by preferring products which support and foster life throughout their life cycles and seek to eliminate the use of substances that are hazardous.
  • Support Social Health and Equity by preferring products from manufacturers who secure human rights in their own operations and in their supply chains, and which provide positive impacts for their workers and the communities where they operate.
  • Support Ecosystem Health by preferring products which support and regenerate the natural air, water, and biological cycles of life through thoughtful supply chain management and restorative company practices.
  • Support Climate Health by preferring products which reduce carbon emissions and ultimately sequester more carbon than emitted.
  • Support a Circular Economy by reusing and improving buildings and by designing for resiliency, adaptability, disassembly and reuse aspiring to a zero-waste goal for global construction activities.

Advocate for Local Legislation

Going forward, one of the most important ways architects can increase the use of greener building materials is to advocate for local legislation to lower emissions. In 2019, New York City passed the Climate Mobilization Act, which set emissions caps for buildings, with the goal of reducing output levels 40% by 2030. Nearly 70% of New York City’s emissions come from buildings. As part of the legislation, owners of structures 25,000 square feet or larger must reduce emissions or pay a substantial fine, an initiative that’s sparking massive change.

Todd Kimmel, the New York City architectural manager for insulation manufacturer Rockwool and a Certified Passive House Designer, is working with architects to design green projects that include large-scale passive buildings such as the House at Cornell Tech Campus and Sendero Verde, a three-building, 752,000-square-foot complex in East Harlem that will be a model of low-energy construction. In the past, Kimmel focused on passive design and reducing operational carbon, figuring out how projects can utilize Rockwool insulation, a stone wool that retains heat while minimizing negative health impacts. (Unlike rigid or spray-foam insulation, mineral wool has no plastics that can be released into the air during installation or a fire.) But lately, thanks in part to the city’s Climate Mobilization Act, Kimmel has seen an increase in the number of architects working with contractors and manufacturers to source materials made with less embodied carbon—a trend he attributes to spillover from legislation that addresses operational carbon.

“Architects used to consider materials primarily from a performance standpoint,” Kimmel says. “Now we’re seeing clients invest in greener building materials and operations that exceed the code requirements, because they need to build for the future, to ensure they don’t get hit with penalties. As a result, that way of designing, which creates a healthier environment anyway, is becoming the new norm.”

Build Consensus

The key to building with more sustainable materials is to create consensus, from clients to contractors to manufacturers. Change isn’t easy. For manufacturers in particular, research and development can be costly and time-consuming. But innovation is leading to better options, including wooden materials that capture carbon and concrete materials that sequester it. In turn, these materials are becoming more available, giving architects an extraordinary opportunity for change.

“Manufacturing today requires investing in innovation,” says Cassandra Mellon, the director of architectural sales at Rockwool. “We’re a net carbon-negative company, and want to lower the embodied carbon of stone wool even more, because we believe that’s important. Part of what helped inspire us were initiatives like the AIA materials pledge, which showed that this movement was gaining momentum. If architects ask about things, we listen. Ultimately, the materials pledge creates the foundation for a collaborative approach between architects and manufacturers as we all strive for sustainable materials, and I think we’re going to see more of these types of products across the industry in the future.”

The Blueprint for Better campaign is a call to action. AIA is asking architects, design professionals, civic leaders, and the public in every community to join our efforts. Help us transform the day-to-day practice of architecture to achieve a zero-carbon, resilient, healthy, just, and equitable built environment.

How To Make Sustainable Practices Profitable

Written By: Benjamin Laker
View the original article here

For decades, the idea that sustainable business practices could lead to profitability has been dismissed. However, with increased pressure from stakeholders and government legislation in recent years, companies are compelled to find ways to reduce their environmental impact while maintaining economic competitiveness. Right now, sustainability is quite rightly top of the agenda, amid the backdrop of the 2021 United Nations Climate Change Conference, more commonly referred to as COP26.

Most people don’t realize that waste is a resource with an economic value and recycling can be a profitable practice say experts.

The environmental impact of organizations and the states they reside in are scrutinized more strongly than ever, ensuring customers and employees do not compromise the ability of future generations to meet their own needs and consequently design a world without waste. At present, nearly 65% of greenhouse gas emissions arise just from handling materials’ production, transportation, and disposal. But a circular economy may significantly reduce 90% of the emissions, thus departing from a linear economy to one that builds circularity into products from the outset is paramount. 

ReCyrcle specializes in this area. Designed to support a waste-free world aligned with the “shared blueprint for peace and prosperity” from the UN Sustainable Development Goals, the innovative tech startup offers a revolutionary recycling system that follows a circular economy approach. “We want to prevent and reduce the waste accumulation of recyclable materials in landfills and change society’s mindset towards waste,” Samreen Nurullah, cofounder and director, told me.

ReCyrcle offers a revolutionary recycling system that follows a circular economy approach

She continued, “collection of the materials directly from the consumers through our app allows us to track the entire process and ensure that these materials do not leak into the environment.” Nurullah’s business partner, Sharaf Rahman, added, “We recycle materials and process them into a usable and manufacturable form reducing the demand and need for virgin materials being extracted from the Earth’s crust.” In doing so, the organization is attempting to digitize the reverse supply chain of waste to make the process more efficient, transparent, and accountable.

ReCyrcle makes a critical assertion – they don’t believe that poor recycling rate isn’t a habit problem but is instead a perception problem. “Most people don’t realize that waste is a resource with an economic value and recycling can be a profitable practice,” observes Rahman. “Our app encourages people to recycle by offering rewards and incentives for recycling in the form of digital tokens.”

The mobile app shows the journey of a plastic bottle and post-consumer packaging waste from the point of collection to being processed into new products so a user can track their recycling habits and buy products made from their recycled packaging waste. This could well be a watershed moment for the future of corporate sustainability, particularly because within countries such as the UK, where the government has delayed plans to implement the Deposit Return Scheme for recycling until late 2024. “We understand the climate emergency and have come up with our private digital deposit return scheme, which can be claimed through our app,” concludes Rahman.

ReCyrcle reprocesses 3D printer waste into recycled filaments to be reused in 3D printing again

Companies like to bucket. Purpose belongs to corporate social responsibility, while the customer belongs to the brand. But here’s the problem with those buckets, concludes Nurullah. Your customers are whole people seeking mission and brand engagement. They expect you to deliver what matters most to them. “Embrace your customer’s mindset, the holistic understanding of their heads and hearts, to deliver on brand and purpose,” recommends Nurullah. Because as companies embrace stakeholder capitalism, they risk subjecting themselves to what besets the nonprofit sector—the tendency to think every stakeholder is a customer, which confuses their strategic aim. Therefore, understanding if your organization is substantially differentiated or even relevant is mission-critical – and the key to entrepreneurial performance, which in the case of ReCyrcle, is impressive. 

That’s not to say they haven’t had help along the way, of course. For example, Rahman explained at length the impact of support that Brunel University’s Bridging the Gap program has had on the organization. “They’ve aided us throughout our journey, and we have recently started collecting 3D printing waste from their design facilities as the curbside municipal recycling programs do not recycle 3D printing waste,” he said. ReCyrcle reprocesses this waste into recycled filaments to be reused in 3D printing again.

This is a key component when thinking about starting a business, says Dr. Marrisa Joseph, Lecturer in Entrepreneurship at Henley Business School. Startups and increasingly established companies have moved away from thinking about what product or service I could offer. Instead, thinking has evolved to what I could create that my potential customer would want, or even better, what they need and how it will impact the planet.

The triple bottom line concept- people, planet, profit- has become an increasingly sought-after value proposition as businesses thrive when they have a greater purpose. That unique nexus is the source of differentiation and the cornerstone of your differentiation strategy. Embracing it requires that you appreciate them as whole people. What matters the most to your customer is what matters the most to you too. Watch out for the zone of indifference, and don’t build your strategy around it.

Every company has attributes and features near and dear to its hearts. Perhaps it’s the origin story, the internal rally cry, or their hometown. Be forewarned. You cannot compete on differentiation by claiming unimportant attributes to your customer. Your customer’s tell-tale shrug is the evidence that what you hold dear can’t deliver a differentiated advantage. And with the case of ReCyrcle, they certainly have it.

Why scaling investment is crucial for sustainable development

Written By: Ahmet Burak Dağlıoğlu
View the original article here

Mobilizing financial resources will play an important role in reaching the sustainable development goals.



  • Global organizations are cooperating on scaling investment to help achieve sustainability goals.
  • Investment promotion needs to change to target sustainable investments, particularly to help reach climate goals.
  • Turkey is implementing this approach by making the SDGs central to its foreign direct investment strategy.

Climate change has been on the international agenda for a long time, but recent developments have upped the urgency of taking immediate action for both humanitarian and developmental reasons. World leaders gathered in Glasgow to discuss climate change at the United Nations Climate Change Conference COP26, following the G20 summit in Rome in late October, which also prioritized sustainability.

Keeping climate change at bay through mitigation and adaptation is imperative to achieving the Sustainable Development Goals (SDGs), which were set by the United Nations in 2015 and made social, economic and environmental sustainability central to economic development.

Achieving the SDGs will, in turn, require an integrated approach and close cooperation among all stakeholders. Mobilizing financial resources will play an especially important role in reaching the SDGs and addressing the adverse effects of climate change. In this regard, foreign direct investment (FDI) has been a significant source of external finance for many countries, especially developing economies, to help achieve sustainable economic development.

Commitment to SDGs can mobilize foreign direct investment

Today, all economies vie for greater FDI inflows as it not only brings capital but also generates employment, transfers technology, and helps move up the value chain. Moreover, FDI can be instrumental in a country’s economic transformation towards a greener economy, as multinational corporations (MNCs) have both the financial wherewithal and technical capacity to help transform local operations to greener global best practices. MNCs have been increasingly incorporating environmental, social and governance (ESG) principles into their investment strategies, not only to achieve ESG investor score targets but also to save costs and mitigate risks, helping achieve both more sustainable and more profitable operations.

The international community is putting more efforts into scaling such investments through establishing effective mechanisms to support cooperation on investment issues, such as the planned World Investment for Development Alliance, which can facilitate collaboration on public-private projects to scale sustainable investment. One important dimension of such scaling is for countries to create a favorable environment to attract “Green FDI” in order to help achieve environmental and climate goals.

Through smart and targeted policies, sustainable investment can make significant contributions to a country’s economic development, including Green FDI to help reduce carbon emissions.—Ahmet Burak Dağlıoğlu

Unless host countries are attractive enough for such investments, MNCs will hesitate to invest there, especially in a time when attracting FDI is becoming increasingly difficult due to unexpected challenges such as the COVID-19 pandemic, policy uncertainty from increasing protectionism, economic shocks, and geopolitical risks. Moreover, the growing inclusion of sustainability clauses into new generation trade and investment agreements by major trading blocs will also affect MNCs’ location choices. Therefore, in order to make the best use of FDI in the aftermath of the pandemic, investment agencies should recalibrate their strategies and position themselves as promoters and facilitators of sustainable investment.

Through smart and targeted policies, sustainable investment can make significant contributions to a country’s economic development, including Green FDI to help reduce carbon emissions. Incorporating the SDGs into a country’s FDI attraction strategy can thus bring benefits across society. Therefore, FDI practitioners and policymakers should develop novel strategies that are more inclusive and SDG-oriented.

How Turkey is contributing to sustainable investments

Cognizant of that we, as the Investment Office of Turkey, have recently revised our FDI strategy and made SDGs one of the main pillars of our investment promotion and attraction policies. We have also incorporated “impact investments” into Turkey’s national development agenda. Through an extensive engagement with national and international stakeholders, “impact investments” have become a priority for private and public sectors in Turkey.

Together with the United Nations Development Program(UNDP), we co-published a series of reports on The Impact Investing Ecosystem in Turkey and SDG Investor Map Turkey, providing a guide for the private sector to perform diligence and make impactful business decisions. After these successful initiatives, Turkey’s Impact Investing Advisory Board was established to mobilize government agencies and private sector stakeholders to develop a state-of-the-art regulatory framework. Establishing such a national impact management framework will standardize the measurement and control across all sectors, which will incentivize impact investing and boost the performance of impact investors.

Success is contingent on going beyond defining certain metrics and standards or appeasing shareholders. Implementation, monitoring, and assessments are essential to creating real impact through sustainable investments. Therefore, national and international efforts to establish strong mechanisms for implementing impact investments and attracting Green FDI must be backed up through collaboration and partnership at every level.

International organizations, such as The United Nations Conference on Trade and Development (UNCTAD), UNDP, and Organisation for Economic Co-operation and Development (OECD), and the World Economic Forum have been playing an important role in creating effective platforms for cooperation. National institutions should continue to engage with these organizations in order to adapt their local investment ecosystems to the changing international investment trends, practices, and opportunities. We are all facing global challenges that require global solutions, and cooperation is a sine qua non requirement to find sustainable solutions for the problems that are threating humanity.

How Office Owners are Achieving Net Zero Goals

Both tenants and investors are increasingly focusing on office building’s carbon footprints when considering new deals.

By: Patricia Kirk
View the original article here

As the push to become carbon neutral accelerates globally, there is increasing pressure on office building owners to implement changes to accommodate those goals, including by making their buildings more energy efficient, using sustainable building materials, reducing waste and improving water systems. Some 105 big companies, including Amazon, Microsoft, Unilever, and BlackRock among others, have pledged to be carbon neutral by 2040, with additional firms promising to reduce carbon emissions by 2030. More than 100 countries, including the U.S., have pledged to become carbon neutral by 2050.

“A future where businesses are taxed on their carbon emissions could be close at hand,” said Drew Shula, founder and CEO of The Verdical Group, a Los Angeles-based green-building consulting firm.

California has already passed legislation requiring new and significantly renovated commercial buildings to be carbon neutral by 2030. Additionally, New York City’s Climate Mobilization Act (CMA) includes Local Law 97, which impacts all buildings over 25,000 sq. ft. and calculates carbon intensity for buildings on a per square foot basis, assigning limits to intensity beginning in 2024. Buildings that exceed that limit will be fined $268 per ton of carbon, notes Meadow Hackett, manager for sustainability and KPI services at consulting firm Deloitte.

She notes that many office REITs are planning carbon neutrality strategies to avoid penalties at their New York City properties, and companies are making capital allocation decisions around energy efficiency based on penalty avoidance.

Green building experts acknowledge that a net zero mandate would present a challenge for office building owners/investors, but note that it may not be as daunting as they might perceive.

“Any existing building’s carbon emissions can be reduced, and the first step is to understand its current level of performance,” says Elizabeth Beardsley, senior policy counsel for the U.S. Green Building Council (USGBC). She adds that this requires metering and reviewing utility bills and any other available building performance data that can help identify areas in need of increased operational efficiency and performance.

Once this assessment is completed, existing building owners and operators should develop a strategic action plan aimed at reducing annual building greenhouse gas emissions, Beardsley says. “The action plan can help owners to develop an ‘optimal path’ forward via the evaluation of alternative scenarios to assess opportunities for system upgrades, efficiency improvements, renewable energy generation and/or procurement, and calculate associated costs for each scenario.”

According to Rielle Green, manager of energy & sustainability with CBRE Property Management, which manages 2.7 billion sq. ft. of commercial real estate globally, there is no one-size-fits-all solution for getting to net zero. “Every property is uniquely built with different operating systems and located in different areas with different climates.”

CBRE property managers work with clients to determine which solutions make sense, which may include installing solar panels to reduce carbon dioxide emissions and energy consumption, smart building technology to monitor energy usage, LED lighting or green roofs.

Beardsley adds that owners could lower a building’s carbon footprint by encouraging tenants to commute by walking, biking, public transport, ride-sharing and carpools. This might involve providing a shared bicycle system or membership in a micro-mobility fleet; contributions for public transportation passes; car-sharing memberships; and on-site electric vehicle (EV) charging stations.

Beardsley also notes that conservation and recycling are other important elements for reducing a building’s carbon footprint. “Reducing a building’s water consumption reduces associated energy loads for water provision and wastewater management, as potable water treatment, distribution and use are highly energy-intensive,” she says. 

She offers case studies to illustrate how existing buildings achieved LEED Zero certifications.

The Los Angeles Department of Water & Power, for example, began reducing the footprint of its 17-story, 55-year-old, all-electric John Ferro Building in 2013 with a suite of energy efficiency measures, including lighting retrofits, chiller and fan system upgrades that earned the building’s initial LEED certification in 2015. The following year, the building, which houses LADWP’s 11,000 employees, recertified LEED Gold and in September 2019, it became the first building in California to achieve LEED Net Zero Energy.

Another example is the historic headquarters of Entegrity Partners, a sustainability and energy services company specializing in the implementation of energy conservation and renewable energy projects, which became the first LEED Zero-certified project in the U.S. in 2019 and the second in the world. The building, which achieved LEED Platinum for New Construction, was also awarded Zero Energy certification by the International Living Future Institute.

Entegrity began devising a plan to retrofit its 13,342-sq. ft. Darragh Building to net zero energy in 2016. Initial strategies employed included all-LED lighting, dynamic self-tinting glass, operable windows and doors for natural ventilation in the summertime, and occupancy sensors. The renovation also used locally-sourced materials when possible; preserved daylighting; and installed lighting controls, high-efficiency plumbing fixtures, and native landscaping.

Office buildings with high performing environmental improvements also command a rent premium, according to Beardsley, and trade at higher values than traditional buildings because they offer savings in operational costs. She cites research that indicates tenant were willing to pay $0.75 per sq. ft. for space in a LEED-certified office building compared to a non-LEED certified one.

Additionally, the U.S General Services Administration (GSA) released a 2018 study on the impact of high-performance buildings that quantified their benefits compared to their legacy building counterparts in the GSA’s portfolio. The study found that the upgraded buildings delivered greater cost savings and tenant satisfaction were deemed, therefore, a less risky investment than traditional buildings.

Shula suggests that Blackrock, the world’s largest asset manager, is a great example of this preference for more environmentally sustainable building. The firm committed to net zero for its own operations and is making being carbon neutral the central focus for its more than $8 trillion in assets under management.

Hackett, notes that sustainable swaps and building retrofits are already common in existing buildings to meet carbon neutrality goals. Landlords are deploying more efficient technology, such as occupancy light sensors, LED lighting, and power management software to control HVAC systems.

“Investors are more in tune with how their buildings are performing when it comes to sustainability and ESG today than a decade ago,” adds Green. She notes that sustainability has definitely become a selling point because potential tenants want to know how their buildings are performing in comparison to other buildings in the market.

Meanwhile, “[Institutional] investors are placing ESG, and climate change in particular, central to their investment strategies.”

Hackett notes, for example, that members of Net Zero Asset Owner Alliance, which represent roughly $5 trillion in assets under management, have pledged to transition their investment portfolios to net zero emissions by 2050.

The cost for upgrading existing buildings to achieve net zero depends on many factors, but the building’s age and relative inefficiency are key determinants, Beardsley says. She also notes that the building’s size, shape, and location may limit its capacity to generate on-site renewable energy.

However, “You don’t need to get to zero carbon all at once,” says Shula. “Create a plan to achieve carbon neutrality by 2030, then work backward to today to determine what steps to take first.”

For example, as building equipment reaches end-of-life, it should be replaced with more efficient, all-electric equipment and appliances to enable the reduction of the carbon footprint, he notes.

Getting ground-up buildings to net zero, on the other hand, adds a cost premium of zero to 1 percent when designed and developed as a high-performance building from the start, according to a 2019 USGBC report, The study also noted that operational savings recoup any incremental costs for getting to net zero in a relatively short time, with return on investment for both existing and new office buildings beginning in as little as a year.

Emma Hughes, a LEED project manager with USGBC, notes that with today’s tools, technology and knowledge all new buildings can be designed and constructed to highly efficient standards and achieve net zero energy during the construction process via integration of renewable energy generation and/or procurement.

Calculating the Costs of Moving to Net Zero

Cutting greenhouse gas emissions will affect real estate investors. The question is how much?

By: Beth Mattson-Teig
View the original article here

In August, the Intergovernmental Panel on Climate Change issued a harrowing report that concluded that nations had waited too long to curb fossil fuel emissions and there is no longer a way to stop global warming from intensifying over the next 20 years.

That has put renewed pressure on countries to cut emissions to avoid an even worse trajectory. In the U.S., many cities and states are enacting net zero legislation with Boston becoming the latest city to pass an ordinance that sets emissions performance standards on existing buildings with the goal of decarbonizing the city’s large building stock by 2050.

That will mean upfront costs to increase energy efficiency and reduce emissions even as the toll of unchecked climate change is already having massive financial impacts in the form of disasters that are increasing in frequency and intensity. As of early October, the U.S. had experienced 18 different weather/climate disaster events that exceeded $1 billion in damages, according to the National Centers for Environmental Information. The cumulative costs for these events is north of $100 billion on the year, putting 2021 on pace to the third most expensive year since 1980.

What’s less clear is who will bear the brunt of the costs associated with the implementation of net zero strategies and how this will affect real estate investors’ returns. That’s what Green Street set out to answer with a recent report assessing the potential costs of net zero across 17 property sectors. It’s a particularly relevant question given that the operation and construction of buildings account for an estimated 40 percent of global greenhouse gas (GHG) emissions, according to the report.

In August, the Intergovernmental Panel on Climate Change issued a harrowing report that concluded that nations had waited too long to curb fossil fuel emissions and there is no longer a way to stop global warming from intensifying over the next 20 years.

That has put renewed pressure on countries to cut emissions to avoid an even worse trajectory. In the U.S., many cities and states are enacting net zero legislation with Boston becoming the latest city to pass an ordinance that sets emissions performance standards on existing buildings with the goal of decarbonizing the city’s large building stock by 2050.

That will mean upfront costs to increase energy efficiency and reduce emissions even as the toll of unchecked climate change is already having massive financial impacts in the form of disasters that are increasing in frequency and intensity. As of early October, the U.S. had experienced 18 different weather/climate disaster events that exceeded $1 billion in damages, according to the National Centers for Environmental Information. The cumulative costs for these events is north of $100 billion on the year, putting 2021 on pace to the third most expensive year since 1980.

What’s less clear is who will bear the brunt of the costs associated with the implementation of net zero strategies and how this will affect real estate investors’ returns. That’s what Green Street set out to answer with a recent report assessing the potential costs of net zero across 17 property sectors. It’s a particularly relevant question given that the operation and construction of buildings account for an estimated 40 percent of global greenhouse gas (GHG) emissions, according to the report.

“That’s why we looked at it more as a cost, because we think this is something that building owners will do more reactively to the pressure that they are feeling or the pressure that they expect to feel,” notes Dave Bragg, co-head of Strategic Research at Green Street.

The Green Street analysis starts with a tally of total greenhouse gas (GHG) emissions per square foot for a portfolio of REIT-quality operating real estate assets. Total emissions per square foot data is translated into a hypothetical total potential cost by multiplying a landlord’s owned square footage by an assumed carbon price. The data set is amalgamated from REIT and tenant disclosure, landlord surveys and meetings with ESG experts.

There are three main buckets for classifying emissions.

According to the report, “Scope 1 emissions are released into the atmosphere as a direct result of activities occurring in the building, like natural gas combusted in the boiler. Scope 2 emissions are reported for electricity, heat, steam, or cooling generated elsewhere but consumed at the properties and paid for by the landlord. REIT reporting on scope 1 and 2 is rather clear and consistent.”

One of the key takeaways from the analysis is that the movement towards net zero appears likely to result in a drag on property prices, property owners will have to invest in things such as more energy efficient systems, on-site solar and the purchase of green power purchase agreements. Ultimately, those costs will be offset, at least partly, by higher rents and/or lower operating expenses. However, there is still the cap-ex spending to consider. “The way that we think about it is that this will be a net cost and a net drag on property pricing,” says Bragg. “So, there is going to be an impact here that needs to be assessed by real estate investors and something that deserves implementing in an underwriting framework.”

 second notable finding is that the impact will be unevenly distributed across property types with some sectors better positioned than others. Those property sectors that are expected to experience a “big” impact of a 5 percent or greater reduction to warranted value are data centers, lodging and cold storage. Those likely to see a “moderate” hit of 2 percent to 5 percent are office, retail and industrial. Sectors with low levels of emissions that should feel a negligible impact to value of 0 to 2 percent are multifamily, student housing, storage, labs and gaming.

“The impact on warranted values equates to about one-third of the hypothetical total potential cost of emissions, which makes sense when considering that the cost will be borne in part by landlords and over a long period of time,” according to the report.

Is there a business case for net zero?

While much of the push for net zero is coming from external forces, real estate owners and operators are assessing the business case for adopting these strategies. Are they only a net cost or are their ways moving to net zero can improve the bottom line? Potential economic incentives include higher rents, reduced costs stemming from energy efficiency and after-tax savings or accelerated depreciation.

Marta Schantz, senior vice president of the Greenprint Center for Building Performance at the Urban Land Institute, argues that this is the case.

“What we’re seeing is that there is growing momentum for real estate owners and developers to work towards net zero, first and foremost because there is a financial business case,” Schantz says.

When operators reduce energy consumption and improve energy efficiency it translates to lower costs, higher net operating income and higher asset value. “So, there is a direct correlation to reduced energy consumption,” she says.

But Anthony M. Graziano, MAI, CRE, CEO of Integra Realty Resources, a commercial real estate valuation and advisory firm, says it is unlikely the market as a whole, absent regulatory pushes, would move fast enough to meet 2050 climate goals under a “Good Samaritan” theory of economics. “The primary driver has to be economic incentive–feasibility,” he says.

Regulatory pressure is already coming down as more municipalities pass ordinances on building-level carbon emissions that are tied to fines for those that don’t comply. For example, the first tranche of fines for New York City Local Law 97 will go into effect in 2024. In Boston, meanwhile, buildings that do not comply with emissions reporting requirements will eventually face fines of between $150 and $300 per day based on their size. And ones that do not reach the emissions standards could see fines of up to $1,000 per day. In addition, owners that do not accurately report emissions could see fines of up to $5,000. 

One of the challenges in the net zero business case is that it is still early in terms of developing quantifiable metrics. There are not enough buildings or portfolios that have achieved net zero goals to be able to offer data on how the strategies impact rents, occupancies and building values.

“There is certainly a component of the market that will sell the qualitative benefits, but we will not see measurable differences until we can quantify the economics,” says Graziano. Companies that are promoting qualitative benefits without economic realization are actually harming real efforts, because investors get poor returns and are discouraged from making changes across their entire portfolio, he says. “Other market makers are watching and seeking quantification, and the fuzzy math perpetuates more inaction,” he adds.

The CRE industry is working to create some metrics and benchmarks around the business case for net zero, but there is a long way to go. Traditional data points, such as building age, building operating cost analysis, market rent and tenant demand, are all primary current proxies for ESG, but are not explicitly derived indicators of ESG value, notes Graziano. One example of explicit indicators would be Platinum and Gold LEED buildings and their relationship to tenant demand and higher rents achieved in the market. For instance, mandates from GSA and others that a certain percentage of building leases must be for Platinum or Gold LEED buildings drives tenants to a limited stock of buildings. Theoretically, those buildings are then in higher demand and can command higher rents, he adds. 

 Cushman & Wakefield released a new study that compared rents at LEED-certified buildings delivered between 2010 and 2020 and compared them to non-certified buildings. The study found that, since 2015, rents for LEED-certified buildings averaged $4.13 or 11.1 percent higher rent than non-LEED-certified buildings.

“It is not inexpensive to achieve net zero overnight. Over time you can certainly do it in a more measured way. But the value and ROI in decarbonizing and reaching net zero is about more than increased rents and decreased operating expenses,” says Schantz. “There are a lot of different qualitative pieces, and more and more owners are seeing that.” And those qualitative factors, such as attracting and retaining tenants, future-proofing buildings and brand reputation are big drivers in the market these days, she adds.

New recycling techniques set to make electric vehicles greener

By Pratima Desai
View the original article here

A technician unpacks a completely burned Lithium-ion car battery before its dismantling by the German recycling firm Accurec in Krefeld, Germany, November 16, 2017. REUTERS/Wolfgang Rattay
A used Lithium-ion car battery is opened before its dismantling by an employee of the German recycling firm Accurec in Krefeld, Germany, November 16, 2017. Picture taken November 16, 2017. REUTERS/Wolfgang Rattay/File Photo

LONDON, July 1 (Reuters) – Researchers in Britain and the United States have found ways to recycle electric vehicle batteries that can drastically cut costs and carbon emissions, shoring up sustainable supplies for an expected surge in demand.

The techniques, which involve retrieving parts of the battery so they can be reused, would help the auto industry tackle criticism that even though EVs reduce emissions over their lifetime, they start out with a heavy carbon footprint of mined materials.

As national governments and regions race to secure supplies for an expected acceleration in EV demand, the breakthroughs could make valuable supplies of materials such as cobalt and nickel go further. They would also reduce dependence on China and difficult mining jurisdictions.

“We can’t recycle complex products like batteries the way we recycle other metals. Shredding, mixing up the components of a battery and pyrometallurgy destroy value,” Gavin Harper, a research fellow at the government-backed Faraday Institution in Britain, said.

Pyrometallurgy refers to the extraction of metals using high heat in blast furnaces, which analysts say is not economic.

Current recycling methods also rely on shredding the batteries into very small pieces, known as black mass, which is then processed into metals such as cobalt and nickel.

A switch to a practice known as direct recycling, which would preserve components such as the cathode and anode, could drastically reduce energy waste and manufacturing costs.

Researchers from the University of Leicester and the University of Birmingham working on the Faraday Institution’s ReLib project have found a way to use ultrasonic waves to recycle the cathode and anode without shredding and have applied for a patent.

The technology recovers the cathode powder made up of cobalt, nickel and manganese from the aluminium sheet, to which it is glued in the battery manufacture. The anode powder, which would typically be graphite, is separated from the copper sheet.

Andy Abbott, a professor of physical chemistry at the University of Leicester said separation using ultrasonic waves would result in cost savings of 60% compared with the cost of virgin material.

Compared with more conventional technology, based on hydrometallurgy, which uses liquids, such as sulphuric acid and water to extract materials, he said ultrasonic technology can process 100 times more battery material over the same period.

Abbott’s team has separated battery cells manually to test the process, but ReLib is working on a project to use robots to separate batteries and packs more efficiently.

As supplies and scrap levels take time to accrue, Abbott said he expected the technology to initially use scrap from battery manufacturing facilities as the feedstock and the recycled material would be fed back into battery production.

PROFITABLE RECYCLING

In the United States, a government-sponsored project at the Department of Energy called ReCell is in the final stages of demonstrating different, but also promising recycling technologies that refurbish battery cathode to make it into new cathode.

ReCell, headed by Jeff Spangenberger, has studied many different methods, including ultrasonics, but focused on thermal and solvent based methods.

“The U.S. doesn’t make much cathode domestically, so if we use hydrometallurgy or pyrometallurgy we have to send the recycled materials to other countries to be turned into cathode and shipped back to us,” Spangenberger said.

“To make lithium-ion battery recycling profitable, without requiring a disposal fee to consumers, and to encourage growth in the recycling industry, new methods that generate higher profit margins for recyclers need to be developed.”

There are challenges for direct recycling, including continuously evolving chemistries, Spangenberger said. “ReCell is working on separating different cathode chemistries.”

Early electric vehicle battery cells typically used a cathode with equal amounts of nickel, manganese, cobalt or 1-1-1. This has changed in recent years as manufacturers seek to reduce costs and cathode chemistries can be 5-3-2, 6-2-2 or 8-1-1.

The approach at Faraday’s ReLib project is to blend recycled with virgin material to get the required ratios of nickel, manganese and cobalt.

Why We Need Green Hydrogen

BY:  RENEE CHO
View the original article here

Green hydrogen has been in the news often lately. President-elect Biden has promised to use renewable energy to produce green hydrogen that costs less than natural gas. The Department of Energy is putting up to $100 million into the research and development of hydrogen and fuel cells. The European Union will invest $430 billion in green hydrogen by 2030 to help achieve the goals of its Green Deal. And Chile, Japan, Germany, Saudi Arabia, and Australia are all making major investments into green hydrogen.

Photo: Dave Pinter

So, what is green hydrogen? Simply put, it is hydrogen fuel that is created using renewable energy instead of fossil fuels. It has the potential to provide clean power for manufacturing, transportation, and more — and its only byproduct is water.

Where does green hydrogen come from?

Hydrogen energy is very versatile, as it can be used in gas or liquid form, be converted into electricity or fuel, and there are many ways of producing it. Approximately 70 million metric tons of hydrogen are already produced globally every year for use in oil refining, ammonia production, steel manufacturing, chemical and fertilizer production, food processing, metallurgy, and more.

There is more hydrogen in the universe than any other element—it’s been estimated that approximately 90 percent of all atoms are hydrogen. But hydrogen atoms do not exist in nature by themselves. To produce hydrogen, its atoms need to be decoupled from other elements with which they occur— in water, plants or fossil fuels. How this decoupling is done determines hydrogen energy’s sustainability.

Most of the hydrogen currently in use is produced through a process called steam methane reforming, which uses a catalyst to react methane and high temperature steam, resulting in hydrogen, carbon monoxide and a small amount of carbon dioxide. In a subsequent process, the carbon monoxide, steam and a catalyst react to produce more hydrogen and carbon dioxide. Finally the carbon dioxide and impurities are removed, leaving pure hydrogen.  Other fossil fuels, such as propane, gasoline, and coal can also be used in steam reforming to produce hydrogen. This method of production—powered by fossil fuels—results in gray hydrogen as well as 830 million metric tons of CO2 emissions each year, equal to the emissions of the United Kingdom and Indonesia combined.

When the CO2 produced from the steam methane reforming process is captured and stored elsewhere, the hydrogen produced is called blue hydrogen.

Photo: parent55

Hydrogen can also be produced through the electrolysis of water, leaving nothing but oxygen as a byproduct. Electrolysis employs an electric current to split water into hydrogen and oxygen in an electrolyzer. If the electricity is produced by renewable power, such as solar or wind, the resulting pollutant-free hydrogen is called green hydrogen. The rapidly declining cost of renewable energy is one reason for the growing interest in green hydrogen.

Why green hydrogen is needed

Most experts agree that green hydrogen will be essential to meeting the goals of the Paris Agreement, since there are certain portions of the economy whose emissions are difficult to eliminate. In the U.S., the top three sources of climate-warming emissions come from transportation, electricity generation and industry.

Long haul trucking is difficult to decarbonize.
 Photo: raymondclarkimages

Energy efficiency, renewable power, and direct electrification can reduce emissions from electricity production and a portion of transportation; but the last 15 percent or so of the economy, comprising aviation, shipping, long-distance trucking and concrete and steel manufacturing, is difficult to decarbonize because these sectors require high energy density fuel or intense heat. Green hydrogen could meet these needs.

Advantages of green hydrogen

Hydrogen is abundant and its supply is virtually limitless. It can be used where it is produced or transported elsewhere. Unlike batteries that are unable to store large quantities of electricity for extended periods of time, hydrogen can be produced from excess renewable energy and stored in large amounts for a long time. Pound for pound, hydrogen contains almost three times as much energy as fossil fuels, so less of it is needed to do any work. And a particular advantage of green hydrogen is that it can be produced wherever there is water and electricity to generate more electricity or heat.

Hydrogen has many uses. Green hydrogen can be used in industry and can be stored in existing gas pipelines to power household appliances. It can transport renewable energy when converted into a carrier such as ammonia, a zero-carbon fuel for shipping, for example.

Hydrogen can also be used with fuel cells to power anything that uses electricity, such as electric vehicles and electronic devices. And unlike batteries, hydrogen fuel cells don’t need to be recharged and won’t run down, so long as they have hydrogen fuel.

Fuel cells work like batteries: hydrogen is fed to the anode, oxygen is fed to the cathode; they are separated by a catalyst and an electrolyte membrane that only allows positively charged protons through to the cathode. The catalyst splits off the hydrogen’s negatively charged electrons, allowing the positively charged protons to pass through the electrolyte to the cathode. The electrons, meanwhile, travel via an external circuit—creating electricity that can be put to work—to meet the protons at the cathode, where they react with the oxygen to form water.

Hydrogen Hyundai. Photo: Adam Gautsch

Hydrogen is used to power hydrogen fuel cell vehicles. Because of its energy efficiency, a hydrogen fuel cell is two to three times more efficient than an internal combustion engine fueled by gas. And a fuel cell electric vehicle’s refueling time averages less than four minutes.

Because they can function independently from the grid, fuel cells can be used in the military field or in disaster zones and work as independent generators of electricity or heat. When fixed in place they can be connected to the grid to generate consistent reliable power.

The challenges of green hydrogen

Its flammability and its lightness mean that hydrogen, like other fuels, needs to be properly handled. Many fuels are flammable. Compared to gasoline, natural gas, and propane, hydrogen is more flammable in the air. However, low concentrations of hydrogen have similar flammability potential as other fuels. Since hydrogen is so light—about 57 times lighter than gasoline fumes—it can quickly disperse into the atmosphere, which is a positive safety feature.

Storing liquid hydrogen. Photo: Jared

Because hydrogen is so much less dense than gasoline, it is difficult to transport. It either needs to be cooled to -253˚C to liquefy it, or it needs to be compressed to 700 times atmospheric pressure so it can be delivered as a compressed gas. Currently, hydrogen is transported through dedicated pipelines, in low-temperature liquid tanker trucks, in tube trailers that carry gaseous hydrogen, or by rail or barge.

Today 1,600 miles of hydrogen pipelines deliver gaseous hydrogen around the U.S., mainly in areas where hydrogen is used in chemical plants and refineries, but that is not enough infrastructure to accommodate widespread use of hydrogen.

Natural gas pipelines are sometimes used to transport only a limited amount of hydrogen because hydrogen can make steel pipes and welds brittle, causing cracks. When less than 5 to 10 percent of it is blended with the natural gas, hydrogen can be safely distributed via the natural gas infrastructure. To distribute pure hydrogen, natural gas pipelines would require major alterations to avoid potential embrittlement of the metal pipes, or completely separate hydrogen pipelines would need to be constructed.

Fuel cell technology has been constrained by the high cost of fuel cells because platinum, which is expensive, is used at the anode and cathode as a catalyst to split hydrogen. Research is ongoing to improve the performance of fuel cells and to find more efficient and less costly materials.

A challenge for fuel cell electric vehicles has been how to store enough hydrogen—five to 13 kilograms of compressed hydrogen gas—in the vehicle to achieve the conventional driving range of 300 miles.

The fuel cell electric vehicle market has also been hampered by the scarcity of refueling stations. As of August, there were only 46 hydrogen fueling stations in the U.S., 43 of them in California; and hydrogen costs about $8 per pound, compared to $3.18 for a gallon of gas in California.

Hydrogen gas pump.
Photo: Bob n Renee

It all comes down to cost

The various obstacles green hydrogen faces can actually be reduced to just one: cost. Julio Friedmann, senior research scholar at Columbia University’s Center on Global Energy Policy, believes the only real challenge of green hydrogen is its price. The fact that 70 million tons of hydrogen are produced every year and that it is shipped in pipelines around the U.S. shows that the technical issues of distributing and using hydrogen are “straightforward, and reasonably well understood,” he said.

The problem is that green hydrogen currently costs three times as much as natural gas in the U.S. And producing green hydrogen is much more expensive than producing gray or blue hydrogen because electrolysis is expensive, although prices of electrolyzers are coming down as manufacturing scales up. Currently, gray hydrogen costs about €1.50 euros ($1.84 USD) per kilogram, blue costs €2 to €3 per kilogram, and green costs €3.50 to €6 per kilogram, according to a recent study.

Friedmann detailed three strategies that are key to bringing down the price of green hydrogen so that more people will buy it:

  1. Support for innovation into novel hydrogen production and use. He noted that the stimulus bill Congress just passed providing this support will help cut the cost of fuel cells and green hydrogen production in years to come.
  2. Price supports for hydrogen, such as an investment tax credit or production tax credit similar to those established for wind and solar that helped drive their prices down.
  3. A regulatory standard to limit emissions. For example, half the ammonia used today goes into fertilizer production. “If we said, ‘we have an emission standard for low carbon ammonia,’ then people would start using low carbon hydrogen to make ammonia, which they’re not today, because it costs more,” said Friedmann. “But if you have a regulation that says you have to, then it makes it easier to do.” Another regulatory option is that the government could decide to procure green hydrogen and require all military fuels to be made with a certain percentage of green hydrogen.
The California National Guard designed hydrogen fuel cells that use solar energy for electrolysis to make green hydrogen. Photo: US Army Environmental Command

Green hydrogen’s future

A McKinsey study estimated that by 2030, the U.S. hydrogen economy could generate $140 billion and support 700,000 jobs.

Friedmann believes there will be substantial use of green hydrogen over the next five to ten years, especially in Europe and Japan. However, he thinks the limits of the existing infrastructure will be reached very quickly—both pipeline infrastructure as well as transmission lines, because making green hydrogen will require about 300 percent more electricity capacity than we now have. “We will hit limits of manufacturing of electrolyzers, of electricity infrastructure, of ports’ ability to make and ship the stuff, of the speed at which we could retrofit industries,” he said. “We don’t have the human capital, and we don’t have the infrastructure. It’ll take a while to do these things.”

Many experts predict it will be 10 years before we see widespread green hydrogen adoption; Friedmann, however, maintains that this 10-year projection is based on a number of assumptions. “It’s premised on mass manufacturing of electrolyzers, which has not happened anywhere in the world,” he said. “It’s premised on a bunch of policy changes that have not been made that would support the markets. It’s premised on a set of infrastructure changes that are driven by those markets.”

Researchers on working on hydrogen storage, hydrogen safety, catalyst development, and fuel cells. Photo: Canadian Nuclear Laboratories

There are a number of green energy projects in the U.S. and around the world attempting to address these challenges and promote hydrogen adoption. Here are a few examples.

California will invest $230 million on hydrogen projects before 2023; and the world’s largest green hydrogen project is being built in Lancaster, CA by energy company SGH2. This innovative plant will use waste gasification, combusting 42,000 tons of recycled paper waste annually to produce green hydrogen. Because it does not use electrolysis and renewable energy, its hydrogen will be cost-competitive with gray hydrogen.

A new Western States Hydrogen Alliance, made up of leaders in the heavy-duty hydrogen and fuel cell industry, are pushing to develop and deploy fuel cell technology and infrastructure in 13 western states.

Hydrogen Europe Industry, a leading association promoting hydrogen, is developing a process to produce pure hydrogen from the gasification of biomass from crop and forest residue. Because biomass absorbs carbon dioxide from the atmosphere as it grows, the association maintains that it produces relatively few net carbon emissions.

Breakthrough Energy, co-founded by Bill Gates, is investing in a new green hydrogen research and development venture called the European Green Hydrogen Acceleration Center. It aims to close the price gap between current fossil fuel technologies and green hydrogen. Breakthrough Energy has also invested in ZeroAvia, a company developing hydrogen-fueled aviation.

In December, the U.N. launched the Green Hydrogen Catapult Initiative, bringing together seven of the biggest global green hydrogen project developers with the goal of cutting the cost of green hydrogen to below $2 per kilogram and increasing the production of green hydrogen 50-fold by 2027.

Ultimately, whether or not green hydrogen fulfills its promise and potential depends on how much carmakers, fueling station developers, energy companies, and governments are willing to invest in it over the next number of years.

But because doing nothing about global warming is not an option, green hydrogen has a great deal of potential, and Friedmann is optimistic about its future. “Green hydrogen is exciting,” he said. “It’s exciting because we can use it in every sector. It’s exciting because it tackles the hardest parts of the problem—industry and heavy transportation. It’s interesting, because the costs are coming down. And there’s lots of ways to make zero-carbon hydrogen, blue and green. We can even make negative carbon hydrogen with biohydrogen. Twenty years ago, we didn’t really have the technology or the wherewithal to do it. And now we do.”