Building to Net-Zero Together

Policy, industry and finance leaders call for deeper climate action in the built environment

40% of global CO2 emissions come from the built environment, yet the sector is just now gaining the political attention it needs and deserves. As leaders of all corners of the buildings and construction value-chain highlighted during the Race To Zero Dialogue on Built Environment, the sector holds enormous potential for decarbonization and resilience, which is starting to unravel but still requires radical collaboration for acceleration and delivery of scale to reach the SDGs and Paris Agreement.

The discussion took place as a virtual event co-organized by the Global Alliance for Buildings and Construction, the World Business Council for Sustainable Development and the World Green Building Council, supported by nine leading organizations in the built environment space. High-Level Champions for COP 26 Nigel Topping opened the event with a clear message: climate actions in the built environment are happening and we need to ride the momentum to achieve a resilient, full lifecycle net-zero built environment by 2050, as part of the vision of the Global Climate Action Pathway for Human Settlement.

Creating a common vision for getting to net zero

In the first segment of the day, panelists have spoken to the part they are playing in their respective fields, on the road to decarbonization of the built environment. The challenges are clear but the advances that have been made are inspiring. From the academic standpoint, Diana Urge-Vorsatz (IPCC) set the scene for the discussion and highlighted that focusing on energy efficiency is key for the buildings and construction sector to achieve its targets and drilling down on embodied carbon needs to be a priority in this effort. On the business side, companies like Saint Gobain and Majid Al Futtaim have ambitious commitments (net-zero by 2050 and net positive by 2040) and have demonstrated great progress towards their short-and medium-term goals. The call is for other actors along the value-chain to join the effort, alongside with clear policy signals that create the appropriate environment and incentives for achieving net-zero targets. On the policy side, Lawrence Khoza from the city of Johannesburg spoke to the importance of local governments in pushing the green buildings agenda forward, as part of their strategy to tackle climate change effects that immediately impact cities, also calling for a platform for further collaboration and buy-in from all stakeholders. 

The views on finance and design from Zurich Insurance and design company Skidmore, Owings & Merrill, focused on the practicalities of advancing the decarbonization agenda. As an insurance company, Urban Angehrn addressed the responsibility to influence the issuers of the bonds and equities the company owns and hence, taking an active role in working with clients to support adopting and implementing net-zero targets by 2050. Progress is there: over 30 investors, with a sum of USD 5 trillion worth of assets under management, have committed to decarbonize their portfolios under the UN-convened Net Zero Asset Owners Alliance. Building on the finance perspective, Kent Jackson pointed to the disconnects within the sectors, using the example of how design teams work unaware of the financing schemes and how bridging the two might further results. The lack of nexus is also clear in thinking of building codes and project timelines, making the final product, oftentimes, outdated at delivery. Additionally, bringing in the consumer and deeper understanding of the environmental standards of a building is key to unlock emissions savings from design and policy tools like mandatory post-occupancy evaluations can support it.

Overall, a call for more ambitious policy measures, including carbon pricing and tax, together with widespread use of science-based targets (SBTs) and whole life cycle approaches can help engender a spirit of collaboration along the entire value chain. There is no time for blame shifting – it is time to combine forces in the buildings and construction sector, with every stakeholder setting targets, raising ambitions and co-creating a net-zero built environment by 2050.

Enabling full-sector transformation

The second segment of the day focused on the tools and solutions available for a zero-emission, efficient and resilient buildings and construction sector. Martina Otto, Head of UNEP’s Cities Unit presented the new Regional Roadmaps for Buildings and Construction for Africa, Asia and Latin America, from the Global Alliance for Buildings and Construction. The documents bring a set of policy and technology targets and timelines on eight different activity areas that cover the entire built environment and can support countries and regions in formulating their own strategy for decarbonizing the sector. As a deeply engaging process, the development of national or local roadmaps can create the common vision and much needed collaboration across the value chain, as they started to have in the MENA region, Vietnam and Cambodia. Furthermore, these roadmaps sparked regional dialogues and cooperation, addressing data and ambition gaps moving forward.

This segment also hosted the launch of the new report by the International Resources Panel “Resource Efficiency and Climate Change: Material Efficiency Strategies for a Low-Carbon Future” and the two lead authors, Edgar Hertwich and Reid Lifset presented the main findings of the report. Production of material cause 23% of global GHG emissions – without significant increase in efficiency of material use, decarbonization targets won’t be met. Taking a life-cycle perspective where appropriate focus is given to GHG emissions ensures highest impact and hence, the urgent need for cross-cutting policies like virgin materials tax, green procurement, etc.

Based on this presentation, panelists held an energetic discussion on the pathways that enable change. Inger Anderson, Executive Director of the UN Environment Programme, addressed the built environment as the ‘sleeping giant’ of climate and resource efficiency, as it holds enormous potential but ist still underestimated by the global community. In the post-COVID world, as countries concentrate efforts in rebuilding their economies, there is a window of opportunity today to change the game and have green strings attached to stimulus funding and with governments leading by example. One instance where change is already crystalizing is Morocco. Minister of National Planning, Urban Planning, Housing and Urban Policy Nouzha Bouchareb shared the country’s mitigation and adaptation advances as part of Nationally Determined Contributions (NDCs), targeting 52% emission reduction by 2030, being highlighted by the Climate Action Tracker as one of two countries meeting progress. The minister emphasized the need to use the current crisis for a paradigm shift and emphasized the usefulness of the Regional Roadmaps as a tool for change.

Co-chair of IRP Janez Potocnik reinforced the importance of efficiency and the untapped benefits of more intensive use of resources. It is estimated that 20% of floor space is under-utilized and yet, in mature countries, floor space is still being added. The combination of recycling and refurbishment could support cut redundancies and better utilize the existing resources. To set in motion the needed changes, organizations like the Green Climate Fund are also in place, working with countries to create further impact through their investment.

Javier Manzanares, Deputy Executive Director for GCF brought up the USD 2 billion fund for investment in new projects to be launched in 2021and highlighted the importance of buildings and cities in the context of this new round.

What enables us to win the race?

The third segment of the Built Environment Dialogues focused on how key policy, finance, and industry enablers can support the buildings and construction sector on its path to achieving the climate goals of the Paris Agreement. Policy, finance and industry leadership has a great potential to drive decarbonization and ensure resilience of built environment assets, but efforts need to be coordinated. Ambitious net-zero commitments by businesses can only be actualized with the help of policy and finance.

While many promising technologies and solutions for reducing emissions in the built environment already exist, there is a need for legislative and financial support to bring them to scale. The sector needs stringent policy measures and incentives that consider the full life cycle of buildings and that address both operational and embodied carbon.

Three keynote speakers presented trends related to policy, finance and industry in the sector and shared insights on what is needed to accelerate the transition to a sustainable built environment.

The keynote speakers were:

• Peter Graham, Executive Director, Global Buildings Performance Network
• Frank Hovorka, French Federation of Real Estate & President of the Council of RICS France 
• Julie Hirigoyen, CEO, UKGBC

One of the objectives of the session was to engage the audience in a discussion about what policy, financial and industry actors can do to step up and meet their responsibility as successful enablers for a resilient future. Following the three keynote presentations, the participants were divided into virtual break-out groups.

In the finance break-out session, the discussion was centered around how we can translate the information on carbon performance into the valuation and investment process. It is about having accurate and reliable data so that investors can have “trust” and assess the risks of their investments, and create transparency. It is also about how to show the long-term value creation and reduction of risks that come from decarbonizing investment portfolios. The speakers from Generali and LaSalle Investment Management explained how they go about setting targets across their equity, debt and real asset portfolios, which needs a coordinated approach and collaboration with other actors.

The industry discussion focused on the mechanisms needed to scale up solutions existing within industry, to increase both demand and supply and engage all stakeholders in a common direction. This includes the need for a data-driven approach and robust benchmarking to allow meaningful target setting and review of building performance (to therefore enable appropriate policy and financial tools), and the mainstreaming of innovations in technology and business models. Collecting data requires coordination across the sector and companies need to step up to that challenge. Multi-disciplinary approaches are required to share the burden of responsibility - corporate sustainability targets cannot be achieved alone, and it is now an impetus to take action. The speaker from the Institution of Civil Engineers shared the need to apply this approach to infrastructure as well as buildings and the importance of verification to validate goals and progress.

In the discussion on the topic of policy as an enabler for decarbonizing the built environment, there was consensus around that policy is key for spearheading collaboration between stakeholders in the sector. An example from South Africa was brought up where policymakers from different departments united around better and more sustainable building materials. This internal alignment resulted in a greater impact on the business community. Another example from Vietnam emphasized the crucial role of policy in bringing all stakeholders on board by establishing a common vision and building a roadmap linked to strengthening buildings in the country’s NDC.

In a brief survey in the breakout groups on which enabler among industry, policy and finance was most important for the built environment, policy came up on top among all three groups – highlighting a special call for policy action.

Winning together – fostering radical collaboration

The final segment of the day had one common thread across all panelists: radical collaboration is needed now to decarbonize the sector. Moderated by Claire O’Neill, Managing Director of the World Business Council for Sustainable Development, the panel discussed the ways in which cross-value chain collaboration can indeed happen. Among panelists there was a shared sense that no one company or part of the value chain can deliver the needed results and at needed scale. A common vision and language on how to get there is needed so that all stakeholders can play their part and realize the decarbonization potential of the built environment. Bertrand Piccard, CEO of Solar Impulse Foundation, emphasized that big corporations have to be the example and they need to communicate their commitments and success as much as possible to set the standards higher – policy and regulation is needed to align the companies that are resistant to change.

As examples of companies taking lead, both Magali Anderson, CSO for LafargeHolcim and Lena Hok, Vice President of Sustainability for Skanska have demonstrated how these companies are pushing themselves to meet higher, greener targets, through financing tools (sustainable bonds) and through technology (EC3 AI-powered embodied carbon calculator for materials, in collaboration with Microsoft) respectively. 

Nevertheless, change needs to happen in all markets and Elizabeth Chege, Chairperson for the Kenya Green Building Society has highlighted that companies need to deliver in the African continent too. She brought the example of Kenya where advances are being made in materials through a sustainable materials directory in collaboration with IFC’s EDGE buildings program and of Bomayangu, an initiative of the Kenyan government to incentivize the building of green affordable housing.

From the local government perspective, Mayor of Argentinian city of Mendoza, Ulpiano Suarez, echoed the role of cities in the planning of the built environment and stressed the importance of understanding and communicating the economic value of sustainable development to support bringing the different actors behind this vision. On the finance side, Katarina Zraljevic from Banco Procredit Ecuador highlighted the bank’s partnership with IFC Edge buildings program on providing technical assistance for the bank and its clients, building capacity in-house. Last but not least, Seth Schultz from the Resilience Shift put the conversation in perspective, in terms of the time pressure that cities and countries are under. Although decarbonization is urgent, without future-proofing infrastructure, our buildings will be back on the same cycle of vulnerability. Whole system thinking and building resilience is the only way forward and needs to be done fast.

The day was closed in positive and renovated spirits. The time to act is now and everyone needs to get on the road to zero. The science is there and continues to advance – more and more so, the evidence steers towards the importance of material efficiency and ties to consumption patterns. The technology is here and business champions are delivering on their parts on net-zero and committing to higher targets. The policy environment needs to catch up and level the field to move the market to accelerate the pace and increase the scale of implementation. Tools like the regional roadmaps offer a solid methodology on which to build a national strategy for decarbonization. Governments hold a great power of leading by example and using tools like green procurement to epitomize sustainable and innovative buildings. Financing needs to pull its weight, enabling and putting pressure on businesses and governments to decarbonize. All of this in an ever-growing spirit of collaboration, working on mitigation, adaptation and resilience always.

Chile High-Level Champion Gonzalo Munoz reiterated the benefits of a net-zero built environment, as a means for job creation and poverty reduction. Especially now under the current sanitary crisis, the economic stimulus packages for buildings and construction need to come with green strings attached. The sense of urgency filled the virtual room but so did the willingness to collaborate, cooperate and co-create.