2023 Winter Issue - 21

ments
Sustainability Outlook:
Top Five Issues
Affecting Real Estate
in 2023
The real estate industry's momentum
on climate action only continues
to grow as the new year
begins, as demonstrated by the
newly released ULI Global Sustainability
Outlook 2023 report. At
the same time, macroeconomic
uncertainties, properly pricing transition
risk, the growing intensity of
climate hazards, and being able
to proactively address government
regulations pose new and continued
challenges for the real estate
and land use sectors.
The ULI Randall Lewis Center
for Sustainability in Real Estate,
in concert with sponsor Ferguson
Partners, convened a series
of roundtables to gain member
input on the publication, engaging
experts and ULI members from
sustainability-focused product
councils in the Institute's three
regions-the Americas, the Asia
Pacific, and Europe. Previous years
have seen the sector strategizing
on environmental, social, and
governance (ESG) and articulating
plans for net zero, but now comes
the urgent need to turn words into
tangible action. The insights from
the roundtables informed this
year's publication, revealing five
key priority areas that will affect the
real estate decision-making.
1. Adjusting ESG strategy for
macroeconomic complications: The
current global economic climate
is raising challenges, questions,
and obstacles to ESG progress in
the real estate sector. This is complicated
by the threat of recession
and rising inflation-forcing the
industry to increasingly grapple
with how to effectively prioritize
sustainability in real estate investment
and transactions while balancing
short- and long-term views
on returns on decarbonization.
2. Embedding transition risk in
transactions and valuations: Investors
and owners are facing material
pressure to price climate risk into
their investment life cycles, and
this challenge will continue to grow
as the appetite for achieving net
zero grows. Being able to accurately
account for the costs and
efforts needed for net zero, while
addressing climate adaptation,
remains a work in progress. Nonetheless,
real estate owners are
planning their exit strategy at the
time of acquisition, paying specific
attention to the risk of disposing of
a stranded asset.
3. Harnessing the power of collaboration:
No one stakeholder
can solve the climate crisis alone;
collaboration is essential in reaching
climate goals at all scales. The
power of effective collaboration on
climate-both at the industry level
and the community level-simultaneously
uplifts the voices of underserved
communities and draws
from a diverse set of professional
perspectives and backgrounds.
Real estate is acting now for results
later because this requires time
and trust to ensure that climate
progress benefits everyone and not
just a privileged few.
4. Addressing global flood challenges:
Water challenges crosscut
and influence the effects of many
climate hazards including, among
them flooding, storms, drought,
and extreme heat. The industry
is looking to scale up methods
to better analyze and quantify
physical climate risk when making
decisions on the location and protection
of the longevity and value
of assets. At the same time comes
the consideration of how to make
buildings and communities better
prepared to respond to extreme
climate events in the future.
5. Responding to government
influence: Regardless of the format
or step in the overall journey
toward sustainability-increasing
acknowledgment of the importance
of climate, federal funding, local
policy incentives, and regional
regulations-governments are
responding. The industry is dealing
with an alphabet soup of regulations
and policy, but waiting for
global consistency is not an option.
As one roundtable participant
said, " Saving the planet is not
something we should compete
on. " With these five issues on the
rise in 2023, the real estate and
land use industry is at a crossroads
to meet the urgency of the moment
and advance and improve upon
the progress made on sustainability
in the built environment.
Read the full publication at uli.
org/SustainabilityOutlook.
EMILY ZHANG is a senior associate with the ULI
Building Healthy Places Initiative. MARTA SCHANTZ
is co-executive director of the Randall Lewis Center for
Sustainability in Real Estate at ULI.
At COP 27, Real Estate
Leaders Say Industry
Must Accelerate
Commercial real estate industry
leaders meeting at COP 27, the
United Nations climate conference
held this year in Sharm El-Sheikh,
Egypt, said a variety of challenges
and opportunities lie ahead in
the industry's drive toward sustainability.
The
challenge is massive. Scientists
estimate that buildings
are responsible for 40 percent of
greenhouse gas emissions-14
gigatons per year in operations,
and another 14 gigatons per
year from construction materials,
according to Roland Hunzicker,
director of the built environment
for the World Business Council for
Sustainable Development.
The European Commission estimates
that 70 percent of existing
buildings need to be retrofitted to
meet carbon reduction goals. That
is starting to happen, real estate
observers say, but not nearly fast
enough.
Retrofits Are Moving Slowly
" We're miles behind, " said Guy
Grainger, global head of sustainability
services and environmental,
social, and governance (ESG) policy
for global real estate advisory firm
JLL. In the Northern Hemisphere,
he said, " [w]e're not even close.
We should be retrofitting 3 percent
of buildings a year in the developed
cities, and we're under 1
percent at the moment. "
WINTER 2023
URBAN LAND
19
2023 Winter Issue

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