2023 Fall Issue of Urban Land - 30

developments
developments
Proactive
Sustainability
By making investments
in needed improvements
now, the commercial
real estate industry
could alter the course of
climate change
As an unintended consequence
of economic growth
underpinned by energy
derived from hydrocarbons,
atmospheric concentration of
carbon emissions has risen
to the highest level in human
history. A warming planet has
numerous dire consequences,
including weather that creates
destructive and, at times,
deadly flooding, wildfire, and
extreme heat events, with
increasing frequency. These
conditions illustrate the human
and economic costs of inaction,
and the unpredictability of
a more perilous future.
The built environment is
responsible for roughly 40
percent of annual carbon emissions,
more than any other
industry sector. Notwithstanding
increasing attention to
sustainability initiatives worldwide
and widespread action
thereon, carbon emissions
globally continue to rise. Commercial
real estate and other
industry sectors must continue
to urgently engage in designing
and funding solutions to
lessen carbon emissions and
bend the curve.
Our industry is at an important
inflection point. Years of
prosperity following the GFC
have been recently upended
by the near-term and enduring
impacts of the pandemic.
Although uncertainty remains
about the trajectory of the U.S.
economy, many companies are
30
URBAN LAND
Owen D. Thomas, chairman
& CEO of BXP and former
ULI global chairman
experiencing a recession
in earnings that affects their
decision-making in negative
ways for the real estate
industry-cost-cutting behavior
often leads to space reduction,
and the full impact of
remote and hybrid work is yet
unknown.
Real estate values have reset
due to higher capital costs and
demand challenges in specific
sectors. Thus, a dearth of
activity makes pricing difficult
to determine and financing difficult
to achieve. During these
times, it is easy to be distracted,
reactive, and caught in
the uncertainty of the moment.
But it is our responsibility as
leaders to remain focused
on both short-term issues in
navigating a more challenging
economic environment and the
long-term problem of limiting
climate change through curtailing
carbon emissions.
Many of us were attracted
to real estate as an opportunity
to make a significant and
lasting impact on the places
where we live, work, and play.
We must take steps to avoid
unmanageable impacts of
a warming planet and to
become more resilient, adapting
to manage the unavoidable
impacts ahead.
Although it may be more
challenging to consider
FALL 2023
proactive sustainability investments
in uncertain times, it is
exactly now that investments
in our future success must be
made. The business case for
investing in sustainability initiatives
is clear.
Alignment with client
demand
The quality and financial performance
of real estate assets
is increasingly correlated with
sustainability performance.
Resource efficiency, decarbonization,
indoor environmental
quality, and climate resilience
matter to more and more of
our clients, many of whom are
implementing their own sustainability
strategies.
We can collaborate with
clients in support of their sustainability
objectives, including
in decarbonization and electrification
or distributed energy
resources, performance optimization
platforms, and lowcarbon
building
materials.
As climate technologies
evolve, we can select and
deploy a promising set of new
solutions to attract and retain
clients. Investing in sustainable
improvements to existing
properties and incorporating
sustainable design into new
developments can differentiate
properties and lead to faster
leasing and price premiums
in even the most challenging
markets. For a consistently
increasing percentage of real
estate users, buildings with
leading sustainability performance
constitute a
gating issue.
Access to investors, costs
Value protection and access
to capital is increasingly influenced
by climate-related
factors. Companies that effectively
manage and disclose
sustainability indicators are
more attractive investment
options as more climateconscious
equity and fixedincome
investors consider climate
risks in their investment
decisions.
Assets and portfolios that
are more vulnerable to climate
change will face increased
insurance costs and grow
less attractive to clients and
investors. Asset valuation
and access to capital may be
affected by a mix of physical
and transition risks that can be
managed through leadership,
knowledge, and foresight.
Regulatory compliance
As public climate change
awareness continues to grow,
government agencies and
policymakers are drafting and
implementing climate-related
regulation. A new regulatory
landscape is taking shape
where SEC climate rules will
enhance and standardize climate
disclosures, and building
performance standards in
many US cities will introduce
penalties for buildings with
high energy and carbon intensities.
New codes and ordinances
will require adoption
of advanced high-performance
building practices for new
development and major renovations.
Organizations addressing
climate change proactively
will be better prepared to navigate
regulatory transition risks,
penalties, permitting requirements,
and escalating operating
costs.
Protecting workforce
As leaders, our workforce is
our most important asset.
Competition for talent remains
robust, and a focus on sustainability
and social good
is an important differentiator
for companies looking to
2023 Fall Issue of Urban Land

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