What's In Store for 2016: CBRE’s Big Predictions for Sustainability in 2016

COP21 a success – what next?
Is 2016 the year we will begin to see real action from participating governments regarding climate change?

Following December’s international convention in Paris, 195 countries signed an agreement to limit the global temperature rise to well below 2 degrees, with an aspiration of meeting a target of 1.5 degrees. At the time, the announcement was met with a poignant mixture of surprise, cynicism and relief.

After all, it is now known that buildings consume around 40% of the world’s energy, and contribute 30% of carbon emissions, so there is no doubt that the property  sector has a big responsibility to meet these targets.

In response, governments are likely to look at the built environment to get results in their drive towards a low carbon economy via increasing construction standards, reporting requirements and Greenhouse gas reductions.

CBRE expect some interesting combinations of government incentives and regulations over the next 12 months, and the hope is that the year ahead will bring progress towards the overall climate change aim.

The rise and rise of ESG
Governments are not alone. Investors will also look to drive a low carbon built environment increasingly using Environmental, Social and Governance (ESG) performance to inform their decision making.

This reflects a risk and reward approach for property investors. For example, mitigating the risk of obsolescence and potentially punitive energy and emissions costs. While, at the same time, anticipating the reward of increased rents, shorter voids, higher quality tenants and higher values from more sustainable buildings.

GRESB (Global Real Estate Sustainability Benchmark) scores have become a key indicator of fund ESG performance, but the most discerning investors are digging deeper to examine the policy and practice behind headline scoring when choosing fund managers and advisors.

The recently released guide Sustainable Real Estate Investment – Implementing the Paris climate agreement: an action framework, provides comprehensive guidance on implementing ESG principles and taking action.

CBRE advises that all property industry players increase their awareness of, and commitment to, better ESG performance or risk being left behind.

Green bonds to the rescue
Alongside, greater focus on ESG issues there is a divestment trend developing. Specifically, institutional investors shying away from fossil fuel industries in favour of ethical investment philosophies such as avoidance of businesses involved in tobacco, weapons and human rights violations.

For real estate this means an increasing number of funds focusing on sustainable buildings or providing funds to improve the energy and carbon performance of existing assets. This is a vital piece of the puzzle for improving building performance and enabling the industry to meet the COP21 goals.

CBRE predicts an influx of innovative financial mechanisms to help make the business case for greener buildings really stack up.

Supply chain – environmental and social concerns to create a new focus
Responsible companies are increasingly bringing the supply chain into their field of vision for sustainability, and seeking to inspire much needed action.

The recently released CDP and BSR Global Supply Chain Report 2016 – From Agreement to Action: Mobilising suppliers toward a climate resilient world – demonstrates the urgency for greater commitment. Commissioned to review the suppliers of 75 global organisations with an annual spend of over US$2 trillion, the report reveals that while 72% of responding suppliers recognise that climate change presents risks to their business, less than half (45%) have set emissions reduction targets and only 34% had reduced emissions in the last year.

Consideration of suppliers’ social responsibility is also coming under increased scrutiny, as demonstrated by new compliance requirements for large businesses in Europe – the European Directive on Non-Financial Reporting – and voluntary measures being put in place globally.

CBRE believes if you are anywhere in the property supply chain it is wise to take note, understand and act accordingly.

A breakthrough for energy storage
Recent years have seen an unprecedented rise in renewable energy installations as technology has become more efficient and cost effective.

To date, we have seen mass coverage regarding solar and wind energy but that is set to change.  Developments in large and small scale energy storage underpinned by new technology will change the landscape. This type of energy storage will allow industry to expand the use of renewables, enable better balancing of demand and grid capacity and could enhance energy security without the need for costly new fossil fuel power stations.

One industry led example is the battery energy storage system (BESS).  On the consumer side, an example is theTesla Powerwall.

At building level, CBRE sees opportunities for on-site storage and local networks to avoid diesel generator requirements, with greater focus on demand response to manage peaks.

Wellness – the emperor’s new clothes or the humanisation of our built environment?
Health and wellbeing are now very much part of corporate occupiers property conversations.

CBRE’s 2016 European Occupier Survey, which surveys leading companies worldwide,  revealed that 75% of respondents have a wellness programme in place, recognising the positive impacts on employee productivity, attraction and retention.

Interestingly, 28% of respondents included “sustainable design and building certification” as a key element of their programme, and 67% noted that ‘indoor environment quality’ was important to their people, up 15% on 2014. The rise of “wellness” can be attributed to the fact it is more personal and easier to grasp as a concept than carbon or climate change, but these results show the intrinsic link between “green” and “healthy” in our workplaces.

We hope that the property sector continues to embrace the value of sustainability this year and the huge opportunity it presents, not only for our industry, but for the millions who engage with us well beyond.