Article

More Progress Required on The Journey Towards Net Zero

Real Estate insight by Louise Collins, Head of Project & Development Services UAE and Head of Engineering & Energy MEA

September 06, 2022

“We need nothing short of a dramatic and ambitious transformation from a world of thousands of net zero buildings to one of billions if we are to avoid the worst impacts of climate change. It is possible to create a world in which every single building produces zero carbon emissions, but we must start today.” – Terri Wills, CEO of the World Green Building Council (WGBC)

There is almost universal acceptance for the need to create more net zero real estate. While most would agree there has been some progress made on this journey, there is far less consensus on the level of progress. Data from the World Green Building Council suggests that progress to date remains limited, with just 804 certified Net Zero buildings globally in June 2021 (WGBC Advancing Net Zero report).

The Intergovernmental Panel on Climate Change (IPCC) has concluded that global CO2 emissions need to reach net zero by 2050 to provide a reasonable chance of limiting global warming to 1.5ºC. Given that the built environment is responsible for around 40% of global carbon emissions, the real estate community clearly needs to take urgent action.

When it comes to the progress made in the Middle East and Africa region, there is no denying the fact that the Net Zero ambitions of the nations’ have opened up more opportunities for real estate developers to capitalize on the far-reaching advantages of green construction. However, challenges remain as the definition of 'net-zero' and measurement can vary.

While some targets focus solely on carbon dioxide and others cover all greenhouse gases, a ‘net zero’ building is generally taken to be one that produces no net carbon emissions during its construction and operation. Carbon emissions are reduced and whatever is left over is balanced by renewable energy or by purchasing carbon offsets.

In the MEA region, most of the current guidelines are only focused on emissions during the building’s operational life. For projects to be truly net zero over their whole lifecycle, carbon emissions associated with construction must also be eliminated as embodied carbon emissions typically contribute between 30% and 70% of a building’s total lifecycle emissions.

Although there has been an increasing number of real estate projects across the region seeking ‘net zero’ status, many are meeting emission targets by purchasing credits from elsewhere, rather than reducing and balancing emissions from within the project itself.

What these projects essentially require is a ‘net zero roadmap’ to guide their future journey as much of the technology does not yet exist and the investment required is currently too high.

Why adopt net zero?

Net zero real estate is not only vital in limiting global warming but also benefits developers, owners, and occupiers. Operating efficiencies result in lower utility bills and efficient buildings are healthier to work in. The next generation of workers are attaching far greater importance to working in sustainable buildings and for sustainable employers.

Access to green funding (often on preferential terms) and higher demand from tenants will ultimately result in higher values, allowing net zero projects to outperform their peers. If these advantages are not sufficient, government regulations will mandate such projects in the longer term. This combination of benefits will eventually result in far more net zero real estate being developed in MEA, but the pace of delivery is likely to vary.

Who will drive the implementation of net zero real estate in the region?

In October 2021, the UAE pledged to reduce its carbon emissions to net zero by 2050, the first country in the region to do so. Against this background, it is only a matter of time before legislation mandating all buildings achieve net zero status by 2050 is introduced in the country.

However, when it comes to the other markets in the region, the current absence of necessary regulations could affect the progress towards building a net zero environment. Considering this, and the shortage of sustainability premiums, the move towards net zero buildings in these markets is likely to be driven by the requirements of global occupiers in the short term.

The UAE development community is responding to the converging pressures from occupiers, investors, and legislators by introducing their own net-zero commitments. Majid Al Futtaim, was the first real estate business in the region to announce a ‘net positive’ strategy (back in 2017), seeking to create a ‘net zero’ corporate footprint by 2040.

When to commence the net zero journey?

The process to create net zero buildings starts with their design, which mostly incorporates a range of energy efficiency features.

The next stage in the process involves the supply chain of products used during the construction process. There is a general lack of understanding about the impact of supply chains and material selection on the level of greenhouse gas emissions. Around 70% of carbon emissions from real estate emanate from just two products - steel and concrete. Thus, a serious effort to create true net-zero buildings necessitates a strategy that prioritizes the reduced use of these two core components.

In conclusion, the transition to net zero buildings (those where emissions are balanced by offset within the property itself) is best viewed as a journey and a long one at that.Inthe Middle East and Africa region, theUAE is currently leading the way (with a commitment to achieve net zero status by 2050), closely followed by KSA with plans to achieve net-zero status by 2060, and possible initiatives that are likely to be introduced ahead of COP27 in Sharm El-Sheikh, Egypt, in November 2022. When it comes to the other nations in the region, they have also jumped on board, following in the footsteps of the aforementioned, although still in early stages, but nonetheless surging forward.

The importance of achieving the desired destination is so great, that more clients are approaching JLL, seeking assistance in the preparation of ambitious yet achievable roadmaps, including quantifiable investment plans to place before their boards and other stakeholders for action.

Considering the gradual change in mindset among developers coupled with the concerted efforts of the governments, we are confident that the pace of progress will continue to increase over the next decade, heralding a sustainable future for real estate in the region and beyond.

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