The impacts of climate change are becoming more obvious every day, hastening humanity’s response and shaping our lives in many ways. As such, it has rightly become a pressing issue across nearly every sector of business. As the built environment is responsible for generating nearly 40% of global greenhouse emissions annually, the problem is particularly pronounced in the real estate industry.
To examine the causes of and potential solutions to this threat, UVA’s Center for Real Estate and the Built Environment explored the critical topic with a special webinar on April 28, featuring a timely conversation with keynote speaker Owen Thomas, CEO of Boston Properties (NYSE:BXP). Presented by the Center’s Director, McIntire School of Commerce Professor Drew Sanderford, and moderated by Dean Malo André Hutson of the School of Architecture, the engaging virtual event welcomed guest speakers Professors Vanessa Guerra and Arsalan Heydarian from the School of Architecture, as well as Central Michigan University Director of Real Estate and Professor Spenser Robinson.
A Here-and-Now Problem
Thomas discussed the hurdles for reaching “net zero real estate,” and the strategies BXP has implemented to achieve it over time, with their assets. Leading “the largest public company in the country that owns major commercial office buildings,” with 80% of its portfolio in downtown districts in coastal cities, the executive explained the challenges that he and his firm face.
“As you think about the built environment, it is responsible for about 40% of greenhouse gas emissions; about 28% comes from building operations: power, gas, steam. And then the other 10% comes from the construction of buildings; the creation of concrete and steel, in particular, uses enormous amounts of power, which create greenhouse gas emissions, and that’s a big part of the climate impact of the real estate business and the built environment,” he says.
Speaking about the three “scopes” used for classifying emissions (scope 1: direct activities; scope 2: upstream activities; and scope 3: downstream activities, construction, and the actions of tenants who control their own power), Thomas noted how there is consistent focus on scope 1 and 2 emissions in real estate, while scope 3 receives less attention but is a large contributor to the greenhouse gas issue.
“Whenever anybody talks about net zero in real estate, they’re always talking about scopes 1 and 2. But 3 is big, and it’s important, particularly if you’re a developer,” he says. “A lot more effort is going to go into the scope 3 mitigation.”
Thomas acknowledged that as a property company, they can only do so much, but believes that “greening the value chain” is critical for the future of the built environment. “We can use the right materials, have the most efficient building systems, measure, monitor…but if we don’t have green power and green materials, most notably concrete and steel, we can’t get to absolute zero. So, we are engaging a lot more proactively with our supply chain to try to make all that happen, because it must be done in unison.”
Thomas detailed the methods BXP uses to inventory their carbon problem and their sustainable activities, their net zero goals when considering new projects, as well as the influence of regulations in cities where they operate. He says there is a need to try to get closer to science-based temperature targets—and fast—if net zero is going to be reached.
“This is clearly a here-and-now problem. It’s a problem for all of us, and we need to do something about it.”
As Director and former Global Chairman of the Urban Land Institute, Thomas also spoke about how that organization actively monitors the real estate industry for carbon performance and consults with both municipalities and smaller firms to lower their emissions.
“The Urban Land Institute is probably the largest organization that focuses on the real estate industry and the built environment. We have founded a net zero imperative where we are working with cities and with property owners to give them actionable plans for how they can get their buildings or their cities to net zero.”
Measuring and Reporting
Following Thomas, three other featured speakers helped to expand the conversation in a variety of areas critical to real estate.
Robinson brought up the SEC Proposed Rule S7-10-22 from March 2022, which, while not yet official, will present some hurdles for companies. Highlights include mandatory disclosing of climate risks starting in 2023 or 2024. In addition to all public firms being required to report their scope 1 and 2 emissions, and all larger-sized firms reporting scope 3 emissions, they will also require external audits by an approved greenhouse gas authority.
In addition to defining different types of risk, such as acute risk, which is composed of event-driven extreme weather events, and chronic risk, which includes longer-term weather patterns and related effects (e.g., sustained higher temps, sea level rise, and drought), Robinson discussed the difficulties of measuring scope 3 emissions. Indicating that much of the measurement may involve estimations and assumptions, he also discussed some of the methods employed to attempt to measure greenhouse gases, and suggested that the SEC will likely settle on one of the preexisting international standards for general carbon footprinting when the time comes.
Heydarian, from UVA’s School of Engineering and a member of the University’s Link Lab, focused his talk on interiors. As his own research broadly focuses on user-centered design, construction, and operation of intelligent infrastructure, he tackled the question of producing healthy, clean indoor air at a reasonable cost.
“The idea is this: Instead of a preset schedule, can we use contextual information to optimize the operation of HVACs?” he asks.
By employing more efficient ventilation control algorithms on HVAC systems, Heydarian says it’s possible to improve air quality while cutting down on HVAC energy usage, which represents about 50% of residential and commercial energy consumption. He explained that his research looked at historical occupancy rates to predict future numbers using Python to inform the HVAC system and the decision to power ventilation based on total energy and productivity costs, as limiting ventilation during unoccupied hours reduced energy use without compromising quality.
Scheduling can make a big difference. Using estimates of the model Heydarian and his UVA colleagues employed, they improve the optimization of the HVAC system by 15%, admitting that they would need to move toward a more user-centered perspective of how they manage the buildings (so that the space remained comfortable at all times for anyone in it), but insist that the approach produces “major energy savings and creates healthier environments.”
Recognizing Informal Systems
Guerra, whose background as an architect, urban planner, researcher, and scholar informed her talk, discussed informal systems and economies as a contributor to urban resilience in Quito, Ecuador.
Interested in expanding concepts about the built environment and areas that promote sustainable communities to create real estate value, economic development, and more, Guerra detailed the workings of informal transportation systems in Ecuador’s capital city. As the informal sector in cities around the world represent two-thirds of the planet’s workers, it contributes about $10 trillion to the global economy, and by 2050, is on track to become the biggest global economy, with 50% of the urban population involved.
Turning to a case study of the informal transportation systems in Quito to explain how they contribute to the resilience of the city, Guerra says that the unregulated covered pickup trucks that bring commuters to the central area of Quito from areas farther afield help the city to battle many disruptions, including floods and political protests—regular contributors to congestion that state-sponsored, “legitimate” systems cannot overcome. Her findings challenge the current narrative that informal systems are problematic and have negative implications for cities, but as they provide a great deal of value, she believes these systems can teach much about resilience and adaptability.
“The informal sector is too powerful to ignore, and we need to find ways to work with all the pieces, but we need data, which makes it difficult to quantify it,” she says. “It is important to find ways to accurately report the impact and significance of these practices all around the world.”
Reasons for Optimism
In closing out the event, Sanderford asked his guests what they’ve witnessed that offers them hope for addressing the challenges ahead.
Thomas was honest in his assessment of the situation, but still upbeat: “We’re late. Unfortunately, humans think and operate more in the short term. This problem requires 50-year, 100-year planning. Many knew this problem was out there many, many years ago, and it has unfortunately taken severe weather events and real evidence of climate change to force action. But what gives me hope is there are a lot of people after it now. The amount of dialogue that we have with our shareholders, lenders, and clients has increased exponentially in the last couple of years. And that gives me great hope that we’re on a track where we can attempt to solve these problems.”
Guerra says that “communities’ agency and capacity to bring about change and to implement their own initiatives” offer her hope.
Heydarian found solace in the progress of tech, seeing potential improvements for the future through better monitoring and tracking through automation: “We’re at a point that we definitely need to address some major issues, and where automation is taking us can help to a certain extent.”
Robinson found that the conversation itself and other events like it that bring attention to the issue provide a reason to believe that the situation can be righted. “The more dialogue we have, the more attention we shine on something, and the more people begin to focus on this from a big picture. Where I’m seeing hope is that virtually every major government has now decided to jump in and suggest that this is a real issue. This increased rigor and increased attention [bring] more smart, motivated people focusing on bettering the planet,” he says.
The Center for Real Estate and the Built Environment aims to foster more of these fruitful exchanges of ideas to promote positive, actionable steps. They will continue the conversation on Grounds at their inaugural annual conference, to take place Nov. 11.