By Richard Palmer, WSP | Parsons Brinckerhoff Associate Director Sustainability
How the development of a sustainability value model across the built environment requires an integrated approach across buildings, infrastructure and the public domain.
Scientists and economists both agree that a meaningful reduction in our broad environmental impact makes sound commercial sense. The 2006 Stern Review on the Economics of Climate Change estimated that immediate action on climate change could cost in the order of two per cent of global GDP while delayed action could cost upwards of 20 per cent of global GDP.
Whilst investors have effective tools that value non-financial factors such as corporate governance and the disclosure of Environment, Social and Governance (ESG) issues, the creation of a broader sustainability value framework for assets is still a challenge, but the property market is ahead of the pack.
The property sector has a well-developed asset and portfolio assurance system in place with the Global Real Estate Sustainability Benchmark (GRESB), a reporting tool that provides institutional investors with a globally consistent assessment of how sustainability is addressed across property portfolio assets.
However, the commercial property sector, while significant, represents just a fraction of the built environment, which leaves a significant gap in our current environmental impact knowledge. We have some way to go before other built assets – infrastructure and public domain – have an equally well-developed benchmarking framework.
One of the shortfalls of the current industry approach is the limitations it places on how we treat the interconnectivity and complexity of the built environment. “Buildings do not exist in isolation from the utilities, transport infrastructure and public domain that supports them. Yet we do not measure this connectivity. “
Further alignment would create a workable universal assurance framework for assets. “Likewise, the investment frameworks that underpin the growth of our cities – public spending cycles, public-private partnerships and even private finance for urban renewal projects – are not always accurately reflected in commercial property investment, even though these assets are inextricably linked.”
Green bonds – responsible use of proceeds
The increasing use of green bonds to provide debt market finance for projects is another sustainability assurance measure for responsible investment.
There are greater opportunities available in the green bond space given the range of assets for which debt finance is required and the role that green bonds could play in urban renewal investments.
Buildings are just the beginning
We have solid principles in place for responsible investment in the built environment, frameworks for reporting and asset certification across a range of assets. We also have an increasingly aware investment community that understands the potential for responsible investment to improve the balance of risk and return across built assets.
What we don’t have is a fully integrated system that covers property, infrastructure and urban renewal that is recognised in debt markets, equity markets and across public procurement agencies as the assured measure of sustainability performance.
We can close this gap in investment modelling through open engagement with peak bodies and with development agencies.
“With cross agency collaboration and industry commitment we can develop a single framework for certification and reporting that provides assurance for assets across the entire built environment – and that accurately reflects the interdependent relationships between our buildings, infrastructure and the public domain.”