Environmental & Sustainability Impacts on the UK Real Estate Sector

Posted by The Landsite on 22nd November 2022 -

Companies in the UK real estate sector are increasingly evaluating their environmental footprints. 

From legislative and behavioural changes 

Consumers are more discerning when deciding who and where to buy from, choosing brands and products that reflect their own values. Equally, organisations are increasingly using ESG (Environmental, Social & Governance) as a lens through which to view their own way of conducting business, in a more responsible, fairer and sustainable way. In this article we explore some of the key legislative and behavioural changes impacting the real estate sector from an ESG perspective, the implications and likely benefits. 

UK Government Commitment 

A heightened understanding of the causes and effects of climate change is the driving force behind a largely coordinated global effort to tackle arguably the biggest issue of our time. The UK Government has set plans to achieve Net Zero by 2050. In June 2021 it went further than any other nation and a new target was written into law, requiring the UK to reduce its emissions by 78%, by 2035 versus 1990 levels.   

The Government’s commitment has wide-reaching implications for the real estate sector. It is beyond the scope of this article to cover all requirements for commercial and residential sectors, but we highlight some key observations and proposals:  

- New buildings to be zero carbon by 2025 

- New homes to produce 75%-80% less carbon from 2025 and no new homes built from 2025 with fossil fuel heating 

- Energy Performance Certificate (EPCs) C rating on sale or rental of homes in England & Wales by 2028 

- Further tightening of minimum energy efficiency standards (MEES) 

- Mandatory disclosure for lenders of average energy efficiency across their mortgage portfolios 

- Low carbon heat sources to replace oil, coal and gas heating by 2033  

- Performance based ratings for energy use and carbon emissions 

Sustainability in Property Development

The construction industry is one of the biggest emitters of greenhouse gases (GHG). Tackling the above will require innovation and changes in behaviour, not just from developers but landlords, tenants and households. Some key changes are likely to be:  

- Improving insulation and air conditioning for more efficient energy consumption 

- More advanced smart-metering 

- Increased use of renewable energy (wind, solar etc.) 

- Growth in the local storage of renewable energy 

- Increase in EV charging points 

- Retrofitting buildings and reusing materials 

We are seeing more evidence of the sector embracing these requirements and in many cases going further.  The benefits of doing so range from the greater availability and lower cost of funding, through to creating spaces for today’s more consciously minded tenants.  

For example, the property group Bruntwood, has just been granted approval to redevelop a Grade II-listed commercial site in Manchester - Pall Mall on King Street. Completion is anticipated in late 2023 and it is targeting net zero carbon in use, with all energy coming from renewable sources. Redevelopment of the existing structure, rather than rebuilding, is estimated to save c.7,900 tonnes of carbon. Bruntwood is intending to recycle and reuse furniture and materials and create a space for companies that focus on having strong ESG credentials of their own, thus having sustainability, carbon neutrality and wellbeing at their core.  

In summary, change is coming and being proactive will likely be a real competitive advantage. Strong ESG credentials are a must-have, not a nice-to-have. Companies in the UK real estate sector are increasingly evaluating their environmental footprints, devising strategies to achieve Net Zero and developing their social impact. It might sound daunting, but it’s imperative to start your journey today. 

To learn more contact ESGmark®  the community for people and organisations who care about the environment and society.

 

Source information, guides and services for sustainable development

Discover more real estate services and property listings

 

Interested to read more? TLS Insights magazine for property developers, landlords and investors

November Issue | October Issue | September Issue