Sustainable buildings: investing to tackle the 40% challenge for a climate-resilient future
In the climate change debate, real estate is the elephant in the room.
Our homes, offices, shops and recreational spaces - the physical infrastructure crucial to human prosperity and wellbeing - account for around 40 per cent of global carbon emissions. What is more, the built environment is also responsible for numerous other ecological problems, including excessive water usage, electricity usage, and waste on a similar order of magnitude.
How to shrink the real estate industry’s environmental footprint was the focus of this year’s Klosters Forum on “how to design and build for a regenerative future”.
During a three-day meeting in June, participants took part in detailed discussions covering issues ranging from sustainable construction, regenerative practices, innovative buildings design and materials and the role of nature.
Launching the debate on the theme: “how to tackle real estate’s 40 per cent challenge and realise a climate-resilient future”, representatives from Pictet Group explained why assessing real estate’s environmental credentials is fraught with difficulty.
Zsolt Kohalmi, global head of real estate and Deputy Chief Executive Officer at Pictet Alternative Advisors, pointed to the “time value of carbon emissions” as an example of the complexities facing real estate companies and investors as they attempt to shift to more sustainable practices.
For an average life of a building, Kohalmi said up to 45 per cent of total emissions occur in the first couple of years – a construction phase of a project that involves extraction of raw materials, manufacturing, transportation, installation, and disposal of waste.
These emissions – otherwise known as embodied carbon – are far greater than those of operational carbon, which is the amount of carbon emitted annually once a building is in use.
The Klosters Forum participants, who included architects, urban planners, green building start-ups, material scientists and investors, shared personal experiences and offered insights on how to tackle real estate’s environmental problem.
A few themes stood out. The role of nature in the built environment was one.
Participants agreed on the need for the built environment to be reconnected with nature.
This would involve a number of novel construction techniques, including incorporating natural and regenerative elements into building designs, experimenting with innovative bio-based materials such as timber and algae and carrying out strategic reforestation, afforestation, and other carbon capture methods.
“As (Italian botanist) Stefano Mancuso says, we’re living in nature and plant blindness. We have to incorporate nature into our culture; culture is not antithesis to nature,” said Mikolaj Sekutowicz, a participant and partner responsible for Strategic Development and Culture at Therme Group, a German resort developer.
The rewilding of cities could also help reduce the environmental impact of buildings. Among the most high-profile projects is Bosco Verticale (Vertical Forest), a residential block in Milan.
Towering 111 metres and 76 metres high, the twin buildings together have 20,000 trees, shrubs and perennial plants, mitigating smog, producing oxygen, reducing energy consumption and sequestering carbon. What is more, residents of the building have expressed a high degree of satisfaction with comfort levels and thriving green areashttps://www.worldgbc.org/news-media/bosco-verticale-not-easy-being-green. This offers a prime example of biophilic architecture that can connect people and nature.
But the construction of new buildings, even using sustainable techniques, is no panacea, participants were told. In many parts of the developed world, where buildings were constructed during the last decades, retrofitting might be a better way to reduce carbon emissions.
There is a need for the built environment to be reconnected with nature.
Copyright © 2022 Julian Tse Photography
In Europe, for example, some 90 per cent of buildings were built prior to 1990 and 40 per cent before 1960. Studies have shown that refurbishing can result in 70 per cent less emissions than new construction given the issue of the previously mentioned embodied carbon emissionsEuropean Union, In focus: Energy efficiency in building, 2020; American Institute of Architects, BHSF and EHA, 2021.
This is not to say, however, that other parts of the world do not need new buildings. Economies in Asia, Africa and Latin America will require more residential and commercial floor spaces to accommodate a growing population.
“A one size fits all approach doesn’t work in promoting sustainable buildings,” said Stephen Freedman, head of research and sustainability for Thematic Equities at Pictet Asset Management.
Instead, he added, a customised approach is essential to develop climate-resilient neighbourhoods in close collaboration with local communities. Location-specific features must be factored in, such as building technologies that are suited for different geographies and reflect the local availability of raw materials.
The Italian city of Venice – whose very existence is threatened by climate change - can serve as an inspiration.
When it was built 1,600 years ago, it used water-resistant alder trees that were abundant in nearby forests as foundations to stay afloat on the marshland. Now, the city is safeguarding its future by turning to new nature-based solutions.
For example, it is using locally sourced natural materials and labour to build fortifications in its salt marsh belt, which represents the city’s best defence against storm surges and waveshttps://webgate.ec.europa.eu/life/publicWebsite/index.cfm?fuseaction=search.dspPage&n_proj_id=4555. The bioengineering project has also engaged residents and businesses, providing employment and economic opportunities in the local community.
As Venice’s efforts demonstrate, governments and municipal authorities play a key role in sustainable construction.
Forum participants agreed that policymakers should adopt a carrot and stick approach – incentivising climate and nature-positive companies and projects with tax breaks and smart subsidies while penalising and regulating firms that fail to take action. Such policies should help highlight the true financial and social cost of non-sustainable buildings.
But attendees also warned against the industry relying exclusively on top-down approaches. Instead, they called for decentralised decision-making involving local communities. They also emphasised the role of “soft power” such as education initiatives and better climate reporting.
“We need a framework where everyone can participate in regenerative development,” one participant said.
Increasing investing in research and development (R&D) should also be a priority to enhance competitiveness, foster innovation and accelerate sustainable transition. The construction sector is traditionally considered conservative and low-tech due to the lack of R&D investment, which is estimated to be in low single digits as a percentage of revenue, compared with at least 10 per cent for healthcare and IT counterparts. Here too, tax reliefs – such as the UK’s tax credits on R&D activity in the innovative use of green methods -- can help encourage investment in growth and sustainable innovation.
The financial industry has a duty to address and improve real estate’s 40 per cent problem. At the same time, sustainable transition in buildings represents a large, long-term and growing investment opportunity. Specifically, the industry should mobilise private capital into sustainable buildings to meet increasing demand from investors for impact solutions which incorporate environmental, social and governance (ESG) aspects.
A one-size-fits-all approach doesn't work in promoting sustainable buildings.
One participant quoted former British Prime Minister Winston Churchill who said in 1944: “We shape our buildings; thereafter they shape us.” As demand for more efficient, environmentally-friendly building is poised to grow, participants called for a more thoughtful approach to how we construct, run, refurbish and demolish buildings, to make the built environment climate resilient and equitable for all.
Timber renaissance: building a new solution to limit global warming
Every day, the world’s urban population swells by 200,000. At that rate, more than two thirds of us will be living in cities by 2050 compared with just over half todayUN World Urbanisation Prospects.
That will require a significant expansion of the built environment. It could also mean a significant enlargement of humans’ carbon footprint. Cities already account for around three quarters of global carbon emissions and energy useSeto et al. 2014; UN-Habitat, 2011. This means using popular construction techniques and planning methods would likely derail efforts to halt climate change.
But it need not be this way. Participants attending The Klosters Forum showcased the ways in which the looming urban expansion could yet be sustainable. Not all the solutions were technologically advanced. The most effective, attendees discussed, literally grows on trees.
Timber has strong credentials as a sustainable building material. Historically, timber has been used in building construction for centuries across Asia, Europe and Americas thanks to its durable and resilient properties and relative ease of construction.
In recent decades however, the material’s share in building has shrunk in the face of concrete and steel which are considered more durable, rot resistant and easy to mass produce.
Wood for good
In a workshop on “how to scale timber buildings that regenerate sustainable forestry and local economies,” The Klosters Forum participants stressed the need to readopt this earliest method of construction en masse, especially if the world were to halt global warming and environmental degradation.
Timber provides an attractive cost-effective means to reduce net carbon emissions, especially the embodied carbon that the building sector badly needs to cut.
What’s more, it also acts as carbon sink, can restore biodiversity and improve soil quality.
There’s no shortage of data to support timber’s utility. For example, research shows a young willow tree building up a dry biomass of 75kg in the first five years of growth captures 140kg of CO2,Zuercher, Bern University which compensates the emission from a typical household’s electricity use for 10 days.US EPA
Wood sequesters carbon even after it is logged. Every cubic metre of wood used as a substitute for steel or aluminium reduces carbon emissions to the atmosphere by an average of 0.9 tonnes.European Confederation of Woodworking Industries Proper forest management ensures timber is sourced sustainably without depleting forests.
New technology is making timber even more versatile
Source: The European Confederation of Woodworking Industries
Busting the myths
The key challenge, forum participants agreed, lay in formulating strategies that could incentivise the construction of timber-based buildings and regenerate sustainable forestry and local economies.
One of the myths surrounding timber is that it is not fit for tall buildings. However, mass timber is beginning to be used more widely for high-rise buildings, thanks to innovation.
Among the pioneering engineered wood products is cross-laminated timber (CLT) – a building panel made of sawn, glued and layered wood which allows architects to build wooden skyscrapers.
Mjøstårnet, currently the world’s tallest timber building in Norway, which rises to more than 85-metre high, uses CLT. A 100-metre-tall timber residential block is currently planned in Switzerland for completion in 2026.
The market for CLT is expected to grow to a USD2.5 billion globally by 2027 from the current USD1.1 billion, an annual increase of some 15 per centMarkets and Markets.
Another misconception is that timber-based buildings pose a fire hazard. However, wood is inherently fire resistant – when the external layers of a timber beam char, they protect the core from damage for longer periods. What is more, new technologies such as CLT can produce a stronger and fire-resistant weave which can outperform unprotected steel structures in fire safety.
Built by Nature, an Amsterdam-based organisation dedicated to showcasing ground-breaking projects, has been making multi-million euro grants to foster mass timber construction in cities.
“There are a lot of myths about mass timber – whether it’s inflammable or contributes to deforestation for example. There are a lot of research that speak the contrary and it’s important to distribute them and dispel these myths,” its CEO Amanda Sturgeon, a participant, said.
Forum attendees discussed the lack of technical knowledge in the public sector and municipal authorities. To overcome this challenge, forum attendees suggested that the industry should train sustainability facilitators to engage with this tough group of stakeholders.
They added that regulation and tax schemes should also change to reward environmental performance of buildings to induce system-wide change.
Encouragingly, some European governments are pledging a greater use of timber and other sustainable materials to meet national or municipal net zero targets. The city of Amsterdam is mandating that 20 per cent of all new construction projects to use wood or other biobased materials from 2025.
The French government is requiring all new public buildings to be made at least 50 per cent from wood or other sustainable materials from this year.
Typically, residential buildings in Europe use around 20 per cent of timber; this number drops to just 5 per cent for commercial counterpartsTomorrow's Timber.
“Policies and mandates have to come into play to move the sector at speed we need,” Sturgeon said.
Waste that is resourceful: new building materials that regenerate
Hemp, seaweed or even demolition waste?
The Klosters Forum participants, representing a diverse group of building industry practitioners such as architects, engineers, entrepreneurs, insurers and investors, explored ambitious ideas on how to source and introduce nature-based building materials.
In a workshop on “the quest for new building materials & the role of nature”, participants heard from Dr. Merlin Sheldrake, a British biologist, who championed fungi as a valid and practical alternative building material.
The author of the book “Entangled Life: how fungi make our worlds, change our minds and shape our futures” explained why the building industry should tap fungi to benefit from their unique abilities such as carbon absorption and improving biodiversity.
Fungi are “non-human intelligence” which could help humans solve their pressing environmental problems, Sheldrake said.
Fungi indeed are an up-and-coming material in various industries. Engineers have turned mycelium, a complex network of durable fibres that support fungi, into a bioregenerative material that can be used as building blocks.
MycoWorks, a San Francisco-based mycelium start-up, has discovered that its patented bricks made of fungi are sturdy yet flexible, resilient and weather-proof that can be shaped like a cement block. Mycelium-based bricks are compostable with a consistency that is stronger than concrete when compared pound for pound.
Going for “brown gold”
Dr Gnanli Landrou, co-founder of Swiss-based Oxara, used the forum to showcase the cement-free admixture technology that his start-up has developed. Oxara’s patented method mixes clay-based excavation waste with a mineral additive, which hardens after 24 hours, ready to be used in building floors and non-load-bearing walls.
Oxara’s earth concrete has all the processing advantages of the conventional counterpart but emits 20 times less embodied carbon and is cheaper, which means it can help build affordable housing.
That could be crucial.
Data from EU shows construction and demolition waste is the bloc’s single largest waste stream by mass – 15 per cent of which goes directly to landfillEuropean Environmental Agency.
“There’s plenty of waste that can be recycled. It’s also a financial issue for a company -- if you don’t recycle you have to deal with it,” said Dr Landrou.
“What was considered as waste yesterday is now a resource. In the circular economy there’s no waste. Demolition waste in construction, in the future I hope, will be brown gold. We need to change the construction industry one building at a time.”
What was considered as waste yesterday is now a resource. In the circular economy there’s no waste.
Ditte Lysgaard Vind, a renowned circular economy specialist, gave forum attendees samples of building materials made from recycled beer kegs and sea plants. She explained that hemp was another natural material that could be used in construction.
“We can design the world of tomorrow with the waste of today, while designing a world without waste,” she told the forum.
“As we move further into bioengineering, we can turn nature into biomaterials that are convenient to scale.”
The other material Lysgaard Vind demonstrated was made of eelgrass, a plant species found in estuaries, bays and other shallow nearshore areas.
Eelgrass, which absorbs three times more greenhouse gas than trees, is a carbon-negative building material that is also fireproof, rot resistant and a good insulator. It can also be thatched – using a traditional Viking method -- and prefabricated into convenient panels that install easily onto roofs and façades.
While alternative building materials are promising, their commercialisation has been slow in an industry that is typically resistant to technological change.
However, Lysgaard Vind believes changing business dynamics between developers and climate-conscious investors could prove transformative.
Developers – both big and small - have no choice but to incorporate sustainability to avoid the risk of their buildings becoming a stranded asset, Lysgaard Vind added.
“The built environment has become such an asset class that it is servicing the financial industry by offering investment opportunities,” she says. “With investors being the key decision makers, demand for sustainability and transparency is a positive driver now.”
Copyright © 2022 Julian Tse Photography
What is The Klosters Forum?
The Klosters Forum is a not-for-profit organisation, offering a neutral platform for disruptive and inspirational minds to tackle some of the world’s most pressing environmental challenges. Its mission is to accelerate positive environmental change by developing and nurturing a growing community of leading thinkers and doers and by fostering cross-disciplinary exchange and collaborations.
Every year, the Forum hosts an environmental annual event connecting high-profile participants from the fields of science, business, politics and industry, as well as NGOs, creative minds and sustainability experts in a neutral and discreet environment. This year, the annual forum took place on 28-30 June 2022 with the theme “The future of the built environment.”
Click here to find out more.
Pictet’s partnership with The Klosters Forum
The Pictet Group is pleased to partner with The Klosters Forum to draw attention to the impact of real estate on our environment and to contribute to the conversation about this important issue.
As stewards of global capital, we are able to withhold or withdraw capital from businesses that fail to take their environmental responsibilities seriously. In our view, whilst today’s environmental debate tends to focus primarily on climate change, investors now need to pay as much attention to their impact on biodiversity as they do to their carbon footprint. Our investment teams have substantial experience in this area through the pioneering range of sustainable and thematic investments they manage.
