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As entities around Australia look to make significant headway on their 2030 net-zero targets, energy-efficient buildings could become a hot commodity to both buy and lease.
As Cushman & Wakefield’s head of sustainability and ESG for Asia Pacific, Matthew Clifford, indicated: “Major occupiers are asking which landlords are going to help them on their journey to net zero.”
“And remember, if you’re talking about professional services occupiers – say a tech company, or a bank, or an insurance company – then up to 80 or 90 per cent of your carbon footprint probably comes from real estate,” he explained.
For those occupiers, a building could potentially make or break their ability to meet their net-zero goals, not to mention how it impacts the bottom line.
“If I sign a lease in a building that’s not net zero or has no plan to be, it’s making it harder for me, the occupier, to reach my goals, and I will likely need to stick my hand in my own pocket to pay for more decarbonisation work because the landlord is such a pivotal part of my overall story,” Mr Clifford noted.
Building investors, then, can potentially find increased competition for their properties with sustainable upgrades.
But according to the ESG expert, the approach to any environmental changes must match the investment strategy.
“If you take a one-size-fits-all approach, there’s a pretty good chance that you’ll apply solutions that don’t pay,” he warned.
For example, Mr Clifford wouldn’t necessarily recommend a big capital spend for a building that’s held in an opportunity fund, where the investors are likely going to sell in two to three years. The approach, he said, needs to be “right sized”.
In that situation, he recommends harnessing technologies that offer small wins.
“A lot of the shorter term solutions are more operational expenditure rather than major capital items – maybe optimising or tuning the building automation or control systems. A really classic example is heating and cooling the building at the same time. It’s just dumb, but it happens all the time. Or running the lights overnight when nobody is there. You wouldn’t expect it, but it still happens, even in modern buildings,” he explained.
“There’s almost always some of these low-hanging fruit, quick wins that don’t cost a lot of capital, that can probably be addressed through better maintenance or OpEx budgets,” Mr Clifford added.
Queried as to whether his approach to sustainability is a cynical one, given that it prioritises investment outcomes, Mr Clifford made the case that sustainability can’t only rely on questions of ethics as a motivational strategy.
“This might sound controversial but hear me out. Scientists have been talking about climate change for 30 years now, banging their heads against the wall and not getting anywhere. Fear mongering about melting ice caps doesn’t motivate people; fear is not a great motivator,” he argued.
To get more of our built environment to go net zero, Mr Clifford said that innovation should look to make financial sense.
“You know what does motivate people? Money. The way to make investors green their buildings is to make sustainability pay.”
Though 2030 may seem like a significant amount of time to enact change, Mr Clifford noted that for investors who have set a net-zero goal, the deadline is really only one investment cycle away.
Firms, he stressed, are suddenly realising they need to “double or triple their efforts to make up for years of slow progress”, or sell assets to reconfigure their portfolios.
“These are the kinds of debates going on in the investor community. They know sustainability is important. They want to move fast. They know the clock is ticking.”
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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