Unveiling the business case for sustainable buildings

Key takeaways from JLL’s COP28 panel discussion on how the business case for ESG is evolving

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In a world where sustainability is increasingly recognized as crucial, the real estate industry is not exempt. Amid economic challenges and competing budget priorities, a recent panel discussion brought together industry leaders Guy Grainger, global head of sustainability services and ESG at JLL; Lisette van Doorn, chief executive at ULI Europe; Peter Epping, Hines global head of ESG; and Darren Sear, global head of sustainability, property at Standard Chartered Bank, to highlight the significance of investing in sustainable real estate. Moderator James Darius Ball from GreenBiz expertly guided the conversation as the panelists shared their insights on the topic.

There are some very compelling reasons why acting sooner rather than later is the smart move in building the business case for investing in making real estate more sustainable. The major takeaways from the discussion cover notable factors that should be considered to secure the buy-in needed and implement a timely plan for your real estate:

1. The Growing Demand for Sustainability

Market dynamics are shifting with the growing demand for sustainable spaces. While the current estimation of sustainable assets may be undervalued, the evident potential for substantial increases in value, coupled with the industry's underappreciation of the market opportunity, underscores the prevailing underrating within the sector.

2. The Overlooked Potential of Leading Indicators

The prevailing notion that the marketplace’s emphasis on lagging indicators, rather than leading indicators such as rent premiums and brown discounts, is gaining traction, with the latter showing significant momentum. The industry appears to significantly undervalue the market opportunity presented by these leading indicators.

3. The Role of Decarbonization Plans

It is crucial to integrate decarbonization plans into comprehensive sustainability strategies, adding significant value and future-proofing buildings. Simultaneously, careful consideration of timeframes and return on investment (ROI) during retrofitting ensures the effective utilization of technically sophisticated upgrades.

4. Strengthening Partnerships for Future Success

Large and sophisticated occupiers are currently exerting a more significant influence, underscoring the growing importance of partnerships. The strength and value of the partnership between owner and occupier is often recognized as not strong enough but is deemed essential for moving forward.

5. Climate Risks and Transition Risks

There is a need to align climate risks and transition risks to ensure a holistic approach to sustainability. It is important to assess and evaluate both physical and transition risks in decision-making processes and business models.

6. The Importance of Nature and Biodiversity

While carbon reduction efforts are still important, the integration of nature and biodiversity in sustainability strategies must not be overlooked.

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7. The Value of Resilience

The operational risk of climatic events should be considered, and investing in resilience can prepare assets for potential damage from extreme weather events.

8. The Need for Verification Controls

Lastly, there is a need for controls and verification of products related to clean energy and carbon reduction. This ensures that investments are sound and that the products being used contribute effectively to sustainability goals.

As the world moves towards a more sustainable future, the real estate sector must keep up. These takeaways provide a roadmap for integrating sustainability into real estate investment strategies and further highlight the opportunities present in this evolving industry.

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