With the built environment responsible for 40% of global carbon emissions, decarbonising real estate assets must be a key priority for investors and corporate occupiers.
Real Estate Portfolio Carbon Management
The commercial real estate industry has accelerated its focus on responsibility and social purpose. Occupiers, investors and city leaders each have a role to play in meeting demand for greener, more sustainable spaces, and how it can no longer be seen as “just another expense”, instead essential to achieve better sustainability outcomes and financial returns.
We have seen governments facing pressure to pledge ambitious net zero targets, but meeting these targets depends on more than government pledges, with businesses and investors having a vital role to play. Reports have shown that when businesses consider the environmental impact of their investments, they subsequently yield greater value in the future – both from a financial and environmental point of view. The climate crisis poses a financial risk in terms of both physical and transition risks. Transition risks will arise as the economy shifts to become low-carbon and more climate-resilient. As a result, we are seeing more organisations making zero carbon commitments and restructuring their business model and operations to hit their reduction targets.
Main motivations for Real Estate Investment Managers to consider a Carbon Management Plan:
- Growing pressure with climate-related risks and financial disclosures;
- ESG Program covering emissions Scope 1, 2 and 3, and a pathway for net zero target;
- Reliability and Consistency following recognised and approved international standards;
- Science-based decision making process for more sustainable and cost effective choices at early design stage;
- Recognition for Industry leadership and collaboration.
Life Cycle Design for projects and portfolio
Over the past decades legislation has focused on the operational impacts of buildings from heating and lighting, rather than on the impacts from the construction materials. In the majority of countries there is still no legislation requiring the measurement of embodied carbon, although some countries are now providing leadership. There is also insufficient transparency and availability of comparable data for designers, contractors and decision makers.
Life Cycle Assessment (LCA) has been recognised as the most comprehensive method for calculating and reporting greenhouse gas emissions for construction projects. Life-cycle assessments and resulting life-cycle cost considerations are becoming increasingly important and turn the focus on the long-term benefits of sustainable real estate.
In the real estate market in particular, the use of LCA will enable investors to quantify, compare and improve the environmental performance of their assets, and more broadly, the use of LCA will assist in showing how real estate assets that have the highest level of sustainable performance, can drive higher rental incomes and increase client satisfaction.
“Clients in the real estate market have benefited from the extensive information that can be extracted from eToolLCD and used in Sustainability reports and Carbon Management Programs. Goodman Group and Frasers Property have committed to reduce and offset their Embodied carbon emissions. Using eToolLCD software helps to achieve this goal across their entire portfolio” – says Maryia Perthen, eTool BD Manager.
eTool provides eToolLCD, a calculation tool to measure and report whole life carbon, including both operational and embodied emissions associated with individual projects and portfolios. This calculation covers initial and long term impacts of:
- Operation (maintenance, repair, replacement)
- Operational Energy (gas, electricity, other sources)
- Operational Water supply and treatment
- End of Life (demolition, waste processing, disposal)
- Benefits and Impacts beyond the system boundary (product reuse, energy export)
The figure below explains the different life cycle stages and split between embodied and operational carbon:
Life Cycle Design methodology applied to Portfolio Carbon Management will enable Real Estate Investment Managers to track, improve and demonstrate emissions reduction on the path to net zero
- Measure: Quantify baseline emissions of each building, conduct hot-spot analysis and determine how far there is to go to reach zero emissions.
- Compare and set a reduction target: Develop a target to achieve the objectives of investors, regulatory requirements/bodies and stakeholders.
- Create scenarios and reduce impact: Understand the contribution of each improvement strategy and prioritise to achieve the best life cycle return on investment.
- Certify results and report: Conduct independent review of models and produce results aligned with standards for increased transparency and consistency.
Utilise LCA across the value chain
The use of Life Cycle Analysis is not limited to new build projects only. By utilising the power of eToolLCD, investors can quantify the environmental impacts of any construction project or existing real estate portfolio. Examples include:
- Modelling Existing Buildings for Adaptive-Reuse in eToolLCD
- Foot Printing “As Built” or Existing Building
- Retrofit or Refurbishment of Existing Building
- New Building that Retains Parts of Existing Building
New Build and Refurbishment Projects
No matter the size of the project, eToolLCD can be utilised throughout all the relevant project stages, allowing the users to model effective component and building level LCA assessments at any project phase.
eToolLCD has benchmark models that can be used at concept stage when only typology and rough floor area is defined. As the design progresses, eToolLCD’s unique template system can be utilised to provide industry average specification and quantities of construction components (piling system, floor slab, structural elements, walls, finishes, services, etc) as well as operational energy and operational water figures.
Our ever growing library contains 1000’s of templates applicable to all kinds of building and infrastructure projects being built across the globe. Users have the ability to customise construction components and also combine templates to create whole project benchmarks.
eToolLCD can fully support investor and corporate occupiers requirements with regards to Standing Assets, and will enable Facilities Managers to record actual in-use emissions on an annual basis. This will allow the client to better understand the carbon impacts of maintenance, repair and replacement cycles, and to improve this going forward.
eToolLCD can also be utilised to coordinate the expected replacement cycles of key elements (e.g. central plant) and ensure that purchasing can be done with the optimum carbon and financial efficiency on a portfolio wide basis.
Achieve life cycle environmental net benefit
An example of how Life Cycle Design methodology can be used to make informed decisions, is to calculate the environmental payback of a Solar Photovoltaic system over its whole life cycle. The same system can take twice as long to payback in environmental terms depending on the location and the carbon intensity the solar PV system is connected to. There is no simple answer as the result will depend on multiple variables including:
- Technology efficiency, durability, warranty terms;
- Solar generation capacity: location, shading, maintenance, cleaning;
- Environmental Product Declaration – solar panels, inverter, cabling, framing
- Electricity Grid carbon intensity, as the replaced energy source
- Electricity Grid decarbonisation factor, accounting for increase contribution of renewables
Industry progress and motivators
There is also a main driving force for change that will be made at a national government level, through legislation and regulations to reduce emissions. Various examples throughout the globe include:
- The U.S. Securities and Exchange Commission (SEC) recently released a proposed rule requiring mandatory climate disclosure from all U.S. public companies, called the Enhancement and Standardization of Climate-Related Disclosures for Investors
- Climate standard of the IFRS’ International Sustainability Standards Board (ISSB)
- Task Force on Climate-related Financial Disclosures (TFCD)
Embodied Carbon Regulations
- London Plan Policy SI 2 sets out a requirement for developments to calculate and reduce WLC emissions.
- Part Z – A Proposed Amendment to UK Building Regulations to introduce legislation towards mandatory reporting of carbon emissions in the built environment, along with limiting embodied carbon emissions on projects.
- Various other regulatory programs in Canada, France, Netherlands and USA.
Other non-regulatory requirements include for example, the World Green Building Council’s (WGBC) Net Zero Carbon Buildings Commitment to reduce (and compensate) all operational and upfront embodied carbon emissions by 2030.
Environmental data and software tools
Regulations will help create free-to-use products and buildings database to reduce complexity and assist the benchmarking and target setting process.
- Increase research and development
- Reduced complexity, web-based and easy to use
- Cost effective, SaaS model
- Increased market demand to meet rating schemes and regulatory requirements
Supporting Green Rating Schemes and Regulatory Requirements
As LCA of the built environment rapidly propagates as a standard component of sustainable design, most rating schemes (buildings and infrastructure) around the world have begun to or/and have already integrated LCA into their credits and framework. eToolLCD meets the requirements of many international schemes and has been successfully utilised to improve the rating performance for many projects all over the world.
LCA studies conducted for Rating System purposes (frequently with a limited scope covered) can be integrated with LCA studies conducted for Corporate Reporting or Regulatory purpose and ensure the alignment between different use and application of sustainability credentials and LCA results. One example is the increased use of eToolLCD to meet the London Plan – Whole Life Carbon Assessment requirements. eToolLCD is approved by the Greater London Authority (GLA) and is aligned with the RICS guidance to ensure consistency in the lifecycle carbon results.
Benchmarking embodied carbon
Embodied carbon of new buildings now represents a significant contributor to total emissions. Embodied carbon is often associated with Supply Chain emissions and Scope 3 emissions. Carbon emissions released before the building begins to be used (upfront carbon), will be responsible for half of the entire carbon footprint of new construction between now and 2050.
In order to prevent and mitigate embodied emissions, increase resource efficiency and stimulate the development and market supply of low carbon products, the sector must:
- reduce and account for its impact on the environment and natural resources through design and construction, and
- generate a strong and urgent demand signal to activate the necessary finance to decarbonise materials, construction and heavy industry processes.
Advantages of using LCA to calculate embodied carbon
- Reliable industry-based data (EPD, LCA process-based inventory)
- Data quality requirements (ISO, EN standard compliant)
- Tools and functionality (increased scope, streamlined modelling and reporting process (Importing features, BIM integration)
- Consistency/common metric, standard compliant results and reporting
- Independent review, third party verification
Recommended process for benchmarking embodied carbon
- Calculation method: Standard BS EN 15978:2011 Sustainability of construction works. Assessment of environmental performance of buildings.
- Technical Guidance: RICS Whole life carbon assessment for the built environment
- System boundary, life cycle stages: Whole life carbon (A-D) and Embodied Carbon (A1-A5, B1-B5, C1-C4)
- Construction Scope: Substructure, Superstructure, Façade, Finishes, Services, Fittings and Furnishing
- Data quality: Standard compliant data (EN15804, ISO21930, EPD) Utilise detailed spec: volume, mass, size, quantity, not only financial information.
- Independent review: Standard compliant review (ISO14044)
Benchmarking and target setting using LCA As-built calculation
- Accurate measurement of the true embodied carbon to practical completion of a project
- Specification and origin (for Modules A1–A3) of each product and material delivered to site
- Transportation mode and distance (for Module A4), will be known in detail
- On-site material waste tracking and construction activity energy metering will inform a precise Module A5 value.
Impact Reduction Targets
According to the AR6 WG1 report, IPCC (August 2021): the residual global carbon budget to remain within 1.5° global warming with 66% probability is given as 400 billion tonnes CO2 from the start of 2020. Global CO2 emissions are about 36 billion tonnes per year, so the 400 billion tonnes will last just 11 years if no reductions are made.
For a high polluting country such as the UK, with CO2 emissions of 10 tonnes per person per year, the carbon budget will run out by the end of 2024, i.e. in 2 years
Embodied Carbon becomes more relevant in the route to Zero Carbon with the ultra energy efficient buildings and grid decarbonisation. Technical working groups like eTool, LETI, RIBA, GLA, CLF and World GBC recommend at least 40% reduction in embodied carbon by 2030.
As the organisation´s knowledge of embodied carbon increases, assessments utilising LCA methodology undertaken earlier in the design phase become easier to use for decision making. This in turn will lead to increased opportunities to take action on reducing the embodied carbon impact of projects and activities.
- Prioritize “Circular Design” – less new buildings and more reuse and refurbishment
- Designing more efficient buildings – reduce material and energy demand
- Requiring design optimization to use less material and chose lower carbon materials
- Requiring low- carbon procurement to ensure the materials used are lower impact than average
Functionality – maximise project primary function:
- Net Lettable Area
- Increased lifespan
Design and Structural optimisation:
- Low Carbon Material (biobased)
- Run whole life carbon scenarios for energy and buildings services
- EPD – Use buying power to encourage and support the suppliers in their value chain to adopt more sustainable business practices.
- Design for deconstruction and disassembly
Solutions to reduce emissions within the supply chain will be the most challenging, yet most impactful.
How to achieve your net zero carbon reduction target
- Identify key drivers – Investor pressure, tenant demand and increased asset value;
- Circular design – Less new buildings and more reuse and refurbishment projects
- ESG Program and Carbon Policy – Set targets and consistent requirements for all projects to follow across all their phases;
- Define scope and what it means to achieve net zero carbon in practice – Standard compliant whole life carbon calculation and reporting (EN15978);
- Quantify and improve performance – Measure the carbon footprint today and define strategies to hit desired target;
- Reduce Embodied Carbon – Optimise design to use less material and choose lower carbon options to achieve savings from upfront emissions, as well as operational and end of life embodied carbon;
- Materials efficiency can include using lightweight structures or secondary raw materials and products, minimising material loss on the building site and improving the service life and thus durability of products used in buildings. Structural designs for example are often over-engineered and dimensioned above the required level of performance.
- Ensuring the use of lowimpact refrigerants in projects should be a priority for all projects using refrigerant-based systems.
- Plan, design and specify low-carbon concrete solutions.
- Reduce energy consumption – Increase efficiency and the use of renewable energy. Eliminate fossil fuels.
Return on investment
Investors who target a sustainable strategy are rewarded through a combination of higher rents, stronger leasing velocity and higher occupancy rates throughout the cycle.
Global property insurance premiums have grown significantly as real estate portfolios sustain physical damage from natural disasters. Many existing properties will be rated as “high carbon” and will successively fall behind when competing for customers and occupancy rates and investors in the mid to longer term future.
Real-estate organisations can use their physical presence to generate and store energy with solar arrays and batteries, helping to stabilise energy grids and reduce the costs associated with clean energy. Firms can introduce new revenue streams, including vehicle charging, green-facilities management, and other on-site services that enable occupants’ sustainable preferences. Organisations can support occupants by tracking emissions using smart sensors and tracking energy consumption through heating, cooling, lighting, and space management.
Firms that are able to lower impact will reduce future costs of carbon offsetting and also have an advantage in attracting capital for net-zero buildings or investment themes that support community-scale decarbonization.
eToolLCD Software Features
Real Estate Portfolio Wide Reporting
Investors and corporate occupiers who are required to report their portfolio emissions, can utilise the robust LCA data available in eToolLCD via our reporting functionality.
The reporting structure uses a Life-Cycle approach instead of the Greenhouse Gas Protocol standard (Scope 1, 2 and 3), and includes all assessment and reporting in relation to BS EN15978 life cycle stages (Product, Construction, Use, End of Life, Beyond project life cycle) to ensure the whole asset life cycle emissions are included in scope. GHG Protocol Scope 1, 2 and 3 results can also be extracted from eToolLCD.
eToolLCD Portfolio Wide Reporting allows the client to calculate and report Whole Life emissions applied to major developments, refurbishments, deconstruction of an asset and in-use developments. Software users can utilise the organisation dashboard, where GHG emission and reduction from all projects can be quantified. Software users can create projects and collaborate with the internal design team and external specialists in one centralised portal in eToolLCD.
Life Cycle Costing
LCA and Life Cycle Costing (LCC) Integration. It is unavoidable that where there is carbon, there is going to be a cost associated. However it is not always clear to the investor or client, that by reducing the environmental impacts, can also improve the bottom line.
One of the most powerful parts of eToolLCD’s unique template structure is the inclusion of data on all people and equipment impacts as well as materials that make up a construction component. Templates include maintenance as well as replacement costs over the project life cycle, allowing users to conduct Life Cycle Costing integrated with environmental performance. More info on eToolLCD advanced features.
Common challenges and best practices in data collection and reporting
Organisations are used to GHG Protocol, mainly focusing on Scope 1 and 2 and not including Scope 3. Real Estate emissions categorised as Scope 3 are extremely significant and must be part of the calculation and reporting framework. Since Scope 3 emissions are not directly under a company’s control, they are difficult to assess. But companies cannot afford to bypass or ignore them anymore.
However it is important to distinguish between embodied carbon and what is classified as scope 3. For example:
- tenant energy use (B6) is reported as scope 3, but it is not embodied carbon, it is indirect emissions, not controlled by the asset owner.
- refrigerant gases fugitive emissions (B1 and Scope1) and equipment use (A5) depends if it is directly controlled by the organisation (Scope 1) or sub-contracted (Scope 3).
A whole life carbon approach using the project life cycle stages make it easier to assess all emissions associated with the project life cycle, despite the fact if they are owned or controlled by the organisation (direct / indirect) or upstream / downstream emissions.
Carbon Accounting vs Life Cycle Design. Carbon Accounting will focus on past emissions and use this information to help mitigate future emissions. Life Cycle Design has a focus on forecasting both upfront and long term emissions during early concept stage and preventing these emissions from occurring by finding better alternatives.
Carbon calculation based on LCA has specific standards for construction projects (EN15978) and materials (EN15804, ISO21930) which makes it easier for Real Estate organisations to include all emissions in scope with increased consistency and reproducibility.
eTool serves the organisations who are aiming to lead the industry in delivering low carbon buildings and infrastructure. eTool provides eToolLCD software for optimising whole of life carbon and cost of new and existing construction projects, aligned with best practice international standards for Life Cycle Assessment. eToolLCD life cycle design software is targeted at large construction projects and asset portfolios. It is a technically superior, secure, collaborative, holistic, high value carbon management platform. Proven by our world leading customer and project list.
eToolLCD software will provide the following benefits when used as part of an ESG Program:
- Easy to use and collaborative, large user base of LCA experts
- Whole life carbon calculation, including both operational and embodied carbon
- Detailed calculation of embodied carbon including upfront, maintenance and end of life emissions.
- Full carbon accounting and extraction of results aligned with GHG Protocol (Scope 1, 2 and 3)
- Design tool to assist the decision making process and best return on investment
- Carbon management at project level as well as whole portfolio
- Standard compliant data for materials and services (generic and product specific EPD), transport, construction impacts, operational water and operational energy