The commercial case for making buildings more sustainable

Despite the current economic headwinds, developing and implementing clear decarbonization and resilience strategies now is the smart decision for longer-term performance:

• Mounting costs from climate risks, including heatwaves, flooding, storms and droughts, are increasingly impacting urban areas – with big implications for building owners.

• Rising demand for sustainable buildings and spaces that support corporates’ low carbon goals and meet employees’ rising expectations will change lease markets at scale.

• More restrictive finance and tougher regulation are coming down the line. Companies face more stringent building performance standards and corporate disclosure mandates.

Creating a more sustainable and resilient future requires today’s buildings to undergo marked transformation in their infrastructure and operations.

Yet in today’s tough economic environment, securing the internal buy-in and investment needed to make existing buildings more sustainable can be a difficult task.

Investment in real estate is down and fundraising is more challenging. The office sector, in particular, is experiencing dynamic shifts in demand with the impact of hybrid work on lease renewals.

Despite the shorter-term hurdles, developing and implementing clear decarbonization and resilience strategies now is the smart decision for longer-term performance. In many respects, the commercial case for sustainable buildings has never been stronger due to three key factors:

Mounting costs from climate risks

Learn more

Increased demand for sustainable buildings

Learn more

More restrictive finance and tougher regulation

Learn more

No city – and few buildings within – is immune from the growing impact of climate change.

It’s not just dealing with events that make international news headlines. Those already on the front line of climate change are suffering from repetitive smaller events which may be growing quickly in scale and intensity. In the U.S. the impacts of climate-fueled extreme weather events have cost US$612 billion in the last five years, according to NOAA’s National Centers for Environmental Information

However, for some companies, climate risk remains a blind spot. Part of building a strong business case will involve understanding the risks of disruption to business operations and potential damage to buildings.

Taking action for long term resilience

One of the biggest challenges in assessing climate risk is the wide range of approaches and the lack of consensus on standardization. Some providers are thinking about value at risk in terms of insured value, others are looking at change in asset value or replacement cost.

Nonetheless, climate modeling and scenario analysis tools are becoming more sophisticated, enabling more companies to understand their risks and develop plans to take appropriate action. These short-term resilience measures should be integrated into broader decarbonization plans which are key to reducing longer-term risk.