Can we transform the building sector? (part one)

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Can we transform the building sector? (part one)

Set over two days in early 2019, the GBCA National conference examined the latest innovations and technologies, established new dialogue with thought leaders and undertook a deep dive into the topics critical to building a sustainable built future. Insights from international participants were shared on carbon budgets, data use and privacy in buildings, climate risks and investor concerns, ethics in construction and sustainable supply chains. The language of selling sustainable homes was also explored as well as the emergence of the circular economy in a construction context.

Over two parts, TURLOUGH GUERIN’s article summarises highlights and insights arising from the event for the sector, cities, government and individual companies.

There is a lot more happening in the Australian construction sector than the construction of green buildings. In March of this year, at the UNSW Roundhouse in Sydney NSW, the Green Building Council of Australia (GBCA) ran a national conference called Transform 2019, which covered many emerging issues for the building sector.

International and local perspectives

To kick things off, a leader from the energy sector in the US shared insights from that country’s most progressive state. The international speaker was from the California Energy Commission (CEC), and revealed how the energy and climate change conversation has moved from ‘if and when’ to ‘now and how’.

Specifically, these building-related risks were highlighted:

  • Pacific Gas and Electric, an energy utility, filed the first stage for lodging bankruptcy in January 2019 largely due to its infrastructure being impacted by extreme weather events.
  • The need for peaking gas-powered plants to augment the grid to retain stability with increased renewables coming online (also a need in Australia).
  • The CEC is introducing a three-year building energy standard cycle.
  • Demand optimisation is encouraging a move closer (of users) to the energy generation source, matching consumption and generation, emergency use, and to transition the move away from fossil fuels.

The City of Sydney energy position was articulated as moral leadership on climate change matters, including our country’s positioning towards coal and how that must change from a carbon accounting and budget perspective. Statistics were given on the proven reserves of coal and the point was made that little or no discussion is being had in the public domain on the concept of the carbon budget. Through a carbon budget lens, Australia’s coal reserves make the nation a relatively large global greenhouse gas (GHG) emitter. This is a very different lens to the commonly reported tonnes of greenhouse gases or proportion of industry burden.

The take-home message from the Sydney delegate: climate change represents a huge business opportunity and the green building sector should take its skills and knowledge to other sectors to help them and not to wait for other sectors to respond to the challenges of climate change.

Climate risk and investors

There was considerable discussion at the event regarding climate risk, the enhanced focus of investors on climate risk disclosure and the emergence of green bonds. There were many issues raised of relevance to readers, however some of those most pressing were the issues raised by Green Cross, which ran through a scenario of how climate risks can impact individual home or unit owners, considering implications for each part of the home/unit ownership business ‘ecosystem’, such as banks, councils, lawyers etc.

In summary, risk profiles can be wide ranging and personal impacts can be devastating. There were no easy answers and potential purchasers of property need to be very mindful of the risks that they may be inadvertently procuring when they sign a contract for a new property in relation to climate-related risks.

Stockland has taken a leadership position in this area, undertaking comprehensive portfolio level analysis of its assets against climate impacts, claiming this is paying off with lower insurance premiums and enhanced customer services to its tenants. This work was well received and viewed as a good example of work on climate risk scenario planning and follow through.

Other issues in this climate risk area were as follows:

  • Minter Ellison updated the audience on the impacts that climate risk is having on cost of accessing capital and how EU banks are moving quickly to ring-fence capital that is associated with sustainability performance. It is not entirely clear, however, what defines sustainability performance (note that alignment and accreditation to ISO 14001 is not considered sufficient).
  • EU banks are offering lower costs of capital to mortgagees that implement energy efficiency interventions to their assets with the reasoning there is more money available from lower power bills to pay for mortgagees.
  • The NSW Government’s green bond is now launched and offering this product to other government investors. The ANZ bank indicated that it will likely launch sustainable financing offers once the remediation work created by the banking royal commission (BRC) has been addressed.
  • Given the increasing rates of home insurance premiums – some are now up to $5000 per year in northern Queensland and up to several hundred thousand properties in Australia are now considered uninsurable – it was speculated that individual home owners will consider self-insuring.
  • A criticism levelled at banks in a broad sense was that they are still not offering loans that factor in lower rates of access to capital when renewable energy, storage and energy efficiency interventions have been made.

The sustainability conversation within the building sector has now shifted towards a ‘better financial performance’ conversation, as sustainability action in as-built buildings is now viewed as providing a competitive advantage. Also, the Task Force on Climate-Related Financial Disclosure (TCFD) is now being accepted as the industry standard and best practice, though it was acknowledged that the quality of disclosures will improve over time. The TCFD is enabling investors to compare the monetary impacts of climate risks on profit and loss cashflow and balance sheets of investment targets.

There was no major change in position from Australian investors except that the need for ESG performance should be further heightened. A key message from the investment sector was that asset owners should engage with investors and the ESG community.

Other messages were as follows:

  • The message from the commercial property sector to government was to “get on board, as the rest of industry is”.
  • The Global Real Estate Sustainability Benchmark (GRESB) is aligning itself with TCFD, especially around resilience.
  • The sustainable finance trend is here and now and growing. Individuals have the opportunity to fuel it by demanding that their superannuation must go towards sustainable investments.
  • Organisational sustainability performance is now being leveraged to create sustainable finance debt solutions.
  • The discrimination between ethical investment, green finance, impact finance etc. is dissolving and the various concepts and expectations around them are merging, which is a positive thing for the building sector.

Click here for part two of the article, in which Turlough will reveal further insights into ethics in construction, creating sustainable places and developments in supply chains.

Turlough Guerin is a non-executive director on several boards including Bioregional Australia Foundation, a champion of the global One Planet Living framework. He is an advocate for sustainable business, strong and effective climate governance and is a Fellow of the Governance Institute of Australia.


Image: Amar Saleem via

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