Investing in Sustainable Buildings

Decarbonizing buildings has a vital part to play in reaching global net zero greenhouse gas (GHG) emissions.

The world is currently undergoing the largest wave of urban growth in human history. By 2060, two-thirds of the expected global population of 10 billion people will live in cities of some form.¹ To accommodate this growth, cities need to roughly double the current floor area available. To put it into perspective this means adding a floor area equivalent to the area of Manhattan in New York City every month for the next 40 years.

At the same time, when including building construction, the buildings sector today is responsible for approximately 35% of global energy use and 38% of global GHG emissions.² With more and more countries, cities and businesses committing to net zero emissions by 2050 or sooner, decarbonizing the buildings sector will play a vital role in achieving that target.

These figures highlight the huge potential for the buildings sector to contribute to reducing global GHG emissions by designing and delivering more sustainable buildings.

Why invest in sustainable buildings?

While people and the planet are the ultimate winners of a more sustainable, net zero future, positive environmental outcomes are not the only advantage of sustainable buildings. Put simply, the greener the building, the more it’s worth. 

There are a number of bottom-line benefits to going green.

Tenants and investors are increasingly gravitating to energy efficient and sustainable buildings.³ Such buildings have also been shown to attract higher values, known as a “green premium.” For example, in Sydney and Melbourne, buildings that have been awarded a 4.5-star National Australian Built Environment Rating System (NABERS) sustainability rating are worth on average 8% more than comparable unrated buildings on a per square meter basis and for buildings awarded between a five- and six-star rating this can increase to 18%.⁴ In London, highly rated buildings are worth 10% more than comparable unrated workplaces⁵ and in the U.S.A. evidence shows that green certifications like Leadership in Energy and Environmental Design (LEED) result in a sales premium of up to 7.6%.⁶ 

Key principles underpinning sustainable design

Not all sustainable buildings are the same. The climatic conditions and cultural needs, as well as wide-ranging environmental, economic and social priorities means the challenges and demands of sustainable buildings will vary between countries and even regions. 

However, there are many shared guiding principles of sustainable building design and delivery that are a critical consideration for any built environment asset, as shown in Figure 2.

There are two ways to deliver sustainable buildings — constructing new, more efficient buildings or improving existing buildings through a retrofitting program. 

Retrofitting buildings can improve building performance, significantly reduce energy and water usage and improve amenities for occupants. Retrofitting also offers the ability to retain the significant resources already embedded within them which would otherwise be wasted if the building was demolished to make way for new construction. New construction on the other hand guarantees a fit-for-purpose asset, greater design flexibility and may be more adaptable to future or changing urban needs.

When we consider the contribution of the building sector to current GHG emissions and the scale of construction that must take place in cities to accommodate future growth in urban populations, it is clear both approaches are part of the solution.

As Jeff Merritt, Head of Internet of Things (IoT) and Urban Transformation at the World Economic Forum says:

“In order to meet the goals of the Paris Agreement to limit global warming, we need to see in the next ten or so years the majority of our buildings become net zero carbon. Any guess on how many cities currently meet that goal? Less than one per cent. There is a staggering challenge here.”⁷

Just how staggering is well illustrated by the statistics below.

Regardless of whether you’re retrofitting an existing building or designing a new one, the first step on the sustainability journey is to capture an inventory of potential sustainable building solutions and begin the process of evaluation and selection. There is a growing list of decarbonization solutions that can potentially be incorporated into building designs that tackle both operational emissions and embodied emissions as shown in Figure 3 below.

What solutions should you incorporate into your project?

Well, there's no simple answer but there are a range of tools that can be used to assess the different options available. In this case, we conducted a multi-criteria analysis assessing the potential feasibility and perceived value of each sustainability solution in the built environment today, the results of which are outlined in Figure 4 below.