The property industry can’t afford not to adapt to climate change

Extinction Rebellion in London. Image: Getty.

From the school strikes for climate, to Extinction Rebellion protests and calls for a Green New Deal, citizens around the world are putting pressure on their governments to prevent global warming more than 2°C above pre-industrial levels.

In the UK, these efforts have met with some success – the government has declared a “climate emergency” and promised to reduce greenhouse gas emissions to net zero by 2050. Even so, scepticism persists in some quarters: former chancellor of the exchequer, Philip Hammond, has argued that the UK government’s goal may be unaffordable, based on estimates that the transition to a zero-carbon economy could cost up to £1trn.

Of course, there is likely to be significant public money spent on renewable energy transition and carbon offsetting. The costs of assets made obsolete by climate change policy – such as unexploited fossil fuel reserves – is also potentially huge.

But the problem with perspectives like Hammond’s is that they don’t balance the cost of acting now against the cost of doing nothing. In the UK and around the world, people live and work in buildings that are typically powered, heated and cooled using energy from fossil fuels. If these buildings are not retrofitted with energy efficiency measures, there is a real risk they will be rendered obsolete by policies aimed at reducing greenhouse emissions.

A valuable asset

Research at Northumbria University has examined this situation in relation to international real estate. The global value of real estate is estimated at $217trn – that’s roughly 2.7 times the GDP of the entire world. Of this, $162trn worth is residential, $29trn worth is commercial and $26ttrn worth is agricultural land.

A conservative estimate is that global real estate consumes 40 per cent of global energy annually and accounts for more than 20 per cent of international carbon emissions. So it’s hardly surprising that international agencies have identified real estate and the built environment as key contributors toward global warming and a major target of international efforts to reduce greenhouse gas emissions.

One of the most comprehensive approaches to reducing building energy use can be seen in the European Union (EU). A 2010 directive on energy performance made it mandatory for all European properties to hold an energy performance certificate and monitor energy use from heating and air conditioning. The government of England and Wales has used these energy performance certificates to enforce minimum standards of energy efficiency for privately rented family homes and commercial properties.

Since April 2018, any commercial property with an energy performance rating below E (that is, those properties with F and G ratings) has been deemed illegal to let (although there are some exemptions related to maximum cost of improvements). By 2020, the plan is for these same rules to apply to residential property – which includes shared homes, nursing and care homes and blocks of flats.


A less daunting prospect

In England and Wales, it is estimated that 10 per cent of residential property stock (worth £570bn) and 18 per cent of commercial stock (worth £157bn) does not meet these minimum standards. If these properties are not retrofitted to become more energy efficient, they will become obsolete and lose value, since the owners will no longer be allowed to let them.

Put this way, the cost of achieving an energy transition is less daunting, because the cost of not acting is equally (if not more) expensive. It’s even reasonable to expect benefits to the economy from the growing building retrofit industry.

If all international governments adopted similar minimum energy efficiency standards as the UK – and assuming the same proportions of property stock are potentially obsolete – the risk value for residential real estate property assets can be estimated at $16trn and $5trn for global commercial assets (based on their global vale, mentioned earlier).

A timely riposte

The potential cost of not acting in the real estate sector should provide a catalyst for the transition to more energy efficient buildings. It should also provide a riposte to those who worry about the cost of transitioning to net zero emissions. Indeed, there’s a clear need for investors and property owners to move beyond green-washing and reduce the carbon emissions of real estate before costly regulation and enforcement sets in.

Ignoring climate change exposes real estate assets to the risk of permanent disruption – especially now that the potential impacts of global warming are being widely acknowledged. Clean technology is becoming more affordable and consumers are adopting principles of environmental sustainability. Indeed, it’s already becoming more common for investment managers and financiers to demand that companies disclose business model exposure to climate change, while investors are starting to take advantage of exposed assets.

It makes sense for property owners to plan for the introduction of powerful new climate-related policies in the coming years. Adapting existing buildings and constructing new developments that are not reliant on fossil fuels – though perhaps costlier in the short term – can create a more resilient, and therefore valuable, asset in the longer term.

Kevin Muldoon-Smith, Lecturer in Real Estate Economics and Property Development, Northumbria University, Newcastle and Paul Michael Greenhalgh, Professor of Real Estate and Regeneration, Northumbria University, Newcastle.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 
 
 
 

To see how a city embraces remote work, look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”

Katie Bishop is a freelance writer based in Oxford.