“We are starting to find out how to link carbon to money. How can we better understand the interplay between what we know about the social environment and investment decisions? In my lifetime, the population of the world will treble. How will that impact you?”
This was the question that session chair Graham Colclough, vice president, global public sector at Capgemini, posed to kick-start the plenary session of the Urban Land Institute’s European conference in Paris recently, opening a debate on the role the real estate industry could play in the context of social, economic, and environmental change.
It was a message similar to that of His Highness the Aga Khan, keynote speaker at the conference’s leadership dinner, who urged delegates to balance the financial aspects of investment decisions with the social and environmental impact of making them.
Colclough warned that the industry needed to face these fundamental issues and asked delegates to consider how they might tackle challenges in their day-to-day businesses.
He introduced delegates to the notion of the “Friday experiment” as a way of exploring the impact that incremental changes in behavior could have on the environment. He drew parallels with the way “dress-down Fridays” became an accepted social norm and suggested that business could try to use the same method to encourage workers to embrace sustainable transport.
“Imagine what would happen if every Friday I started biking or taking public transport to work. . . . How would that change our way of living, and what would that do to the economy?”
The panel—which comprised the same speakers who took part in the first session of the conference, “The Only Problems Left Are the Big Ones”—was then quizzed on whether that preceding debate had given them any fresh thoughts on today’s issues.
For Ernst Ulrich von Weizsäcker, cochair, international panel for sustainable resource management, higher energy prices were necessary to create a better society. When quizzed about the impact of urbanization on demand for energy, von Weizsäcker said, “Don’t be afraid to raise energy prices. We could be better off by having better energy prices.
“This hysterical reaction that people have when energy prices rise is absurd. It comes close to psychiatric problems.”
Von Weizsäcker drew an analogy with labor, explaining that the Confederate States in the United States feared the economy would collapse if slave labor were abolished because cheap labor was needed for cotton. “They are better off now because wages have increased. I say our economies would get better, more efficient, more sustainable, and less indebted if energy rose in price.”
Von Weizsäcker said he felt optimistic that urbanization would aid in resolving the world’s population issues. “In terms of demographics, there is an interesting story for the Urban Land Institute. I know from the U.N. Population Fund that urbanization is the strongest factor in stabilizing populations. In the countryside, absurd growth rates occur and then there is migration to cities where families stabilize,” he added.
While Andrea Boltho, emeritus fellow at the University of Oxford and director of Oxford Economics, said the West needed to recognize that countries were “aging much more rapidly” than first thought and that pension systems are unsustainable. “The hope in the West is that emerging countries will pull us out of recession, but that hope may not last.”
For Amlan Roy, managing director and head of global demographics and pensions research at Credit Suisse, the industry needs to appreciate that the biggest challenges for megacities in the developing world is access to clean drinking water and sanitation. “SARS and swine flu are problems for megacities and we need to think about them, because we can’t wave a magic wand to get rid of them,” he said.
Roy argued that sovereign wealth funds such as those from China and Abu Dhabi were taking an increasing interest in sustainability and demographics. “They are very forward-looking and taking these things very seriously,” he said.
When asked how the speaker’s concerns translated into hard-and-fast investment opportunities, Roy concluded that the industry needed to “better understand” consumer behavior and learn from consumer companies. “It is now passé to model decisions on a two-parent, two-child family,” he said.