As global climate strikes were unfolding in more than 150 cities around the world, public officials from New York City and Washington, D.C., sat down with real estate and business leaders at the ULI Fall Meeting to address ways to collaborate on battling climate change.
“How can cities and real estate developers and asset managers do better?” asked moderator Brian Swett, director of cities in the Americas and a principal of Arup, a multidisciplinary engineering and consulting firm. “We know we have to effectively decarbonize” to prepare real estate for the next century, he said.
Cities across the United States continue to make new commitments to global climate mitigation, with 240 municipalities having signed on to the We Are Still In campaign to support action in accordance with the Paris Agreement, which aims to keep global temperature rise below 2 degrees Celsius in this century. And more than 50 cities now have set the goal of 100 percent reliance on renewable energy for the future.
But with buildings accounting for 75 percent of U.S. electricity consumption, achieving these commitments will require the active participation and cooperation of the real estate sector. Buildings are historically among the largest sources of greenhouse gas emissions because they use so much energy for heating, cooling, and lighting. They also are often energy inefficient due to leaks, old windows, and poor insulation.
Many cities are still in the early stages of developing new policies and incentive programs to support the real estate industry in making the transition to more energy- and carbon-efficient building development and management techniques. The successful Green Ribbon Commission in Boston—a group of business and civic leaders working to develop shared strategies toward carbon neutrality—is cited as an important model for public/private partnerships.
Tommy Wells, director of the District of Columbia’s Department of Energy & Environment, presented the move toward decarbonization as one enhancing the District’s appeal. The people who choose to work and live in D.C. value sustainability, he said, so making building planning decisions that focus on steps to help achieve decarbonization is in sync with those values. Developers in D.C. “know they have to stay on the cutting edge of where people want to work,” he said.
For John Lee, deputy director of buildings and energy efficiency at the New York City Mayor’s Office of Sustainability, a signature way of achieving efficiency goals is through the force of law. He heralded the May 2019 enactment of Local Law 97, known as one of the most ambitious pieces of climate legislation for buildings enacted by any city in the world. The law seeks to put New York City on a path to meet its goal of reducing greenhouse gas emissions by 80 percent by 2050.
Lee acknowledged, though, that cities cannot fight climate change only through reducing carbon emissions; cities and real estate developers must also work to use more renewable energy sources, he said. “The current onus is on efficiency first,” he said.
“This is aggressive,” he said. “Without coordination between the public and private sector, we are not going to get there.”
The potential for tension in the public and private partnerships comes when officials weigh mandates and regulations against voluntary steps. Sometimes environmental regulations are announced that “regulate first and ask questions later,” said Ben Myers, director of sustainability at Boston Properties.
Lee noted that New York City’s Local Law 97, while highly ambitious, is not popular with all the real estate community. “The regulation that was imposed on property owners was not designed to be convenient for any of us,” he said. “The carbon metrics and standards we are trying to meet were borne out by a situation we created for ourselves.” The emission reduction goals, he said, “are necessary for our existence. It is necessary for us to survive as a city.”
Still, while regulations can be helpful, “in a lot of cases, incentives really drive improvements,” said Jessica Elengical, vice president of alternatives and real assets at DWS, a Europe-based global asset management company. “That is one piece” that is key to improving the public/private partnership—“a good balance between incentives and regulations,” she said.
The challenge, though, for developers who want to aggressively move toward voluntary compliance is a lack of uniformity in systems from city to city, Elengical said. But Myers said compliance will be easier to achieve because of “the revolution of energy systems toward green power.”
“We are going to need renewable energy to meet these caps,” he said, referring to regulations being put in around the country mandating emissions cuts. “Efficiency alone is not going to get us there. The only way we are going to do it is by working together.”
From the real estate brokerage perspective, companies are working to collect data on how tenants are addressing energy efficiency issues through use of green leases. A green lease has changes in certain clauses to better adjust financial incentives and sustainability goals between a landlord and a tenant.
“What we are trying to do is start signing more lease agreements and adding addendums to get the energy data that we need,” Elengical said. “That works better than requiring that tenants provide the data that we need. We like for there to be tenants who are really interested in this as well.”
Ultimately, that may be where public/private partnerships on climate change are most successful. Myers noted that many of Boston Properties’ younger employees “find more purpose in work that is trying to develop more sustainability and responsibility.”
“For climate action,” he said, “there is no magic bullet.”