More than 70 cities worldwide have pledged carbon neutrality by 2050, and because buildings contribute upwards of 70 percent of a city’s emissions, a wide range of policies addressing energy use and emissions in buildings under consideration in major cities across the United States. Already, over 31 U.S. cities have set energy benchmarking policies for buildings, with 15 also requiring that structures meet performance targets or undertake energy audits. Other cities have passed stricter energy codes, building rating systems, emissions targets, all-electric building ordinances, and renewable energy targets. Even as COVID-19 upends daily life and business, new climate policies are being passed, including Columbus, Ohio’s Energy and Water Benchmarking and Transparency Ordinance and St. Louis, Missouri’s Building Energy Performance Standard Bill, which will be discussed in more detail below.
To help accelerate progress toward shared climate action goals, the public and private sectors should unite around a set of principles. ULI Greenprint’s recently published Decarbonizing the Built Environment: 10 Principles for Climate Mitigation Policies report serves as a starting point for cities interested in engaging real estate leaders during the shaping of climate mitigation policies, and for real estate organizations to increase their understanding of the potential impact of these policies. Each principle speaks to a specific strategy for creating successful climate mitigation policies at the local level, with an emphasis on what the city and real estate sector can do to better collaborate:
- Calculate a baseline, then set interim and aspirational goals.
- Involve stakeholders early and continuously.
- Understand the business of real estate.
- Align with the larger policy ecosystem.
- Connect to a city’s other social and economic goals.
- Be comprehensive.
- Prioritize existing buildings.
- Be flexible in achieving goals.
- Foster a marketplace of support.
- Ensure compliance, reward success, and accelerate transformation.
Stakeholder Engagement in St. Louis
The story of St. Louis’s recent climate legislation showcases the value of early and ongoing real estate engagement, allowing the city to feel confident in the bill’s support. On April 20, the St. Louis Board of Alderman unanimously passed a bill establishing a Building Energy Performance Standard (BEPS) after meeting virtually for the first time due to COVID-19. After Mayor Lyda Krewson signed the policy into law on May 5, St. Louis became the first city in the Midwest and fourth U.S. city to pass a BEPS policy, after New York City; Washington, D.C.; and the state of Washington.
BEPS requires building owners to meet minimum energy or emissions performance levels, with standards set by local data for different building types. BEPS sets a baseline of performance and requires direct action to comply, which continually drives improvements as the standards increase over time. With BEPS targeting buildings measuring over 50,000 square feet (4,600 sq m), those below standard will be required to make improvements; however, building owners can choose their preferred energy-saving actions to improve energy performance, allowing owners to integrate energy upgrades into their capital planning processes.
The adoption of a BEPS policy in St. Louis follows passage of the 2017 Building Energy Awareness Ordinance, a citywide benchmarking policy requiring large building owners to annually report energy and water use. Benchmarking data showed that buildings in St. Louis were the biggest users of local energy and the biggest contributors to carbon emissions and pollution, making buildings a key stakeholder in reducing their energy use and emissions. St. Louis hopes that the BEPS policy will result in cost savings from energy efficiency improvements, create local retrofit jobs, develop healthier and more resilient buildings for residents, and provide greater stability in the electric grid.
According to city of St. Louis alderwoman and BEPS sponsor Heather Navarro, “This law represents over a year of collaboration between the city, institutional partners, labor, real estate, utilities, environmental advocates, and more. It demonstrates that we can find climate solutions that improve short- and long-term health and make St. Louis a stronger and more resilient community for everyone.”
To accomplish this goal, St. Louis received technical support and policy examples from the American Cities Climate Challenge and the Institute for Market Transformation. The city’s yearlong community engagement effort built on lessons learned from the benchmarking policy process using an established stakeholder group. This group, composed of utilities, property managers, elected officials, labor, city agencies, affordable and multifamily housing, education, design professionals, and real estate, met bimonthly in two-hour sessions to talk through topics like data collection and equity. The local U.S. Green Building Council–Missouri Gateway chapter served as the Building Division’s primary advocacy and stakeholder engagement partner. Alderwoman Navarro also helped with stakeholder outreach and feedback. With this support, the city was able to reach a large section of the real estate community, either through large gatherings and one-on-one follow-ups.
While the city was concerned about opposition from some real estate stakeholder groups, most parties just wanted a seat at the table. To overcome lingering concerns, the city engaged private-sector groups supportive of the legislation to present their individual perspective on the bill’s benefits. For example, while addressing climate is important, for many businesses, this policy’s key benefits were the overall positive economic impact and St. Louis’s opportunity to be a leader.
After such strong engagement and education, there was no vocal opposition to passing the standard. The Board of Aldermen felt comfortable passing the legislation virtually and BEPS was passed unanimously. Stakeholders focused instead on how best to implement it in St. Louis. To support implementation, the city will create a Building Energy Improvement Board to guide the setting of performance targets and compliance support and enforcement, while also allowing a high level of ongoing community input and participation.
St. Louis’s accomplishments aligned with many of the principles outlined in ULI’s Decarbonizing the Built Environment report, two in particular:
- Principle 3: Understand the business of real estate. The city worked hard to speak to real estate stakeholders in their language and understand their motivations. Real-life case studies were used to show the benefits of energy efficiency projects in specific buildings across the city. For example, a 35-year-old building in downtown St. Louis needed to replace its cooling towers. Between the rebates and cost savings, the building owners realized they would save $250,000 per year in utility costs after making the improvement. Other real estate professionals who had done building improvements were also invited to share their stories, reinforcing that energy efficiency truly can add value to buildings in the area.
- Principle 6: Be comprehensive. To achieve the city’s goals, all buildings in the city needed to be subject to BEPS while still reflecting local needs. For example, while affordable housing and houses of worship are subject to the policy, advocates for those groups highlighted funding challenges to meet the standard four-year compliance cycle. To support their needs while still including them in the policy, those groups received a compliance cycle of six years.
Lessons Learned and the Path Forward
St. Louis is the latest—but not the last—city to pass an aggressive climate mitigation policy that directly affects the real estate community. Many real estate owners have already embraced the strong business case for sustainability because reductions in energy use, carbon emissions, water consumption, and waste production can lead to lower utility costs, lower maintenance costs, healthier buildings, more satisfied tenants, and because, ultimately, it improves the overall value of an asset. As cities refine their climate action plans and others prepare to develop their own, collaboration and partnership between cities and the real estate sector will be necessary to design and implement policies to meet ambitious climate mitigation goals.
No matter the stage of a city’s progress, from policy proposal to implementation and compliance, real estate has a role to play, whether through providing policy input, preparing capital budgets for sustainability investments, or educating internal staff on energy-efficient technologies. The greater the engagement, the greater the overall value a building owner receives from a new climate policy.
RAJIV RAVULAPATI is an analyst for the Building Division for the city of St. Louis, overseeing the implementation, compliance, and enforcement of the city’s benchmarking ordinance and its newly passed Building Energy Performance Standards ordinance. MONIKA HENN is a manager of the ULI Greenprint Center for Building Performance.