黑洞社区

New York during September鈥檚 Climate Week is the place to be for committed professionals keen to share solutions in a common effort to take action and address the climate crisis.

With so many sessions happening each day, the 黑洞社区 team selected some key built environment topics to highlight to our readers 鈥� and we went one step further: we hosted our own roundtable in association with the Climate Group and supported by Gleeds.

At a venue on Broadway, minutes from Times Square, 黑洞社区鈥檚 editorial director Chlo毛 McCulloch chaired a discussion with 13 construction professionals from around the world with different areas of expertise.

Over an hour and a half, they debated the dual pressures to decarbonise the built environment that are coming from investor demand and regulatory change. Clearly both are important drivers in decarbonising our built assets 鈥� and they are inextricably linked.

As was pointed out early in the discussion, the relationship between funding and regulations is symbiotic: investors react to policy-makers鈥� regulations and in turn policy-makers develop regulations with an eye to what the market can absorb.

People also felt that the balance of pressure from investors or regulations depended on the asset type they are working on and where they operate globally, whether that is on projects in the UK, the US, Europe or the global south.

This wide-ranging and detailed discussion threw up some challenging points, and the panel were frank about the sticking points and hurdles that exist for project teams in delivering greener buildings and infrastructure.

>> Also read: Highlights from New York鈥檚 Climate Week

While everyone was keen to take responsibility for doing their bit and advocating for low carbon solutions, the reality often is that consultants, architects and contractors are not the ultimate decision-makers. The landscape set by regulators, investors and clients determines so much of what is built or refurbished, and influencing both can be an uphill task.

Here is a summary of our panel鈥檚 views on the topic.

The regulatory backdrop

Regulations vary hugely between countries and in the case of the US, where our roundtable was located, between states.

Michelle Regent, chief ESG officer at Gleeds, made this point, observing that the regulatory framework in the US appears to be more fragmented than in Europe. However, while the EU may have managed to create more of a uniform approach, the regulations there are still complex to navigate.

Many of the environmental impact reporting requirements for corporates have undoubtedly led to progress. Businesses in the EU are now, however, dealing with a growing level of complexity in the reporting process as a plethora of frameworks have emerged.

By way of example, Regent pointed to the workload and deadlines associated with the CDP, formerly known as the Carbon Disclosure Project 鈥� which is requested by global investors 鈥� alongside the reporting to comply with the EU鈥檚 Corporate Sustainability Reporting Directive (CSRD) which came into force in 2023. She said: 鈥淵es, they are supposed to integrate and you are starting to see the links between them, but the demand and the scale of the questions asked is so vast 鈥� especially when you are working globally.鈥�

The greater structure, the greater governance and the whole direction of travel of the EU taxonomy is positive.

Michelle Regent, Gleeds

She added: 鈥淭he greater structure, the greater governance and the whole direction of travel of the EU taxonomy is positive. But impact reporting is very demanding on organisations, and I have had some interesting conversations with US [professionals] this week saying 鈥榤aybe there are some lessons here, maybe we can leapfrog some of the complexity鈥�.鈥�

Other panellists could also see the pressure that is being felt right now to quantify impact when it comes to projects in Europe. Mark McKenna, global sustainability director at Arcadis, puts it down to the CSRD, particularly the new framework that introduced the principle of 鈥渄ouble materiality鈥� for assessing ESG impacts. This means that companies now have to report on not only how their business is financially impacted by climate change (financial materiality) but also their impact on people and the environment (impact materiality).

Another piece of EU regulation raised was the Revised Energy Performance of 黑洞社区s Directive, which came into force in May 2024 and which Julie Kjestrup, head of policy and thought leadership at Velux, said shows how a holistic approach can turn the dial. 鈥淔or the first time, you have a piece [of legislation] around resilience and you have a piece around embodied carbon. It鈥檚 a piece of legislation that does combine that.鈥�

Meanwhile Anica Landreneau, global sustainable design director at HOK, described the existing US regulations as 鈥減iecemeal鈥�. The need for US regulations to move towards a total carbon measurement for buildings 鈥� so, not just operating carbon but also embodied carbon 鈥� was identified by both Landreneau and David Briefel, sustainability director and principal at Gensler. They agreed that when project teams are required to consider both 鈥渋t really changes the calculation, and it does push you more towards looking at existing buildings repurposing or bio-based materials鈥�.

Also looking at events through a US lens, Adrian Farren, Gleeds鈥� vice president for the Americas, highlighted the New York-specific Local Law 97 which came into force this year setting at target of 40% emission cuts in existing buildings by 2030, which he said could result in building owners being charged 鈥渁 significant amount of money鈥�. That prospect has led to a real shift in the last few years, though some on the panel disagreed about the effectiveness of the measures (see New York鈥檚 Local Law 97, below).

Regulating for operational and embodied carbon

Specific regulations may vary by country, region or state, but all the panel鈥檚 statements made clear that across the board a step-change is needed if there is any chance of hitting global carbon goals 鈥� particularly from an embodied carbon perspective.

Their experience on projects so far is that most action on embodied carbon has been driven by the values of individual firms, clients or industry initiatives rather than a uniform or mandated approach.

Paul King, chief executive of Built by Nature, felt strongly that the embodied carbon in building materials has been overlooked for too long and is in dire need of being regulated. His organisation focuses on increasing the use of sustainably sourced timber and bio-based materials as a complement to or replacement for more carbon intensive materials.

Before his current role, he explained he worked for main contractor and developer Lendlease, which is where he recognised the scale of the challenge. He described the process contractors go through in reporting their progress against scope 1 and 2 emissions, which pale into insignificance compared with scope 3: 鈥�99% of [contractors鈥橾 carbon footprint is scope 3 and 86% of that is upstream emissions associated with our materials鈥�.

We need to start regulating for embodied carbon, so we鈥檙e not again building buildings that we can鈥檛 afford financially or environmentally

Paul King, Built by Nature

In King鈥檚 view, the UK took a big step backwards when the government abandoned its 2016 target for all new homes to be zero carbon. 鈥淚n the UK, we don鈥檛 regulate [embodied carbon] at all. We can see we鈥檝e slipped behind where regulation ought to be in terms of other areas, and now people are having to pay the cost to get buildings back up to where they ought to.

鈥淲e need to get ahead of that and start regulating for embodied carbon, so we鈥檙e not again building buildings that we can鈥檛 afford financially or environmentally.鈥�

Gensler鈥檚 Briefel said in the US he had been involved in the creation of the Gensler Product Sustainability (GPS) Standards, which establishes a minimum level of criteria that his practice has for materials across all projects in the US, Canada, Europe, and the UK.

He said: 鈥淎t this stage a certain amount is being driven by regulation, and there are certain parts of the market that are only being driven by investors. But the really progressive clients, the ones always asking to go further, are those that are being driven by their values, or the values of their staff, and that needs to be wider spread.鈥�

There are examples of where this has been done top-down and it is working. Irene Garcia, built environment lead at the Carbon Neutral Cities Alliance, highlighted the work that is being done in the Dutch city of Utrecht to embed embodied carbon targets in public procurement. 鈥淭hey鈥檙e putting a monetary value on the carbon store in the building, as a way of incentivising developers to come forward with designs using timber that can show a higher degree of carbon storage.鈥�

Sometimes local government doesn鈥檛 go as far as they can, not because they鈥檙e not ready, but because they don鈥檛 want to leave behind the SMEs

Irene Garcia, Carbon Neutral Cities Alliance

She did add that not all national governments within Europe are regulating at the same pace, and in many countries big companies want them to move further and faster but governments are worried about a backlash from smaller businesses. She explained: 鈥淪ometimes local government doesn鈥檛 go as far as they can, not because they鈥檙e not ready, but because they don鈥檛 want to leave behind the SMEs.鈥� She added that in Denmark and Finland she has seen the governments pull back from more ambitious targets for low carbon concrete and lower embodied carbon targets called for by the large corporates to allow smaller companies time 鈥渢o invest and make that transition鈥�.

Mandates for operating carbon were also discussed, with panel members pointing out that simple measures that require no new technology or upskilling would have a significant impact on emissions. As an example of this Maurice Loosschilder, global head of sustainability at Signify, pointed out that while about 2% of global greenhouse gas emissions currently come from lighting, which is about the same as aviation, 鈥渋f you had a magic wand to replace all the lighting in the world with connected LED lighting, we could halve that in just one day, with available technology鈥�.

Investor and financial pressures

Without access to finance, the ability of owners and investors to upgrade existing buildings 鈥� of whatever asset class 鈥� remains severely limited, meaning energy performance does not improve and the risk of owning stranded assets increases. While this should be a big driver to change, the panel highlighted how market dynamics can affect different building types.

McKenna of Arcadis said: 鈥淲hen we talk about assets, we always default to offices because that鈥檚 the one side of the market that is well funded and scoped by institutional investment with large portfolios, which we know are generally governed by listed organisations that have climate commitments. That market feels disproportionately big, [when] actually listed office space may make a fraction of the total building portfolio.

Some of the biggest gains in decarbonisation have to happen in that 80% or 90% which is not covered by access to finance

Mark McKenna, Arcadis

鈥淚f you put major global hubs such as London and New York to one side, you鈥檝e probably got 80% or 90% of all the other assets which are not covered under stringent targets. So that is a big challenge that we鈥檝e got from an investment point of view, because some of the biggest gains in decarbonisation have to happen in that 80% or 90% which is not covered by access to finance.鈥�

But even in the office market in a city such as New York, there are barriers to investment. According to reports in the US press last year, there was 94 million ft虏 of vacant office space 鈥� the equivalent of 30 Empire State 黑洞社区s 鈥� in Manhattan, with some corporates reducing their office commitments largely in response to post-covid hybrid working arrangements. And just as demand for office space is falling, the requirements on owners from Local Law 97 are ramping up.

贬翱碍鈥檚  Landreneau felt that the way tax incentives work for property owners in cities like New York is part of the current problem. She said: 鈥淎 lot of commercial property investors are upside down on their construction debt, so they don鈥檛 qualify for financing. It doesn鈥檛 matter what rate you give it to them, they don鈥檛 qualify.

鈥淢aybe they owe more than they have in terms of assets, and if you鈥檙e not making a profit, then you can鈥檛 get the tax relief. So I think there are the incentives that are structured for a boom time, and we have to figure out how to transition those to a very difficult time right now in property.鈥�

Property owners are saying this is a real problem because insurance is not covering the costs

Priya Jain, Mace

Opportunities do exist, though, with some clients in cities such as New York and Boston repurposing office buildings for housing or for the biotech and pharmaceutical sectors, according to Priya Jain, president for the Americas at Mace. A key issue she identified when it comes to stranded assets affects the areas frequently hit by flooding. She said: 鈥淧roperty owners are saying this is a real problem because insurance is not covering the costs.鈥�

Funding to upgrade housing is particularly challenging, with limited access to finance for whole-life carbon as well as energy-efficiency measures. Kara Magoolaghan, principal at affordable housing consultancy KMCG, pointed out that in the part of the US housing market where she works, the rising temperatures and extreme weather events mean that some homes are already becoming uninsurable. She said: 鈥淎t this stage, we don鈥檛 see the driver being on the regulatory side. Our investors are worried about the resilience.鈥�

She said insurance rates have been going up at a rate that nobody ever expected and to a point that is 鈥渦nacceptable to our investors and certainly our partners in government鈥�. She added: 鈥淲e know that there鈥檚 been a huge disinvestment in housing in the States and we have a huge housing shortage, which hasn鈥檛 happened by accident.

鈥淭his is not really what anybody wants to hear, but I think some significant investment from government is needed. If the government wants us to close that housing gap, if the government wants us to be building with the incentives of sustainability, then they鈥檙e going to have to put up some money to allow us to do that.鈥�

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