Read this article to understand:
- Why buildings are on the front line in the battle against climate change
- Why the UK’s headline net-zero target must be complemented by more ambitious policies
- The actions developers and investors can take to avoid being saddled with stranded assets
When Julie Hirigoyen decided to continue with her academic studies during the mid-1990s, it was abundantly clear her chosen discipline put her in a minority.
First, she wanted to study sustainability – only to find the relevant course was available at just two universities. Then, she planned to apply what she learned in the notoriously cut-and-thrust property sector. This was at a time when most of the leading players were more worried about bad debts, falling prices and the health of their central London portfolios than the climate agenda. For many professionals in the industry, "sustainability" just meant how long you could last in the gym.
Hirigoyen made it work, though. Over the decades that followed, she became one of the first employees at an early "green" consultancy, Environmental Governance, before co-founding her own sustainability consulting business, Upstream, five years later. After that was taken over by the international property group Jones Lang LaSalle, now JLL, she stayed on and occupied several key sustainability roles in both the UK and continental Europe.
Now in her eighth year as chief executive of the UK Green Building Council (UKGBC), Hirigoyen has helped to ensure environmental issues are at the heart of the way property people think about the built environment.
UKGBC, a membership organisation for the property and construction industry, was formed in 2007 with the goal of transforming the way the built environment in the UK is planned, designed, constructed, maintained and operated.
Hirigoyen has been credited with transforming UKGBC into a powerful mouthpiece on sustainability
During her tenure, Hirigoyen has been credited with transforming UKGBC into a powerful mouthpiece on sustainability, with a seat at the table when it comes to government initiatives. But she has also spearheaded efforts to drive collaboration between the wide variety of forces at work in the sector, from policymakers and town planners to designers and architects, engineers and construction firms.
Hirigoyen, who is also an independent director at the privately owned contractor Willmott Dixon, steps down from her position at UKGBC next summer, but has already made clear that her next job will have a similar focus. “This is my passion,” she tells AIQ.
“I originally did a law degree, and then I did an MSc in environmental protection and management at the University of Edinburgh. It was literally just a year after Jonathon Porritt, Sarah Parkin and Paul Ekins founded Forum for the Future, the first solutions-driven NGO, really, in sustainable development. I came across that as I was doing the Masters and went and joined its scholarship programme.” This was at Middlesex University, where she pursued a second Master's degree in sustainable development.
Forum for the Future is still going strong, working with businesses, governments and other key stakeholders to promote sustainability, including through education. Porritt and Parkin, once a prominent figure in the Green Party, remain active campaigners, while Ekins is a professor and director of the Institute for Sustainable Resources at University College London. Back then, though, it must have felt for them, and for their like-minded peers, a bit like environmental ground zero.
It forced us to think about the different components in the system that need to change at different rates
“That was really early days,” Hirigoyen says. “I think it was only the second year they’d ever run the scholarship; and it was very focused on different sectors. We spent a month based in local authorities, a month in big business, a month in a law firm, a month in a financial institution and so on. And it really forced us to think about the different components in the system that need to change at different rates.”
Hirigoyen began to hone two of her central convictions about making sustainability work in practice. The first is that policymakers and market practitioners must tailor their approach to the various parts of the property sector – residential, commercial, freehold, leasehold, or social housing, for example. What works in one area won’t necessarily fit the bill in another.
It’s hard to see a sustainability-based discount on stamp duty going down well with the long-term owner of a shopping centre, for example, but for a new-build developer and first-time buyer, the idea could be a winner.
The second is that only by joining forces and pooling resources can the buildings sector’s various stakeholders – developers, investors, planners, standard setters – stand a racing chance of achieving their aims. And those are: to properly green the built environment and make it more energy efficient – and to channel the billions in private capital waiting impatiently to support it.
If Hirigoyen was thinking ahead of her time back then, it’s tempting to conclude she still is and has to be. The UKGBC boss sat down for an interview with AIQ as the COP27 climate summit was beginning in earnest in Sharm el-Sheikh, Egypt, amid widespread scepticism about what it could achieve as a global recession looms and governments get edgy. The backdrop: rampant inflation, rising interest rates, a war in Europe and mounting predictions of a property price crash, both residential and commercial.
An intensifying global energy crisis is turning the screws in every area
Added to the mix, an intensifying global energy crisis is turning the screws in every area – in property terms, on owner-occupiers, tenants and landlords. At the same time, as the world races to achieve net zero, developers are under pressure to improve the efficiency of their buildings and real estate investors are having to decarbonise their portfolios in line with their own targets. The result: a fair bit of tension around capital and assets.
In the end, such was the wrangling at COP27 about a long-promised $100 billion "loss and damage" fund to compensate the developing world for climate events that the summit had to be extended for an extra day in order for governments to thrash out the bones of an agreement.
Yet buildings are on the front line in the battle against climate change. As UKGBC points out, the built environment – homes, offices, public spaces, high streets, towns and cities – is responsible for 25 per cent of the UK’s carbon emissions. If transport is added in, the figure jumps to 42 per cent. The government has committed to slashing the sector’s emissions by 68 per cent by 2030, but has come under fire in numerous quarters, including from the Environmental Audit Committee, for failing to put the necessary policies in place to achieve this goal.
Perhaps unsurprisingly, Hirigoyen says she wants to see much more national ambition from the government, which she says should also be putting far greater emphasis on the detail and implementation of policy plans.
We’re lacking the policy frameworks to achieve net zero, nowhere more so than in the built environment
“The UK has a legally binding net zero by 2050 target and a net-zero strategy, which actually is not bad. But we’re lacking a lot of the finer details, the granular policy frameworks needed to achieve that, nowhere more so than in the built environment,” she says.
Hirigoyen notes the Committee on Climate Change has pointed to the buildings sector as one of the least well defined in terms of policies for getting to net zero and one where some of the biggest policy gaps exist.
“We did some analysis for our net-zero carbon whole-life roadmap for the UK built environment, which we launched at COP26. It tracks policies that currently exist or are planned. It says that by 2050 they would only get us 60 per cent of the way towards credible net zero, just for this sector. There’s loads missing.
“I would like to see a commitment to tackling that gap. Obviously from our point of view that’s for the UK built environment, but that’s as true for any other country or sector,” she adds.
The summit failed to secure an agreement to ramp up emissions cuts, nor a commitment to end production of fossil fuels, so on that Hirigoyen will have been left disappointed.
Ambition and action
She argues another way that the government could raise its ambition is to bring forward its target date for net zero, to 2045 for example, as Scotland has already done.
“The target isn’t necessarily the challenge, though,” she says. “For me, it’s more about what are we doing to stand any sort of chance of achieving the target. If we’re only going to achieve 60 per cent of it, that’s not very credible. The credibility and rigour have to come through in the form of that detailed policy.”
It’s more about what are we doing to stand any sort of chance of achieving the target
So, just how do we stem the numerous tonnes of carbon our built environment still pumps into the atmosphere?
The first, and possibly biggest, challenge is the UK’s 29 million existing homes. To stand any chance of hitting net zero by 2050, each of these must be adapted, or "retrofitted"; in practice, this means insulating draughty properties, replacing gas boilers with heat pumps, installing energy-efficient meters and switching to all-electric, renewable energy sources.
There are various green grants and energy-efficiency incentive schemes designed to encourage homeowners to make the leap, but none of them are sufficiently adventurous or targeted at those more likely to respond, Hirigoyen says.
“Existing-home retrofitting requires national fiscal incentives and carrots and sticks, as well as capital investment, support for local authorities and much more localised efforts to start scaling up. Each different type of tenure requires a different approach. It’s complex and we need to be thinking about the one or two key levers.”
Disclosure and desirability
Hirigoyen advocates compulsion in some areas – arguing the government should bring forward its proposed ban on sales of gas boilers, for example, although a date for a full veto has yet to be set. However, much more effective would be a better-targeted system of incentives and rewards, tailored to the type of property and occupier.
“Many of us have been talking for many years about stamp duty rebates or reduced council tax for a more efficient home. You want those incentives because that’s going to make people want to do it, rather than force them to do it. In the early stages that’s better than just saying ‘you’re not allowed not to’.
Each tenure will require slightly different packages of triggers and incentives
“That would be really effective for owner-occupied, or even private rented, but probably isn’t going to help with social housing and so on,” Hirigoyen says. “Each tenure will require slightly different packages of triggers and incentives. But the existing homes piece is key and we ought to be thinking about it more holistically.”
Then, of course, there are commercial properties, just as likely to be inefficient users of energy and intensive emitters, with gas boilers in the basement and a heating system that works overtime. Here, too, there are some powerful levers to be pulled, including ones that property owners, and their investors, could end up feeling in their pockets.
The most obvious is to mandate performance disclosure for commercial properties based on real, rather than estimated, energy usage and carbon emissions, Hirigoyen says. This would give property owners, developers and investors real insight into the actual carbon intensity of an asset – not modelled energy performance certificates (EPCs) but what she calls “real-life energy and carbon performance disclosure”, available to see at the point of sale or lease.
“One would think, from an energy point of view, this should become even more palatable. You need to know what your liability is,” she says. It’s not hard to see how having an accurate measure of a building’s carbon intensity could have both financially beneficial, and painful, implications for its market value and desirability as an investment.
Nabers, everybody needs good Nabers
The idea of using actual data to measure performance of existing buildings is just the beginning. We should also be using it in the design of new buildings and revisiting them to check how they are measuring up, Hirigoyen says. Doing that ensures the data becomes increasingly accurate as time passes.
“We talk a lot about the performance gap. The reason is that we’re modelling notional building performance at the stage of designing it, and we don’t follow that through. We don’t even go back and work out if the building comes close to achieving it. We really ought to be basing our design choices on ultimate actual performance, not on modelled, theoretical performance.
Lots of commercial real estate investors are trying to use Nabers to design for performance
“That’s really important. There are mechanisms now that enable some of that to happen more easily. There’s an Australian system called Nabers, which we’ve now brought over to the UK and there’s a big pilot going on; lots of commercial real estate investors are trying to use that to design for performance. And it’s gaining traction, though it’s definitely not yet on the regulatory framework,” Hirigoyen says.
Nabers, which stands for National Australian Built Environment Rating System and is clearly a gentle pun on the country’s hit soap Neighbours, is administered by the New South Wales government. It can also measure water consumption and waste production and be used to assess existing buildings as well as aid the design of new-builds and retrofits.
Yet this idea of collating accurate, valuable data has numerous other applications in the built environment, possibly with profound implications in some cases.
How, for example, do property owners and town designers and planners make the decision whether to refurbish or retrofit an existing building, or tear it down and start afresh with a more effective net-zero template?
This brings us to the idea of the whole-life carbon assessment, in other words trying to establish the total amount of CO2 emissions created during the entire life cycle of a building. That includes the building materials used in its construction, its lifetime as an occupied property and the carbon effects of the demolition process.
Whole-life assessments are neither mandatory nor regulated, which is something Hirigoyen clearly thinks should change. Measuring and making accountable the totality of the carbon footprint of a building would necessarily make it easier to control.
And it is a whole-life carbon assessment that Hirigoyen says is the best way to decide what to do with an existing building. “Invariably, you’re going to favour retrofit and refurbishment over tearing something down and starting again – because that really is profligate. We haven’t got enough ‘stuff’ anyway, we’re running out of things like sand. We need to do more with less.”
In fact, UKGBC argues demolition is effectively a thing of the past. About 80 per cent of the buildings that will be around in 2050 have already been built, it says, meaning the prevailing theme for the UK built environment over the coming decades is going to be one of modification rather than new development.
“It’s also a question of what investors and occupiers want from that asset,” Hirigoyen says, beginning to touch on what is possibly the biggest question among sustainable investors: where to find net-zero investments that really are just that.
“For all those investors who signed up to GFANZ [the Glasgow Financial Alliance for Net Zero, a coalition of financial institutions], it’s a question of when, not if. All that capital has to move into a net-zero specification at some point. If I were a major property owner, I’d be thinking: ‘I’ve got to get my asset to that, within a certain time, otherwise that asset is not going to be worth anything, it’s going to get stranded.
“‘Either I move out now, which isn’t a very good strategy, and try to find other net-zero assets, or I invest ahead of the curve and make sure that I extend the viability and longevity of that asset and its attractiveness to the marketplace.’ That’s really important. And in that respect, legislation and government policy is lagging behind market forces,” Hirigoyen says.
Desperately seeking definitions
While the appetite is clearly there – among developers to "green" their property portfolios, and among investors to move into net-zero assets – there are still fundamental bottlenecks. In short, not enough capital is being directed into creating and funding net-zero property assets, and not enough government initiatives are in place to help it happen.
Yet it’s not as if there’s nothing going on. Hirigoyen says the UKGBC is collaborating with more than a dozen organisations and industry bodies – the Better Buildings Partnership, Royal Institute of British Architects, Royal Institution of Chartered Surveyors and The Carbon Trust, to name a few – to define what exactly net zero means for different types of building.
Net-zero carbon has not yet been defined for building
“Someone will say: ‘this is the first net-zero carbon development’, or ‘the first net-zero mixed-used development’. They’re all slightly different firsts. None of them are accurate. Net-zero carbon has not yet been defined for buildings,” Hirigoyen says, quite strikingly.
“For an office building, retail building or shopping centre, it’s going to mean different things. And it will need to have an energy-use intensity target. Regardless of whether you’re using more renewable energy, you need to use less energy overall. So it will have an energy-use intensity target metric, and you won’t be able to claim net-zero credibly if you haven’t hit that target,” she adds.
With input from various working and technical groups, the UKGBC and others are trying to get the property industry to coalesce around a definition of net zero, which can then be used to set credible targets. That endeavour, in which whole-life carbon assessments look likely to play a role, seems like a pretty good start.
Hirigoyen cites a definition of net zero set by the Science Based Targets initiative, the global partnership widely followed by the private sector. It says that, irrespective of sector, net zero means an absolute reduction in emissions of 90 to 95 per cent, supplemented by minimal carbon offsetting. Companies cannot claim to be net zero unless they have achieved that initial reduction.
In the UK, it’s about what is feasible and realistic for this particular asset class
“The same is true for buildings,” she says. “It’s both a top-down approach, as in what global budgets of CO2 should be allocated to different countries and different sectors, and then a bottom-up approach country by country. In the UK, given what we know about grids and decarbonisation factors, or the growth in floor area of different asset types and so on, it’s about what is feasible and realistic for this particular asset class to bear in getting the whole thing down to residual amounts.
“It's both bits that are needed – top-down and bottom-up. A lot of initiatives out there are trying to do this in either one or other of those ways. Actually, you’ve got to plug them together, otherwise you don’t get them globally aligned.
“We’re doing that here in the UK. Similar efforts, but not necessarily the same methodology, are being adopted elsewhere. There’s a lot of ironing out to ensure that, for instance, if you’re a global investor, you’ll have different targets and different jurisdictions, but at least the same approach has been taken, so you can relate to that. That should be quite a game changer.”
In the UK, some specific things can be done to help move the whole process along, not least much better government coordination across the various parts of the built environment ecosystem.
“That’s where in a sense we’re the least strong, because policy is still developed in silos. Ultimately, no policy is ever devised without consideration for its financial implications, and so everything comes ultimately from a Treasury department or equivalent. We really ought to have the same for carbon, so every policy has a carbon or environmental impact assessment. We can’t make decisions that lead to non-net-zero outcomes,” Hirigoyen says.
Hirigoyen is not convinced Truss’s planned investment zones were drawn up with environmental issues and objectives in mind
“A good example there is the planning system, and the reforms being put on the table. Again, some of these are very recent, like the investment zones under the previous [Liz Truss] administration,” she says. Hirigoyen is not convinced Truss’s planned investment zones, which her replacement as prime minister Rishi Sunak is going to retain, were drawn up with environmental issues and objectives in mind.
“The point is that the planning system isn’t being used as a vehicle for achieving net zero; it’s just seen as a block or control on development. At the moment, it’s just not sensibly directing the development and investment we’ve got towards net-zero outcomes as a whole. That worries me.
“We have to think about all these things as a systemic change rather than ‘what do we do just for buildings’. You have to think about what that means for land use, planning, energy, even food production,” Hirigoyen says.
As another example, the decarbonisation of buildings has to be linked with the government’s overall energy policy and with the decarbonisation of the power grid using renewable sources in particular.
“I don’t think you can decouple these things. We focus too much on the grid becoming decarbonised when what actually needs to happen with buildings is that we electrify them and come off fossil fuels,” Hirigoyen says.
“We absolutely have to decarbonise the grid, but we need to recognise that, by flipping to the electrification of virtually everything, demands on the grid are going to go through the roof. We can’t just decarbonise the grid and make it all renewable – we have to do that and improve energy efficiency. We have to get much, much better at how we use the energy in the first place.”
When UK Chancellor Jeremy Hunt made his Autumn Statement a matter of days after our interview, it seemed as if he and Sunak had been listening in on the conversation. In a move applauded by the UKGBC, not only did Hunt pledge to invest in a slew of new renewable energy projects, including offshore wind farms and solar parks, but he also said he aimed to reduce energy consumption by buildings and industry by 15 per cent by 2030. Investment zones will be clustered around universities and centres of excellence in research. Finally, a bit of joined-up thinking perhaps.
Most of the reduction in buildings emissions is a direct result of the increasingly decarbonised grid
Rather discouragingly, Hirigoyen says most of the reduction in emissions buildings have achieved in recent years is a direct result of the increasingly decarbonised grid rather than energy efficiency.
Hirigoyen says there are three big contributions commercial buildings can make. The first is that we need to turn them into “mini power stations”. “They can all have photovoltaics on the roof – you can now coat a building’s facade in photovoltaic film – and panels and glass. As the cost of some of those technologies starts to come down dramatically, we ought to be decentralising our energy usage and making it as onsite as possible,” she says.
The second is that we must make our buildings much more efficient, so less energy is needed to heat and cool them. Much of this is easily achievable through new technologies and can be incorporated into any retrofit or new-build design.
“The third is they should be flexible,” Hirigoyen says. “Especially in the digital age, we should be much better at matching energy demand with supply. That’s very much what the energy companies are incentivising consumers to do; they’ll sometimes pay you to put your washing machine on at times other people don’t. Commercial buildings, with their automated management systems and so on, should be really clever at doing that.”
Standing back, in a sense Hirigoyen is saying that the built environment per se needs to be flexible. If the environmental cost of razing a building to the ground is prohibitive, then we need to ensure these physical assets, and the regulatory structure around them, can adapt.
What we can’t have is properties left languishing because the perceived financial cost of improving them is seen as too high
“There’s lots of things you can do to repurpose a building; you might need to change from one use to another; it may have outlived its current use, but you could reuse it for something else by adapting and improving it,” she says.
What we can’t have is the status quo, where properties are left languishing because the perceived financial cost of improving them is seen as too high, or a less-effective alternative gets pursued in the belief that the planet can take the hit.
“We don’t really have an environmental trade-off,” Hirigoyen says, referring to an October report by the UN that made plain the world’s temperature could have risen by 2.8 degrees Celsius by the end of the century against pre-industrial levels, thus making a nonsense of the Paris Agreement’s commitment to try to limit the increase to 1.5 degrees by 2050.
“The 2.8C scenario is totally catastrophic for economies; it’s not an economically viable place to end up for any organisation or any economy,” she says. “The cost of action needs to be pitted against the cost of inaction, which is increasingly becoming untenable.”
Miles Costello is a multi-award-winning writer and journalist.