Lauren Krause

COP-26 raises awareness about the built environment’s interaction with climate change.

At a high level, COP 26 has served as a forum for world leaders to gather and has inspired business leaders to take note of private companies’ responsibilities and opportunities to contribute to solutions. Lauren comments, “We [private companies] should be thinking about how we can partner with local, regional and global groups to promote action and drive results around mitigating and adapting to climate change.

“In the last few months, I've had more people ask me what 1.5 degrees C means from the built environment’s perspective. I think people are starting to really dig into the nuances of what climate change means for different scenario planning efforts, which I take as a positive sign of engagement.”

While both are needed, mitigation as a collective action can be more impactful than adaptation.

From a real estate perspective, Lauren likens this dilemma to individual versus collective action: “If every company just adapted its portfolio to be more resilient, the worst impacts of climate change will be missed. While adapting individual buildings is important, we need companies and organisations to collaborate. By collectively addressing carbon emissions on a large scale and really putting our efforts and resources behind reducing overall emissions, we’ll see progress. If all we do is adapt, we'll always be adapting to something that's worse and worse rather than slowing the progression of climate change.”

Divestment will occur as regions become more risky.

In certain instances, adapting individual buildings still may not be enough. Lauren explains: “Possible adaptations to physical structures are limited, you can't just pick up a building and move it. In some ways, the built environment is a perfect example of where short-sighted adaptations to address a single building’s problems are futile. A wider lens is needed. What we're doing alongside our Investment partners is looking at our markets as a whole and if we believe, or if predictive models show, that some of our assets are more risky than others because of their location, then we'll be considering whether we should be exiting those locations sooner rather than later.” In time, this may lead to a snowball effect.

“As more and more companies shift capital, there will be regions that will become less suitable for investment, for habitation, or for jobs. When that starts to happen, I believe government agencies will be faced with hard questions about how much money will be allocated to continuing to rebuild in regions that will likely continue to be impacted by climate-related events. As an industry, real estate companies are looking ahead to understand how our markets and assets intersect with climate related events.”

How insurance companies underwrite climate-related events, or eliminate certain coverages, will also create major challenges for retaining an assets value.

Climate change solutions: materials technology, data sharing, doing the obvious.

Carbon sequestration in cement production, using the manufacturing process to reduce carbon emissions, and the search for alternatives to the typical production of mass timber or steel are exciting technological advances. “I think the material side is really meaningful and will lead future innovation,” Lauren says.

In many industries, including real estate, companies are making commitments to reduce carbon emissions. “I think the investment community has done a great job in being a leader of public commitments and developing plans to meet goals. 

“Knowledge sharing around how to make buildings more efficient in a cost-effective manner will be helpful. Embracing innovation, new technologies around materials, data collection and sharing so real estate managers know how best to assess their portfolios, are all solutions we should be exploring.”

“New buildings should be designed and constructed to reduce embodied carbon and existing buildings should be made as efficient as possible," Lauren says. “It's about finding those incentives that make the technologies more broadly adopted, and then mass implementation of the things we already have, such as LED lights. Those are easy things that we could all be doing now..”

Stranded assets have a human dimension.

Looking towards the future and assessing which assets will be stranded is a meaningful move. Lauren says, “It signals to the market that certain assets will not be valued in the future. When investment decisions are made, future decisions are pulled forward and you can start taking action sooner. But it is ‘heartbreaking’ to think about abandoning a building, an industry, a region. Those are really hard decisions to make, and that's where the social side comes into play. Providing meaningful support to the people who will be impacted by these decisions has to be part of the solution.”

Sustainability means more than emissions.

Keeping carbon emissions at the forefront is important from a global climate change point of view, according to Lauren who believes true sustainability also needs to measure human impacts. “We need to consider communities holistically, whether our low-income communities are able to access safer housing, better building interiors or better air quality. What we're seeing from climate-related events is not just a changing of the physical and natural environment, but also where and how people are living. That human aspect has to be front and centre when we're thinking about environmental intervention.”

Human capital can build the road to 2050.

Lauren has faith in human capital: “I’m hopeful  we'll be able to meet or at least get close to our 1.5 degree C goal worldwide. What I've seen in the Western U.S. is an increasing number of climate related events. From wildfires to flooding, to drought, to sea levels rising. It's not niche industries, or people in environmentally-sensitive areas that are thinking about this anymore.

“And while the events that have occurred are devastating, discussion is increasing because of the number of people impacted by the events. And this number will only grow over time. If we can capitalise on the momentum and the energy around what we need to do, I think we can harness a lot of power, human power. It’s human capital, our innovation and ingenuity, that can come up with solutions.”