Air pollution has reached new unhealthy levels in Hanoi & HCMC over the past few weeks. As both cities are taking a range of measures to ease the situation, could commercial real estate assist in lessening this epidemic? What lessons can buildings take from countries already tackling air pollution?
Air pollution is a global issue. Data shows that 91% of the world’s population resides in locations where air quality exceeds the WHO guideline limitations. Countries are closely monitoring air pollution at local levels and working to improve air quality. More than 4300 cities in 108 countries are now included in WHO’s ambient air quality database, making this the world’s most comprehensive database on ambient air pollution. The UK for example issued the ‘Clean Air Strategy 2019’, setting out comprehensive actions required to enhance the quality of air, addressing emissions from transport, home, farming, industry and commercial properties. This strategy enables local authorities to determine operation thresholds for commercial property owners. To encourage energy efficiency, the UK Government has introduced ‘The Green Lease Toolkit’, an initiative which aims to assist property owners and occupiers in establishing carbon, energy and waste reduction strategies to minimise environmental impact.
Environmental awareness in real estate has become an integral part of the growing impact investing trend. According to Lucy Auden, Global Head of ESG (Environmental, Social and Governance) at Savills Investment Management, impact investing has the specific intention of creating social or environmental impacts in addition to the more traditional financial returns. According to Fitch Ratings, assets in the sector rose 15% to US$52 billion during H1/2019, showing the rapid growth of ESG. The Global Impact Investing Network (GIIN), estimates that this impact investing market is now worth US$520 billion.
Ms. Auden added: “Environmental issues and climate change are already on the minds of real estate investment managers. Rather than saying, “I’m going to buy this green building as something that is ‘nice to have’,” the industry is starting to think: “If I buy an inefficient building and plan to do nothing to improve its resilience and efficiency, am I going to be able to sell it? With climate concerns on the rise, is there going to be a buyer in 15 to 20 years who are willing to take on unmitigated climate-related risks?”
“The bricks and mortar element of the real estate sector makes it much more at risk to physical climate changes. The built environment is also responsible for 40% of global carbon emissions, meaning there are also huge opportunities to reduce global emissions. The mitigation and adaptation of climate change both hinge on real estate assets in a massive way,” said Auden.