26 / 10 / 22 - 5 minute read
Rosemary: We saw a record volume of capital commitments at Glasgow during UN COP26 in 2021. Many are unrealised as we head into this year’s COP in Egypt. We are in a critical moment. Commitments are not sufficient; we need action.
Climate inaction is one of the biggest risks. The trillions pouring into socially responsible and ESG investment are not yet directing capital away from activities that cause harm or into solutions at a meaningful scale. Continuing down the same path is the equivalent of allowing great holes to be dug in the backyard, then arguing about what type of teaspoon
we’ll use to fill them up. And in the aftermath of the pandemic, there’s actually ground to make up; we’ve seen the most significant decline in development outcomes in decades.
The market conditions are also changing rapidly, including the most significant change in accounting and reporting standards since WWII, through new standards such as those being developed by the International Sustainability Standards Board and regulatory measures, including the European Union’s Sustainable Finance Disclosure Regulations. While debates about value and disclosure are starting to put some lines on the field and have some bite – for example, Morningstar dropping the ESG tag from over 1,200 funds – these measures on their own won’t be sufficient.
To paraphrase Einstein, we won’t solve the issues from the same level of consciousness that created them. More plainly, what got us here won’t get us there. We need to do some things differently. A constructive way to start the process is putting impact on the agenda – what impacts are we having, positive and negative, and which of them matter most. What does that mean for how we move forward?
Rosemary: The built environment has an important role in strategies to manage the risks and minimise the negative impacts of climate change and, consequently, our future. According to the World Green Building Council, our homes, offices, places of entertainment and the infrastructure that supports them are responsible for 40% of global carbon emissions.
The long-lived nature of infrastructure assets means that decisions made now will lock in vulnerability if they fail to consider the broader impacts. The World Economic Forum’s Framework for the Future of Real Estate envisions a future in which buildings provide shelter and comfort, are energy efficient and equipped to support health outcomes, are resilient to natural shocks, and are affordable and accessible.
Perhaps that is a lot to ask, but it challenges all of us to reimagine what’s possible. Investors, developers, contractors and consultants are crucial to delivering transformative real-world impact through investing in innovation and providing the infrastructure of sustainable, carbon-neutral smart cities and better outcomes for the people who live in them.
To avoid the worst effects of global warming, we need to look across the spectrum of real assets. And it’s not just about energy efficiency and climate resilience; building materials such as concrete and steel and the waste produced in building have significant climate impacts.
Fortunately, built assets are relatively easy to understand in a climate context. Unlike more esoteric financial products, buildings and other infrastructure are incontrovertibly there. They can be seen and touched, and are central to where and how we live and work. Their properties are known and can be studied and measured. Methods for assessing the embedded carbon in construction and operational performance are well-rehearsed, if not yet entirely agreed upon. Similarly, social determinants of health and factors that make for community amenity have been studied and can be measured and designed for. Some solutions will be simple, while others will take more time to solve collectively.
Rosemary is an internationally recognised director and strategist driving innovation and investment for greater impact and sustainability. She is Founding Managing Partner of Mondiale Impact putting impact in the agenda for 21st Century Governance and Executive Director of Impact Strategist and Enterprise Professor, Faculty of Business & Economics at the University of Melbourne. Her current portfolio includes Chair of Climate Ready Australia 2030 and the Sweef Capital Board of Advisors, Ambassador for the Global Steering Group for Impact Investment, Member of a World Bank Steering Group for Innovative Finance and Non-Executive Director Indigenous Business Australia.
Rosemary: I draw inspiration from the people and organisations experimenting with how we can do things differently, asking how we can make this happen – even if we don’t get it right all the time. Here are a few that illustrate the breadth of what’s already being done and trialled.
One international property and infrastructure group, Lendlease, is developing MIND - the Milan Innovation District on the old Milan Expo site is seeking to embed environmental and social sustainability across what’s effectively a new suburb. There is plenty of inspiration – and some lessons – to inform and inspire other
large-scale developments and show communities and policymakers what can be possible.
100 Resilient Cities (100RC), pioneered by The Rockefeller Foundation in 2013 as part of its Global Centennial Initiative, has demonstrated what can be achieved through a city-led, impact-focused, regionally driven and partnership-based agenda. The Resilient Cities Network, which has grown out of this initiative, is helping more cities move faster and share what they’ve done and learned and is developing practices for the type of deep engagement required across city leaders, communities, and the private sector.
Australian property developer, Hesperia, has been established as the first benefit corporation – or B Corp – certified in the property industry. Achieving the certification required they meet sustainability criteria across their business, from products to people and supply chains. Their innovations include low-carbon building materials, large-scale solar and strategic initiatives associated with storm and wastewater management. From an initial, award-winning demonstration, they plan to roll out these innovations across their projects, spanning the medical, commercial, residential and industrial sectors.
The Healthy Futures Fund, a collaboration between Kresge Foundation, Morgan Stanley and the Local Initiatives Support Corp launched in 2012, is an example of what can be achieved when investments are structured to utilise available incentives, and affordable housing incorporates health care and related services. The evaluations found that the US$180m invested in housing also delivered improved access to health and social services for people on low incomes, that in most cases would not have otherwise been possible.
Rosemary: The bright spots of innovation and improvement shine a light on what can be achieved – and the work still to do. Firms serious about hitting net zero by 2050 and driving change in real assets, like PATRIZIA, have a long way to go to meet those goals. The science is clear on climate, and the most recent Intergovernmental Panel on Climate Change (IPCC) reports underscore that climate risks are increasingly “cascading, compounding and aggregating”.
And there is a significant risk that our institutions won’t respond quickly or effectively enough. The scale and urgency of the challenge require us to keep our eyes on the goal, think bigger and reimagine how things are done.
The potential lies in a vision for a financially prosperous future and in which local economies are strengthened in a socially inclusive way, new skills, jobs and industries are created, and how we build sustainable, liveable cities. That’s a vision people can get behind. If not now, then when?