Two-year warning: No net zero plan? No funding

Companies without plans in place to make their assets net zero carbon could struggle to secure debt against them within as little as two years.  This was the stark warning from JLL’s head of sustainability services and ESG, Guy Grainger, as he took to the stage at CREtech’s debut London event last week.  “Your debt provider is in a much more heavily regulated and audited business than real estate,” he said. “If you have no plans to transition your assets to net zero carbon, I would be surprised if you get a loan in two years’ time. At all. Full stop.” Alarm bells Speaking on day one of US-based event organiser CREtech’s first European real estate tech conference, Grainger warned that the urgency around tackling climate change is greater than many in the real estate sector realise. Although he added that he didn’t believe in the blame game, he made it clear that the consequences of ongoing inaction would be catastrophic – for the planet first and foremost, but for the sector, too.  The problem, Grainger said, is that there may not be a short-term return on invested capital when it comes to putting practices in place to create efficiency around energy consumption in buildings. This can discourage real estate businesses from investing at all. But he added that the repercussions of doing nothing will be far more costly down the line – and not as far down the line as many might believe. “I would say most companies at the moment are not putting these practices in place because they have costed it and it doesn’t make immediate financial sense. My question then is, how will you maintain liquidity and resilience in your business? Is this an asset that will still be liquid in three years’ time if you do nothing? “If acting now means you can still get debt and you still have a liquid asset, there is your return on invested capital. Otherwise, you are up a creek and you don’t have a paddle.” Grainger added that targets for 2030 and 2050 are well and good, but warned the sector not to get distracted by longer-lead time frames. He urged the industry to focus instead on a five-year plan: “How can we take those targets and strategies and turn them into real actions? We need to start with changing systems within buildings, we need to change the way we use buildings and change the way we develop and refurbish buildings.  “For too many organisations this stuff sits on the side of their desk while they get on with what they consider their day jobs. Actually, it is a case of putting this front and centre of everything you do.” He added that technology was well placed to help the real estate sector implement some of the practices required to tackle ESG and move towards net carbon zero. “A lot of the technology solutions we need are already here,” he said. “The tech is not the challenge. We are the challenge, the people. That’s where we hit a lot of bumps in the road, especially with new buildings.” Human spirit A fear of change, of jobs being lost to tech solutions, or experimenting with solutions that might not work initially are all hurdles standing in the way of progress. Proper engagement with people within real estate around the benefits of technology will be crucial, said Grainger.  “People are not resistant to this on purpose,” he added. “They are resisting because they haven’t been told the full story around why change needs to happen and what role they will play in that change. We need to transition these people and tell the story well.” Does he think the sector will get there? He is hopeful. “I am a great believer in the human spirit here saving the day.” To send feedback, e-mail emily.wright@eg.co.uk or tweet @EmilyW_9 or @EGPropertyNews