COP29 takeaways for property investors

COMMENT Putting aside the controversy surrounding the hosting country’s lack of climate ambition, and the main agreements on climate finance which dominated headlines, COP29 in Azerbaijan held particular significance for property investors with three important takeaways. In truth, COP29’s ultimate success or failure will not emerge until February/March 2025 – the deadline for all 200 countries signed up to the Paris Agreement to submit their updated national climate action plans (known as NDCs – nationally determined contributions). These have to be bolder to close the gap between the current trajectory of global warming (between 2.5-2.9°C) and the 1.5-2°C commitment under the Paris Agreement. To this end, Keir Starmer has announced a stronger target for the UK of an 81% reduction in greenhouse gas emissions by 2035. Yet, despite the well-documented climate impact of the built environment (buildings being responsible for nearly 40% of global energy related carbon emissions), it has historically been overlooked. Only three of 195 existing NDCs incorporate a building code aligned to net zero operational emissions, according to the Global Alliance for Buildings and Construction. But that is now set to change. Faster than predicted During COP29, the Partnership for Energy Efficiency in Buildings and the GlobalABC released a guide, NDCs for Buildings, to help equip policymakers, planners and practitioners with a comprehensive framework to integrate ambitious climate actions within the buildings and construction sectors. Similarly, the World Green Building Council announced it will develop an NDC Scorecard tool to evaluate and strengthen national policy action on buildings. Other progress was made during COP29 to elevate the importance of buildings and construction in the global race to tackle climate change. For instance, this was the first COP at which one of the official texts noted the key findings of the “Cities: Buildings and Urban Systems” work programme for 2024, which itself made reference to energy efficiency, embodied emissions and electrification of buildings. During COP29, a new set of Buildings Breakthrough 2025 Priority International Actions was launched to accelerate progress towards Near-Zero Emission and Resilient Buildings (NZERB). As part of this, a Global Framework for Action was launched to harness sustainable and circular public procurement to drive demand for near-zero emissions and resilient buildings. It calls on the 70 or so governments signed up to Buildings Breakthrough’s Chaillot Declaration (which includes the UK) to lead by example through ambitious procurement policies, with particular attention to public sector buildings of all types. All these efforts and more will now be overseen by an Intergovernmental Council on Buildings and Climate (ICBC), which was formalised during COP29 and will be coordinated by GlobalABC. While all this may seem complicated, process-heavy and somewhat indecipherable for real estate investors operating in fast-paced markets where capital expenditure on decarbonisation is challenging to justify, it might best be summarised through three key takeaways and their associated calls to action. Firstly, buildings are a big part of the climate problem and are increasingly targeted as a critical lever to climate mitigation across their entire life cycle. This means embodied and whole-life carbon will soon become as important as EPCs and operational carbon. Investors should, therefore, measure, target and disclose both the embodied and operational carbon performance of their assets and use both to inform investment decisions. Secondly, climate change is happening faster than previously predicted. Extreme weather in the form of heat, flooding and high winds is already presenting substantial physical risks to buildings, which will only get worse. For instance, London is the most vulnerable UK city from a real estate perspective in the face of overheating and flooding risks. Investors should commission detailed physical climate risk assessments of both existing and new assets and take action towards enhancing their resilience to extreme weather. This is likely to require collaboration with other local bodies and landowners. And thirdly, with the geopolitical focus firmly on climate finance from developed to developing nations, the concept of climate justice and the just transition is high on the agenda. Property as an asset class that delivers returns to privileged investors will be increasingly scrutinised for its wider societal impact and its overall impact on the lives and livelihoods of ordinary people. Meaningful contributions Investors should be maximising the social value of their real estate investment decisions, and seeking to make meaningful contributions to local employment, upskilling, health and wellbeing and the provision of facilities for broader community enjoyment wherever possible. In short, property investors have much to contribute to the global climate fight. Those that recognise the need to do so early to protect their investment returns are likely to be the winners over those who sit back and await the inevitable surge in regulation that will force them to catch up. The time to act is now. Amanda Stevenson is head of investor ESG at CBRE