Posts

How can sustainability software help real estate save energy? 

Investing in energy-saving sustainability software helps combat your surging energy costs and reduce your carbon footprint. Energy data insight, visual dashboards, and strategic action plans interact to optimise your energy usage, drive cost savings, and deliver a clear roadmap for net zero compliance and resilient assets. 

What is sustainability software? 

Sustainability software reveals a detailed analysis of your energy consumption and carbon footprint, equipping you with the knowledge you need to streamline operations, make fast data-driven decisions, and safeguard your assets from fluctuating energy markets and environmental risks. Tightening your energy belt is a smart financial move, while tracking carbon emissions optimises your net zero roadmap for resilient assets. 

When combined with expert energy management consultancy services and green finance, sustainability software not only trims your energy consumption and carbon output but leverages a sustainable advantage in commercial real estate. Getting more done with less on one purpose-built platform delivers multiple business benefits for and beyond sustainable energy-saving. Here’s how. 

How does sustainability software slash energy? 

Leverage data insight to save energy consumption 

Incorporating sustainability software into your business strategy is like having a powerful ally in your corner, who’s dedicated to optimising your energy consumption. Gathering data from several energy sources, like automatic meter readings (AMRs), sensors, and power monitoring software (PMS), sustainability technology keeps vigil over your energy usage. Whether you’re tracking energy metrics in real-time or at quarterly intervals, sustainability software automatically notifies your sustainability and asset teams when energy levels reach a specific threshold or when there’s a potential problem. Readily available data and alerts support responsive decision-making to save energy consumption, waste, and expenses. 

Imagine being able to compare your current energy habits with those of the past. Sustainability platforms do just that. Importing legacy and current data, sustainability software verifies and analyses energy consumption, water usage, waste treatment, and carbon emission timeframes to deliver a comprehensive overview of your sustainability operations. Finding changes in energy consumption and associated metrics supports better understanding of what’s causing those shifts over time, so you can take immediate corrective action to enhance underperforming assets threatening to affect your fund or portfolio. Robust data acquisition and validation pinpoints these “offending energy zones” to improve your high energy-consuming assets. 

At EVORA Global, our purpose-built SIERA sustainability platform centralises Action Plans for collaboration, visibility, and shared responsibility. Action Plans enable business teams to target asset energy consumption, track improvements over time, and strengthen responsive budgeting. Its sustainability software highlights emerging risk factors and identifies any inactivity threatening to jeopardise your progress towards achieving predetermined energy and greenhouse gas (GHG) reductions. Your top five sustainability impact categories are also visually highlighted to prioritise sustainability strategies. 

As AI (Artificial Intelligence), ML (Machine Learning), and NLP (Natural Language Processing) technologies advance, your sustainability data collections could generate scenario-based models and directly evaluate your progress against Paris Climate Agreement and Carbon Risk Real Estate Monitor (CRREM) targets. For example, an upcoming release of our SIERA platform will feature a CRREM-aligned Net Zero Carbon (NZC) feature to supply transparent, science-based decarbonisation pathways that aim to save energy, cut carbon emissions, and set targets for future timeframes for both environmental elements. 

Accessing and tracking sustainability data helps your real estate business anticipate changes in energy consumption trends to proactively respond to disruptive energy markets or supply chains. This informs smart financial budgeting. When selecting a market-leading sustainability software platform, it’s important to focus on automated sustainability data monitoring to keep up to date on changing energy costs. It’s a key driver for adaptive and resilient energy-saving decisions. Added to this, when your current performance and potential new improvements are clearly outlined in your sustainability software platform, alongside cost-savings, your business can better prepare, adapt, and control its energy consumption. 

It’s also crucial to ensure your energy-saving efforts are informed by accurate and reliable data, so pay heed to the adage “garbage in, garbage out” – low quality data generates inferior data insight. Sustainability software can review energy consumption data for all your assets to find data gaps or inconsistencies, and then recommend steps to address these weak points to deliver robust energy data collections worth their weight in gold. 

Visualise your energy data to maximise energy savings 

Sustainability software visually represents your valuable energy consumption, waste, and carbon emission data insight to display visual energy profiles. And handy dashboards highlight abnormal consumption trends or events for immediate attention. For example, SIERA detects anomalies in utility consumption patterns, which could relate to damaged or inefficient appliances using more energy than necessary. By finding these energy-draining operations and areas of waste, your real estate business can optimise its energy usage, reduce its energy waste, and improve its overall environmental impact. 

Track your energy emissions data to optimise your NZC roadmap 

Sustainability software helps real estate businesses capture, track, and measure scope 1, 2, and 3 emissions to accurately measure GHG emissions and achieve climate commitments. According to Closing the Climate Action Gap by BCG, only 9% of organisations measure their total emissions comprehensively, while 81% omit some scope 1 and 2 emissions, and 66% do not report any scope 3 emissions. Organisations also estimate an average error rate of 30-40% in their measurement. Without a complete understanding of your emissions, it can be difficult to set meaningful reduction priorities and track progress. 

Likewise, the GRESB 2022 Real Estate Assessment Results reveal a “slight decrease in energy, GHG, and water scores as a result of real estate portfolios returning to a pre-COVID-19 state of operations” and highlights that the “like-for-like (LFL) increase in energy consumption is most significant in Europe (3% LFL consumption change)” for real estate and investment funds. Going forward, energy and water consumption need to be kept in check. Sustainability software automates GHG data ingestion, tracking, and performance to set achievable reduction targets, helping businesses streamline operations and processes to advance climate commitments. 

Reducing direct and indirect emissions and saving energy consumption is also achieved by implementing physical energy-efficient measures. For example, lighting sensors and motion detectors identify uninhabited areas to control the right amount of light at the right time (daylight harvesting) and switch off idle electrical equipment. Investing in renewable energy sources like UV Solar or purchasing renewable energy from offsite wind turbines is key. Encouraging fuel-efficient vehicles, carpooling or alternative transport, and installing onsite EV (Electric Vehicle) car and bike charging stations helps. Implementing waste reduction and recycling, promoting sustainable practices across supply chains, installing insulation, energy-efficient windows, and high-efficiency heating, ventilation, and air conditioning (HVAC) systems all contribute to energy-saving, but these tactics are beyond the scope of this blog. 

Report your energy data for energy-efficiency compliance 

Conserving energy in your commercial assets also promotes compliance with energy-efficiency regulations and standards. Automated sustainability software generates auditable energy consumption reports and audits to find energy-saving opportunities. In England and Wales, regulations for Minimum Energy Efficient Standards (MEES) mandates that all new commercial property leases must reach a minimum E energy rating or risk penalties. These fines can range from 10% of the property’s rateable value, with a minimum fine of £5,000 and a maximum of £50,000. Starting April 2023, these minimum energy ratings and penalties will apply to all (not only new) leases. Furthermore, MEES is expected to become more stringent over coming years, uplevelling the threshold to a minimum C rating by 2027 and a B rating by 2030. 

To comply with these regulations and avoid penalties, it’s crucial to evaluate your real estate assets now and find those that fail to meet current or imminent new standards. Planning and budgeting for energy-saving upgrades and obtaining necessary approvals are core considerations. Sustainability software can supply Energy Performance Certificates (EPC) to prioritise your energy-efficiency measures, improve your asset value, and mitigate fines. 

Step beyond energy saving to build better assets 

Investing in sustainability software is a smart strategy to save energy and associated consumption or waste generation. It reduces your costs, improves your sustainability performance, and shows your commitment to protecting our planet. At EVORA Global, we’re always developing our SIERA sustainability software and expert consultancy services to help make your buildings more productive, profitable, and resilient to change. 

Don’t fall behind in sustainability technology. Contact the SIERA team (hello@sieraglobal.com) to find out how SIERA can reduce your energy consumption and carbon emissions to future-proof your real estate assets. 

Forward-looking ESG data

To integrate climate risk and sustainability into financial decisions, we need to standardise metrics, improve data quality and ensure that it is forward-looking as well as measuring past performance. For climate risk, this is an essential part of the TCFD Recommendations for integrating climate risk as an investment risk.

Climate risk is divided into three categories:

  1. Transition risk
  2. Physical risk
  3. Litigation risk

They all have forward-looking components. In ESG data terms, we can use historic data and data models to project future implications. We can do this more easily for the E in ESG because we know that we’re operating within planetary boundaries so we know there are limits. The Stockholm Resilience Centre (2015) monitors the nine planetary boundaries shown below.

Whilst this illustration doesn’t show us overshooting the climate change planetary boundary, that is because we haven’t yet. We are on track to do so with our present rate of greenhouse gas (GHG or carbon) emissions. That is why, in 2015, the UN Paris Agreement was signed by 195 states. This Agreement set us on a course to reduce emissions to Net Zero Carbon (NZC) by 2050, which keeps global warming well below 2°C, and ideally 1.5°C, to prevent catastrophic, non-linear climate change.

Over the last two years, many real estate companies and investors have committed to a Net Zero Carbon target and some have a pathway to get there. For most fund managers, they have not yet had time to project out a NZC pathway for their fund and real assets.

A science-based NZC pathway can show a clear route to reducing emissions each year. We need to be over halfway to NZC by 2030. However, local markets will move at different speeds depending on their starting point today; the local regulations; the cost of energy and carbon emissions; and, to some degree, the local awareness of a changed climate and how this forces climate adaptation. Climate adaptation will be required to protect against extreme weather events, which have become fiercer and/or more common over the past decade increasing insurance losses and premia.

These climate risks are the reason why ESG data needs to be forward-looking.

At EVORA Global, we have developed our SIERA software to be forward-looking on climate risk. We have worked on two new modules. The first is focused on NZC and transition risks and this is already available. The second builds on our partnership with Moody’s 427 physical climate risk assessment, which is used by our consultancy team. This will enable users to see both sets of climate risk in one place, associated with each asset and fund.

The screengrab below shows the NZC module, shows a real estate portfolio and the fund’s NZC pathway. This uses asset energy data from the last 9-12 months to calculate carbon emissions for the whole building. Based on asset type and location, it then automatically projects a science-based NZC pathway out to show the required emissions reduction. The tool can then be used to run different scenarios for emissions reduction based on what is know about each asset.

There are other features within the NZC module so do get in touch if you’d like to organise a demo

Embodied Carbon and its Role in Achieving Net Zero Carbon

  • Embodied Carbon accounts for the total greenhouse gas emissions released to the air as a result of constructing a building
  • Commitments have been made to achieve Net Zero Carbon by 2050, Embodied Carbon must be considered and reduced to achieve this
  • Climate change poses a number of financial risks
  • Embodied Carbon studies can increase climate resilience and therefore reduce risk and increase return

What is Embodied Carbon?

Have you ever walked past a building site and wondered where all the materials have come from? Whether the timber began life as a tree in the UK or abroad? While I was on work experience on one of my Father’s building sites, I found the idea that materials from potentially all around the world have come together to make something new, fascinating. I wondered about the work and energy that went into getting them onto the building site; first the raw materials are extracted, then transported to an industrial site where they are processed into a product, then transported again to the construction site and finally put into place. At each of these stages, energy is consumed and therefore emissions of greenhouse gases are released to the air (measured as emissions of CO2 equivalent, in this article, ‘carbon’). As such, each individual building material has a certain amount of carbon associated with it – the emissions released as a result of that product’s life. These emissions are the embodied carbon of the product, and as a wise person once said, ‘One brick does not a house make’, so the total emissions from all of the products and processes that go into making a building, form the total embodied carbon of that building.

The embodied carbon during construction, along with the operational carbon during the building’s life, such as energy used for HVAC, in addition to the end of life activities such as demolition or deconstruction – depending on where the system boundary is considered – all sum to the total carbon that is released as a result of the building’s life. Accounting for and reducing total carbon emissions has never been more important as the effects of anthropologic climate change continue to devastate parts of the world.

Why is Embodied Carbon becoming more important?

Following the Paris Agreement in 2015, governments around the world agreed that climate change must be limited to ‘well below 2⁰C’, and in our industry a figure of 1.5⁰C has been widely adopted as the target maximum [1]. This can only be achieved by countries and industries achieving a balance between carbon emissions and carbon sinks, resulting in the amount of carbon released to the atmosphere totalling ‘Net Zero’, by 2050 [2]. These commitments are binding, and increasingly severe fines will be issued to those who emit excessive carbon. To be successful, is it vital that governments and companies alike create pathways to Net Zero, to plan the transition to a decarbonised future and ensure that this future aligns with a 1.5⁰C trajectory (see figure 1). It is also important to consider both the total volume of emissions and the rate at which they are released, therefore change must happen in the short term, as sudden reductions in 2040 for example, will not be as successful in limiting the impact of climate change [3].

Figure 1: Global Warming Projections [12]

In commercial real estate, 23 of the leading commercial property owners have committed to becoming Net Zero by just 2030, under the Better Building Partnership Climate Change Commitment [4]. Under this agreement, scope 3, or all other greenhouse gas emissions that occur due to its activities, but which it has no direct ownership or control over, are also included, which covers embodied carbon. With current technology, generating embodied carbon through construction is unavoidable, therefore the only options to balance embodied carbon are to reduce it as much as possible, then offset the rest.

What are some of the risks posed by climate change?

The EU Emissions Trading Scheme operates under a ‘cap and trade’ principle, meaning although offsets can be brought, they will be capped and reduced over time and eventually there is a risk that offsets will no longer be available, or the prices be too high to be economically viable [5]. Similarly, in the voluntary offsetting market, there are a finite number of projects delivering offset ‘credits’, and over time, the low hanging fruit will be depleted so that financing projects becomes ever more expensive. This could lead to the more significant risk of fines being imposed for excessive emissions, along with a carbon tax on the remaining embodied carbon. Furthermore, although industry leaders have placed more responsibility on themselves to improve climate resilience and reduce emissions, there is a transitional risk that regulation will change in the future, leaving some assets stranded. For example, regulation could restrict the use of inefficient technologies or improve carbon accounting and bring more sources of emissions into scope. Should companies refuse to act now and continue with business as usual, they risk being caught out later and be forced to make sudden adjustments to align with new regulations, which could prove extremely costly. Such regulations include the draft new London Plan policy GG6: Increasing efficiency and resilience [6], this policy requires those involved in planning and development to improve energy efficiency and support the move to a low carbon circular economy. As such, planning permission could be refused to developers who do not align to this policy.

The requirements around disclosing climate resilience and environmental performance is becoming more commonplace, the Taskforce for Climate-Related Financial Disclosure (TCFD) is increasing transparency in this area by requesting organisations disclosure their climate-related financial risk publicly [7]. While currently voluntary, emerging Sustainable Financial Disclosure Regulations mean that this is unlikely to stay this way long term. There is therefore a reputational risk that stigmatisation of poor climate resilience could grow, and negative stakeholder feedback could arise. This in turn could prove material should a company lose out on investors because of this, who will be aware of the various financial risks climate change poses and view these as investment risks.

The physical risks of climate change will also be material for any entity with physical assets, which includes real estate, property could be damaged, for example by increased rainfall or flooding, or induce additional operating costs, for example higher temperatures leading to increased use of HVAC equipment, thus requiring additional maintenance. Therefore, it is in the best interest of the industry to limit the physical effects of climate change by sticking to a 1.5⁰C trajectory, where is it widely reported that these risks will be more significant at 2⁰C and above [3].

It must be noted that there is risk in adopting new technology, as it is unknown how that technology will perform in the long term and could have unforeseen consequences, for example new HVAC equipment could cause a building to overheat in certain conditions, potentially contributing to the urban heat island effect. However, new technology and innovations will be required if climate change commitments are to be met, which is why it is important that there is collaboration across the industry to develop and trial new technology and share best practise, which is already evident in companies with robust Net Zero Carbon Pathways, such as Derwent [8]. Considering the challenge of reducing scope 3 emissions, such as during tenant fit out, since developers do not control this activity directly but are still responsible for the carbon, collaboration and stakeholder engagement will be of great importance.

Where does embodied carbon fit into the bigger picture, and how can it increase climate resilience?

Embodied carbon studies can help to increase climate resilience in a number of ways, for example, as such studies become more widespread, increased accountability for developers will help reduce redundant building and encourage developers to think critically about their projects, potentially leading to increased major refurbishment works in preference to new construction. Furthermore, embodied carbon studies can encourage leaner and lighter building, as the simplest way to reduce embodied carbon is to use fewer materials, through identifying and removing redundant building elements. Material hotspots with high carbon intensity can also be identified, and alternatives with lower embodied carbon, such as recycled and reused materials, are promoted which also helps to progress towards a circular economy as highlighted in the European Green Deal [9]. Moreover, by considering embodied carbon during the design phase, strategies can be put in place to reduce it, such as designing for deconstruction, allowing building elements to be disassembled and reused or recycled more easily at the end of life.

Best practice dictates that accounting for embodied carbon emissions falls both with the initial developer and first-time purchaser of buildings [10], because both can have an influence over the design and construction which takes place. Whilst later purchasers of that building will not assume liability for the embodied carbon, it does present an increasing transition risk to developers and purchasers of new buildings, because over time, embodied carbon will contribute an increased proportion of the overall building lifecycle carbon as operational emissions fall. As a financial value is assigned to this risk, the incentive to minimise embodied carbon in future will become ever more critical in investment decision making.

Fortunately, years of varying approaches to measuring and managing embodied carbon have now given way to increased industry consensus, through the publication of key guidance, such as the RICS Whole Life Carbon Assessment for the Built Environment [11]. Several tools now also exist to enable efficient construction of embodied carbon models and identification of best practice enhancements. EVORA utilise One Click LCA for this purpose, saving clients precious time and resource in fast moving design processes.

Embodied Carbon Studies should also be incorporated into a Net Zero Carbon Pathway, as this sends a clear market signal that the financial risks of climate change have been understood and accounted for, which in turn is likely to attract investors, improve stakeholder relations, and could even attract tenants and increase asset value as the market develops over time. However, it is important to plan out a pathway sooner rather than later, reducing the likelihood that a sudden transition is required, which in turn reduces the financial risk of climate change.


If you are interested in getting help on your Net Zero journey, you can contact our Climate Resilience team.


References

[1] Paris Agreement, United nations Framework Convention on Climate Change, 2015

https://unfccc.int/sites/default/files/english_paris_agreement.pdf

[2] World Green Building Council, 2020

https://www.worldgbc.org/advancing-net-zero/what-net-zero

[3] IPCC, Global Warming of 1.5⁰C, 2018

https://www.ipcc.ch/sr15/

[4] Better Building Partnership, Climate Change Commitment, 2019

https://www.betterbuildingspartnership.co.uk/property-owners-make-groundbreaking-climate-change-commitment

[5] European Commission, EU Emissions Trading System (EU ETS), 2020

https://ec.europa.eu/clima/policies/ets_en

[6] Mayor of London, New London Plan, 2020

https://www.london.gov.uk/what-we-do/planning/london-plan/new-london-plan

[7] TCFD, Recommendations of the Task Force on Climate-related Financial Disclosures, 2017

https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf

[8] Derwent, Net Zero Carbon Pathway, 2020

https://www.derwentlondon.com/uploads/downloads/Responsibility/Derwent-London-Net-Zero-Carbon-Pathway-July-2020.pdf

[9] European Commission, A European Green Deal, 2020

https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en

[10] UKGBC, Guide to Scope 3 Reporting in Commercial Real Estate, 2019

https://www.ukgbc.org/wp-content/uploads/2019/07/Scope-3-guide-for-commercial-real-estate.pdf

[11] RICS, Whole life carbon assessment for the built environment, 2017

https://www.rics.org/globalassets/rics-website/media/news/whole-life-carbon-assessment-for-the–built-environment-november-2017.pdf

Image

[12] Climate Action Tracker, 2020