As part of the latest edition of the biannual Emerging Trends in Real Estate report produced in partnership with PwC, the Urban Land Institute zeroes in on decarbonizing the built environment. “The overriding theme from interviews conducted is that the industry is looking beyond occupancies and returns, and it is starting to address its wider responsibilities,” ULI says.

The Emerging Trends report says major tenants and finance sources have been the main drivers of the industry’s focus on decarbonization over the past 12 to 18 months. However, another factor is that climate change has become more tangible in the form of more frequent extreme weather events.

Recognizing the issue is one thing; addressing it is quite another. The ULI/PwC report cites interviews with industry players who point to a daunting amount of complexity in the development, ownership and management of real estate. That makes it difficult for even the largest companies to devise a strategy, let alone the execution.

All of which makes coming up with an effective strategy “vital,” says Craig Hughes, global real estate leader at PwC. “Owners, occupiers and all other stakeholders in the real estate value chain will need to work together, if the industry is to play its part in reversing climate change and adapting to a post-pandemic world.”

Currently, there are no common definitions of what “net-zero” means, according to ULI. It’s not clear whether the concept relates only to the carbon emissions associated with building operations or extends to the “embodied carbon” emitted during the production and transport of materials and the construction of the building. This embodied carbon constitutes a significant percentage of a commercial property’s total emissions.

“Any certification or net-zero standard that does not put embodied carbon front and center of its thinking risks sending the real estate industry down the wrong path, stifling innovation in the areas where it is truly required, and diverting funding to initiatives that will not be that impactful in reducing carbon emissions,” the report says.

ULI global CEO Ed Walter observes, “However acute the economic impact of the pandemic, the real estate industry recognizes that the long-term impact of climate change will be greater. Few have fully come to grips with the challenge, but skills and innovations are spreading through the industry.”