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Peter Epping is Hines' global head of ESG

Q&A with Hines’ Peter Epping on the Company’s New Carbon Commitment

Sustainability has been a watchword for Hines since Gerald Hines founded it in 1957—even if, as the company’s Peter Epping points out, “It wasn’t called sustainability then, or ESG or any other acronym. For him, it was the durability of the buildings and the quality, their longevity and what impact they would have on the city.”

Given that bred-in-the-bones commitment, it’s not surprising that Hines created the position of global head of ESG and last year promoted 21-year company veteran Epping from European fund manager into the newly created role. In late June of this year, the Houston-based real estate investment firm announced a company-wide, global carbon commitment, which among other things set a target of net zero operational carbon by 2040. “That’s just one of the priorities, but probably the most visible one,” Epping told Connect CRE.

Connect sat down with Epping recently to discuss this new commitment and how he believes it’s going to play out. Here’s what he told us.

Q: In terms of both short- and long-term impacts that the carbon commitment is going to have on your properties, what are some of these effects?

A: The short-term effects are that we have started an initiative to collect more data from our assets because that’s really the foundation for everything: collecting all energy data, water data, waste data in order to even understand what are your usage patterns? And that is something that that is underway right now.

We also are starting to implement measures that address the low-hanging fruit, so to speak. So, anything that’s addressing energy efficiency, which is something we have been focused on for years, but now is getting even more impetus. And improving our property management processes. We are also working on putting in place implementation plans for each property. We need to look at the pathway for every asset to get to net zero by the year 2040. And then judging from that pathway, what are the measures that need to be undertaken over time?

Q: You had said that that the carbon footprint was probably the most visible aspect of ESG commitment. How would you say it emphasizes Hines’ commitment to ESG as a whole?

A: I think how it emphasizes that is by way of carbon being the most urgent and probably the most quantifiable and also complex challenge. It is in a way more tangible, and it is more technical, and it feels more closely related to the built environment. And at the same time, it is potentially the most disastrous of the whole range of challenges we’re facing, if you play it out to temperature increases of three or four or, God forbid, five degrees. This commitment is just recognizing the significance of the dangers of climate change and dangers to the to our economies, to society as a whole. And it is responding to the fact that if we don’t get this right, we may potentially not need to get anything else right because there’s not much left.

Q: The program that Hines has in place does not rely on carbon offsets. How is this different from the approach that some others might be taking?

A: The whole terminology around offsets is something that in the market is understood only at a high level, and there’s a lot of variation around that term in itself. For example, offset on the one hand is often associated with just preservation of carbon: things like acquiring a forest and promising not to cut it down. Then on the other hand, it’s also associated with projects where you are actively reforesting or where you have technical solutions that can sequester carbon, take it out of the atmosphere and store it in underground storage facilities. And those two things can be something very different. So, one of the problems is that the terminology is not fully understood by the whole market.

But then secondly, there’s a whole range of approaches companies are taking, and we as a company are not saying that what other companies are doing is just wrong or bad, applying their own combination of methods that they deem sensible. But for us, what matters really is that we did want to focus on really reducing the actual emissions of our buildings. And that’s where we want to invest the money. And what we do not want to do is buy a forest somewhere and look at the carbon that forest sequesters and just say, “okay, because we’re doing that, we don’t need to reduce the carbon emissions on that office building.” Because that for us is not sustainable. It’s not really a solution to the problem because the forest may get cut down, it may burn down, it may still be there, but your building definitely will continue to emit carbon dioxide. So, we want to focus on that investment. And that’s what our target is about.

Q: One final question. Why is it important for companies like Hines to be ahead of both the market and government mandates in terms of carbon commitment and ESG?

A: I would say it’s not necessarily about the fact that we’re ahead, that we feel we need to be ahead of all regulation or government mandates. For us, this is about the science. And we have found the science is extremely clear that we need to reduce the emissions by about 50% over the next 10 years. The more we leave it to the years between 2030 and 2050, the more drastic the cuts will have to be and the more we are in danger of reaching these tipping points where some things may become irreversible. And that is really our main priority.

Government regulation and the Paris Agreement generally say that everything goes in the right direction, and especially if you follow the curve of the 1.5-degree Celsius increase. That is good. But we feel that in our business we can actually make a difference more quickly. And the more quickly we can do that, the better. Now, being ahead of the market is something that, on the one hand, you could say is a competitive gene that we have in our company and many of our peers have that as well. So, there is a natural inclination to do that. But the reason why it matters in this space especially is that by training the whole industry and you could argue the whole economy really, we’re trying to resolve this conflict between wanting to do the right thing and getting rid of an external effect that our business has that previously was part of the economic rationale. And now we want to say that by getting rid of that external effect, we can actually also present a business opportunity.

The fact, though, is that initially you have to invest more. And you have to upgrade your building insulation. You have to strip out fossil fuels. You generate renewables with rooftop solar and so forth. It costs more initially to some extent anyway. But by establishing this new standard, which also saves energy and creates a healthier building overall, you’re setting an example and you’re showing the market that it’s actually possible to build a better building that has a much longer lifespan. This is more healthy, friendlier to its users, and you can make money with it. And that’s the critical thing: we need to get over this question of who pays for this, because we think that actually by making buildings differently and making them better, we’re creating a new market rationale. And as soon as the market understands that, that it’s financially working also, then that will inspire a lot of others to do the same.

Connect

Inside The Story

Hines' Epping

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 16-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 7-10 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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