Put Your Portfolio on a Low Carbon Diet
If your portfolio includes development, your ESG program must include engaging the developers.
It happens to almost all of us. At one time or another, we pick up an extra pound or two and don’t realize it. Maybe it was a cruise or your freshman year in college, but at some point, the calories in exceeded the calories being burned. Often this occurs because we are not paying attention, we are busy or having fun, or just having a cheat meal, week, or month. I’ll get back to it on Monday.
When it comes to understanding how many calories our food has, we use a handy tool put on nearly every label in the United States - the nutrition label. From this label, before we eat the food, we can see how many calories it contains as well as other nutrients. Some even use an app to track those calories, so they know what each food item totals up to. No matter which diet you subscribe to, at the end of the day, on any of them, you are paying attention. You are educating yourself on the impact of the food before you eat it, and you are tracking what the impact is. If you are doing that, chances are you are not adding on those extra pounds.
You may be wondering what does this have to do with real estate. However, our own real estate’s impact on the built environment has a similar cycle. When you think about it, we are ingesting carbon through our buildings. This might be from the materials we use to build our buildings or the energy we use to operate our buildings. Still, in both cases, we are introducing carbon into our portfolio’s diet, and just like our own diet, awareness and tracking are crucial to controlling the amount we take in.
I have posted dozens of articles on the operational side of gaining awareness, but just like you cannot out exercise a bad diet, the same is valid for carbon. Failure to pay attention to what you are putting into your portfolio and only concentrating on performance is the path to not meeting your portfolio carbon reduction goals.
In real estate, if you are not growing, you are losing market share to your competitors. The larger the portfolio, the more new assets being added it takes to maintain that leadership position. New assets come into a portfolio typically through two avenues - acquisition and development.
When it comes to acquisitions, last month, I dove pretty deep into strategies to build into your due diligence in order to identify risks and opportunities when adding new assets in my post, “ The Most Important Step is the First.” But what about those properties that enter your portfolio through development?
The development provides a lot of control and opportunity to increase value for the real estate portfolio. Still, historically we have ceded the specification of the building materials to the architects and engineers. Often, instead of specifying specific attributes, the general contractor and subcontractors are instead provided with precise design drawings but left to select the materials on their own. When this happens, those decisions tend to be based on first dollar cost, not long-term project impact. This can be confusing to outsiders as we have the ability to make sure what we deliver supports our organizational ESG goals, but we often fail to leverage that control into actual impact reduction effectively.
We hear a lot about the 28% of emissions that are related to the operation of buildings, but did you realize of the 11% associated with embodied carbon, it is anticipated that embodied carbon will be responsible for 72% of the carbon emissions associated with global new construction between now and 2030. How can we say we are laser-focused on reducing our carbon impact if we are not addressing both operational and embodied carbon?
If we thought about our developments a little more like we think about our diets, perhaps that could change. By this, I mean we need to consider what we are putting into the building because what we put into the building, we are putting into our portfolio. This means being aware of the impact of materials and specifying what materials or what the impact of those materials needs to be.
I have said for years now that we need a nutrition label on building materials. In fact, I am kind of surprised some industry-leading, sustainability-focused retailer hasn’t included this in their marketing plan. If I am already making a product with less embodied carbon than my competitors, I have a competitive advantage - why not market that? Why not include a label on that product that outlines what is in it? Instead of calories, tell me about the carbon at the point of sale.
In some ways, the Environmental Product Declaration (EPD) serves this purpose. If you are not familiar, the EPD is a voluntary document that transparently communicates the environmental performance or impact of any product or material over its full life cycle. In particular, in construction, the EPS provides insight into the carbon emissions - or “Embodied Carbon” (see link for a deeper dive into embodied carbon).
A similar tool is the single-issue EPD. This scaled-down EPD which was first issued in 2007, helped reduce the complexity associated with comprehensive EPD and, according to the EPD International System, has become “The most popular single-issue EPD… focus(ed) on climate impact information such as the carbon footprint of a product in terms of Global Warming Potential (GWP) as measurable carbon dioxide equivalents (CO2 eq.). It is adapted to ISO 14067 for the calculation of carbon footprint (Carbon Footprint).”
These tools for the development team can be what the food label is to the dieter. While the tools may be present for many building products, actually using those tools remains a challenge. This is where the leadership of the ESG team must engage and educate the development team as to the importance of specifying materials with reduced embodied carbon content in the design of new developments.
The effort to design embodied carbon out of new developments can begin with just three materials – concrete, steel, and aluminum. These three building materials alone are responsible for 23% of total global emissions (most from the built environment).
Concrete is the most widely used construction material in the world. Did you know concrete alone is responsible for 6-10% of global carbon dioxide (CO2) emissions? The primary issue is the Portland cement which is responsible for the majority of concrete’s carbon emissions. CO2 is released at two points during cement production: roughly 40% of the CO2 generated is from the burning of fossil fuels in the manufacturing process, and the remaining 60% is from naturally occurring chemical reactions during processing.
However, by adjusting the proportion of ingredients in a concrete mixture, the carbon impact can be greatly influenced. This starts with understanding your options, and with concrete, this often is what aggregate materials are available. The larger the aggregate material, the lower the impact. This may be as simple as specifying a 1” aggregate material vs. 3/4 inch material. Increasing the amount of aggregate, in turn, reduces the amount of cement in the given mix.
Adjusting the cure time can also reduce the impact. Obviously, there are points in construction where high early strength is needed, but those points are not universal and low cement mixes with increased cure times in footings and mat slabs, as well as shear walls and columns at lower levels of high-rise structures, can be good targets even when relatively high strengths are required. (source)
There are many additional concrete strategies that can be incorporated into new development designs. Architecture 2030’s Carbon Smart Palette tool provides many specific strategies that can be leveraged by architects when reducing the impact of embodied carbon, not only for concrete but many other construction materials (link).
That conversation with the development team means they must engage with the architects designing their projects. According to the AIA, architects play a critical role in reducing the impact of a new development, but you have to make this a priority of your design criteria. The AIA, laid out 10 steps architects can take to assist owners in reducing the carbon impacts of their developments:
Reuse buildings instead of constructing new ones. Renovation and reuse projects typically save between 50 and 75 percent of the embodied carbon emissions compared to constructing a new building. This is especially true if the foundations and structure are preserved, since most embodied carbon resides there. With many projects, the first question should be, "Is there an existing building we can use instead?" This is an admittedly hard sell for architects—after all, many of us got into the business for the excitement and challenge of designing something new from the ground up. But channeling that energy and creativity toward making poor-performing buildings into something beautiful, sustainable, and energy efficient has its own rewards and yields substantial positive benefits.
Specify low-carbon concrete mixes. Work with your structural engineers to design lower carbon concrete mixes by using fly ash, slag, calcined clays, or even lower-strength concrete where feasible. Though access to these materials varies across the country, with an increasing number of options, there is almost always something that can reduce the carbon footprint of your concrete mix.
Limit carbon-intensive materials. For products with high carbon footprints like aluminum, plastics, and foam insulation, thoughtful use is essential. For instance, while aluminum may complement the aesthetics of your project, it is still important to use it judiciously because of its significant carbon footprint.
Choose lower carbon alternatives. Think about the possibilities. If you can utilize a wood structure instead of steel and concrete, or wood siding instead of vinyl, you can reduce the embodied carbon in a project. In most cases, it’s probably not possible to avoid carbon-intensive products altogether—metals, plastics, aluminum—but you can review Environmental Product Declarations and look for lower carbon alternatives.
Choose carbon sequestering materials. Using agricultural products that sequester carbon can make a big impact on the embodied carbon in a project. Wood may first come to mind, but you can also consider options like straw or hemp insulation, which—unlike most wood—are annually renewable.
Reuse materials. Whenever possible, look to salvage materials like brick, metals, broken concrete, or wood. Salvaged materials typically have a much lower embodied carbon footprint than newly manufactured materials, since the carbon to manufacture them has already been spent. With reclaimed wood, in particular, you not only save the energy that would have been spent in cutting the tree down, transporting it to the mill, and processing it, but the tree you never cut down is still doing the work of sequestering carbon.
Use high-recycled content materials. This is especially important with metals. Virgin steel, for example, can have an embodied carbon footprint that is five times greater than high-recycled content steel.
Maximize structural efficiency. Because most of the embodied carbon is in the structure, look for ways to achieve maximum structural efficiency. Using optimum value engineering wood framing methods, efficient structural sections, and slabs are all effective methods to maximize efficiency and minimize material use.
Use fewer finish materials. One way to do this is to use structural materials as finish. Using polished concrete slabs as finished flooring saves the embodied carbon from carpet or vinyl flooring. Unfinished ceilings are another potential source of embodied carbon savings.
Minimize waste. Particularly in wood-framed residential projects, designing in modules can minimize waste. Think in common sizes for common materials like 4x8 plywood, 12-foot gypsum boards, 2-foot increments for wood framing, and pre-cut structural members.
(Source)
If you are not already engaged with the development team in your organization, it’s time to start. Begin the conversation about how their projects either move you closer or further from your organizational goals. You certainly are not going to reach net-zero if your pipeline of new developments works against that goal with each delivery.
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the impact of the built environment. When not blogging, Chris is helping the real estate industry reduce energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience we ignite solutions with real impacts and track performance to ensure the trendline stays laser-focused on the goal. At Conservice we have developed a true bill-to-boardroom solution to help truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.
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