On the “full economic transformation” coming our way that will make the digital transformation look modest

There were a couple of off-stage conversations on Wednesday at Transform that summed up where we are right now and what’s coming.

They picked up the underlying sentiments and subtexts that filtered through the official content at the Green Building Council of Australia’s big annual bash at the Hilton Hotel in Sydney, and some of the tough intelligent thinking that’s seeding a new era for this industry.

They weren’t entirely comfortable.

It’s like that weird feeling you get when the financiers and other evidencedbased bean counters that underpin our ordinary analogue lives start to pay attention to your patch. After years of hammering on their doors they’re now listening – hard – and trying to figure out how to splice their world view onto a collapsing natural world and angry climate.

On the upside, if anyone can make that work they can. From day dot of The Fifth Estate’s existence, we’ve looked to the business and political world for the fastest path to transition to a net zero and nature positive world because these are the fastest most powerful weapons to effect huge transformational change.

Love, kindness and good will may get us there, but probably not before the coal runs out. We need acceleration. And at least Alan Davis of E-Labcalled for mandates – that voluntary collaboration [lovely and feel good as it is] is not fast enough.

As if every single person in the room didn’t already know this.

The dark rumble in the shadows was  the International Panel on Climate Change issuing its “final warning” that no-one much wanted to mention.

There were many positive notes.

The GBCA’s Jorge Chapa noted that even with the once seemingly impossible goal to radically reduce embodied carbon in buildings there was now organised and collaborative commitment. Just a few years ago, he told the audience, you could barely get people agree on the colour of the sky!

Collaboration and organised commitment was the strong theme coming through Wednesday morning’s finance session too.

The panel was led by Nina James, managing director and head of Asia ESG, Blackstone Real Estate, who deftly and entertainingly prised nuggets of insight from Sarah Barker partner, head of climate and sustainability risk governance, MinterEllison; Wendy Mackay, managing director, Pollination; Courtenay Smith chief financial officer, Mirvac; and Robert Dodd, executive general manager, finance & commercial, Landcom.

The finance sector was starting to take climate seriously and wanting to benchmark measure and report on performance on nature, the panel said. The Taskforce on Nature-related Financial Disclosure for instance was no longer a theory but a near reality. But not the only change on the way.

Mirvac’s Courtney Smith summed it up. There was a bunch of standards and reporting requirements coming, the sustainability finance taxonomy, the International Sustainability Standards Board reporting, translating into accounting standards, the TNFD and “whatever ‘t’ the next one’s going to be,” she said.

Along with that were regulators such as the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission, giving this tranche of new frameworks a big nudge.

These authorities, particularly in Australia, had started to play a very strong role in what the standards mean and what gets measured, Smith said.  And as “as they emerge in their messiness” these frameworks will help the market compare, in the same way buildings can be compared, “except for corporate value and outcomes and the equity that you want to contribute.”

As for how the industry gets there, she said, “we’re putting wings on the plane as we go”.

Barker added a warning. Don’t think that because this won’t affect you in the first year or because you’re not big enough and so you’re off the hook, she said. “Because to the extent it’s materially financial, it should already be an issue for your CFO (chief financial officer) or your risk committee.”

There will be a lot of stakeholders in your “value tanks who are going to be asking you for information … needing to suck those data sets into their own reporting system. So don’t be lulled into a false sense of security.”

Landcom was “very enthusiastic” about the moves, Robert Dodd said.

“We see this as a game changer. And we see is going to accelerate the economy heading in the right direction; it’s going to give support and credibility to those organisations that are doing the right thing.”

NSW government land development agency had been working on the issues with Treasury for “quite a few years to figure out what the important measures were”. The TNFD and the TCFD coincide with global accounting standards and that works well because it’s an industry-based standard, Dodd said.

“So it’s not one global hodgepodge, which is a compromise for everybody.”

And his agency had been working with other government agencies to educate and inform on the changes because this was not about a race to be first but a race to get everyone across the line.

In Wendy Mackay’s view the changes on the way meant the issues of climate, resilience and sustainability were no longer contained in sustainability teams, this was a “full economic transformation in the way that we’ve had a digital transformation over the last decade – this will be a sustainability-led transformation at an economic wide level as well as a business level.”

And it’s one that will require education and understanding across all disciplines, she added.

If this all sounds dramatic and game changing it needs to be

It’s as if this fledging movement fighting to change the profile of our hyper-extractive built environment has suddenly graduated from the Ted X stage to the big people’s club.

But it doesn’t feel like some genteel gesture of inclusion that’s being offered but a genuine call for collaboration.

The chief thinking now from the scouts scoping out the next frontline is about resilience.

If we’ve failed to contain climate warming to 1.5 degrees well, we better seriously embark on containment.

This means looking at the biggest connectivity and collaboration story in history.

It means a global alignment on everything we know.

Among the notes we picked up are that governments are starting to look at natural accounting – that splicing of the current economic system onto the natural world. So far there’s no particular indication it will work.

It’s messy and complicated, as Mirvac’s Smith noted.

We know NSW Treasury is working on it and starting to liaise with the federal government on what this needs to look like at national scale.

In the research we’re doing for our upcoming Urban Greening summit on 27 April we’re also picking up that several other groups led by local councils are also working out how to value nature and what this means for development on greenfield sites, for instance.

In the meantime, keeping people safe is emerging as a huge priority as we get set for what feels like the new normal – a series of rolling climate disasters that will leave our sense of equanimity in tatters and fundamentally change what we lucky people in this erstwhile lucky country think of as a normal or an ideal way to live.

Because Australia is on the front line of climate change, we there’s the growing sense we absolutely need to show leadership not just with the home folk but to everyone else around the globe who wants to know how a privileged country will deal with the challenges.

Resilience is now key

Think about what we’ve already seen and are getting eerily used to: floods, followed by fire and that curve ball Covid, that hasn’t actually gone away and that we suspect has got a lot to do with our incursion on nature, so may return at any time in whatever form it takes.

Already as La Niña recedes there’s already been bushfires. Adam Garnys of CETEC mentioned his team is starting to switch from ways to combat mould to how to upgrade filtration systems for smoke. (Because it’s who can forget sitting in a 6 Star Green Star building in the Sydney CBD being unable to breathe properly during the Black Summer bushfires?)

Preparedness is starting to emerge, not as a nice to have but as a necessity.

Recent floods and fires for instance have not only destroyed homes and lives but they’ve drained state and federal coffers. If we expect them to be a regular event, maybe we need an economic framework that prepares for the hits.

There are so many economic Trojan horses to deal with too.

For instance, in the words of one delegate, what happens with the millions of mortgages on 30-year terms that might well be hit directly and materially by climate disasters and are completely untethered to any form of insurance or risk assessment? What is the impact on the home owners and occupants themselves, or on the economies and communities they depend on – or their health?

What happens to the financial institutions that have built their businesses on …climate stability, more or less. And on the investors who depend on those mortgages being sound.

It’s an unknown. But what’s certain is that curve balls will keep coming.

Government agencies are starting to prepare.

Another delegate noted the new NSW Reconstruction Authority that had snared his boss at from Infrastructure NSW, the well regarded Simon Draper as its inaugural CEO.

At the federal level there’s been the establishment of the National Emergency Management Agency formed by amalgamating Emergency Management Australia and the National Recovery and Resilience Agency.

TheResilient Building Council is another fledging group determined to shine a light on the threats but also the benefits of prevention and preparedness. It’s working hard to encourage resilience onto the national agenda alongside energy efficiency for houses – and for governments to take it more seriously.

Resilience is still the “poor cousin” of development, Crystal Fleming, the council’s chief of partnerships and Impact, told us.

And there’s palpable need. According to research by actuarial and insurance consultant Finity one million households struggle to afford insurance premiums for their homes that are equivalent to four weeks’ income. Many don’t bother.

When disaster strikes there’s no building back better, sometimes it’s building back worse, and smaller, Fleming notes.

The council has built a resilience assessment app and is counting on NSW and federal government funding to expand it to energy rating with sufficient verifiable data that might convince banks to advance a green premium for home loans and for insurers to lower premiums.

That’s just one adaptation that the finance world can make to mirror the adaptation that we need to make in the physical world.

What happens at the broad government level is a whole other story.

At some point the federal government needs to grapple with the huge job of integrating long-term value into our economy and policy making.

We’re not saying to ditch the economic cost-benefit analysis, we’re saying if we want it so much let’s embrace it – but properly.

Make a real user-pays system. Don’t let private companies off the hook to shed their externalities for the public purse to pick up. Count the cost of climate impact, health and social disadvantage and measure it against prevention measures, over the longer term that align with our natural world and biorhythms.

A three year or four-year election cycle might be good enough to stop people becoming entrenched in power for its own sake.

But it’s not long enough to deal with our long-term climate, nature and social challenges.

There’s so much more going on but such little shared knowledge across the silos. As one of the delegates quipped, “There’s probably just 500 people in the whole country who really know what’s going on, and most of them are in this room.”

OK that’s probably an exaggeration. We hope it is.

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