Property owners are ready to do more with sustainability, from expanding the CBD disclosure program to sectors outside of offices to carbon positive buildings. Behind them is a tsunami of investment trends and tenant preferences all pushing in the same direction. So what’s the hold up?
According to national program manager for CitySwitch, Esther Bailey, the language at commercial property’s “big end of town” and smaller end alike is changing.
Bailey says members are ready to do more.
This includes potential expansion of the Commercial Building Disclosure program to other sectors and carbon positive targets for buildings.
What’s most noticeable though, Bailey says, is the shift away from traditional driver of bottom line savings to a more “values aligned” approach.
In fact this is an emerging theme in the program’s work.
“Five years ago, my conversations were with building managers who were chipping away at kilowatt hours through lighting retrofits,” Bailey says.
“Today, I’m having conversations with chief executive officers about why disclosure drives value and directs investment inflows.
“The big end of town is following the money – and those purse-strings are increasingly held by investors thinking about more than short-term profit.”
It’s something you can see in the broader investment community, Bailey says. She points to numbers from the Responsible Investment Association Australia that claim more than half of all professionally managed assets, around $866 billion, now take environmental, social and governance issues into their decision making parameters.
The common theme is a shift in consumer and investor demands.
Broader global themes in investment are also driving change, starting with Bank of England governor Mark Carney’s seminal warning 2015 about climate risks to the banking and finance sector in (see the full speech here) and more recently similar warnings from other financial leaders including Australia’s Reserve Bank Deputy Governor Guy Debelle.
Still saving money is a nice place to start from and CitySwitch has plenty of evidence saving carbon works for the bottom line.
Bailey says program partners are slashing bills by an average of 25 per cent.
And their actions must also carry some weight to a broader influence: they represent 4 million square metres of office space in more than 900 offices around the country – or 16 per cent of all office space.
A recent signatory ANZ with its 833 Collins Street headquarters in Melbourne, is a case in point.
But now, Bailey says, industry is ready to do more.
“This year, we called on all signatories to reset their targets to move towards carbon positive. We were hoping for a handful of companies to put their hands up. Instead, we found that 130 CitySwitch companies had already made carbon positive or renewable energy commitments and the same number again had targets in development.
Businesses are at the starting lines with their engines revved, and they are being held back by policy uncertainty.
It’s also time for an expansion of the Commercial Building Disclosure program, which mandates that offices of 1000 square metres or more disclosure their NABERS energy rating at the point of sale or lease.
“Let’s call it,” she says. “Voluntary action can only drive the market so far. Businesses are at the starting lines with their engines revved, and they are being held back by policy uncertainty.
“In the absence of a price on carbon or mandatory energy efficiency standards, we should, at the very least, measure and manage the energy and emissions in our buildings. And we have a policy lever at our disposal that can help us put the pedal to the metal – the Commercial Building Disclosure program.”
When the CBD program was expanded from mandated disclosure of NABERS energy ratings from 2000 sq m for offices to those of 1000 sq m or more, “building owners didn’t blink”, Bailey says.
“In fact those new owners have improved their ratings to the same level in half the time. “People care. Disclosure works.”
Even better she says, economic modelling conducted by Energy Action on behalf of the City of Sydney has found that lowering the threshold further and expanding into new sectors would deliver a 2:1 cost benefit.
This means a “compliance investment” of $26 million would unleash a $157 million of energy efficiency and cut more than two million tonnes of carbon emissions.
An economic multiplier effect could reach $365 million by 2030 in direct and indirect jobs.
A tsunami of capital has hit Australia’s commercial office sector because investors can see that we have a well-managed market, sound governance, resilient stock and a plan for the future
“When disclosure came into the office market, tenants weren’t demanding it or making decisions based on a rating. But in the 10 years since, we’ve seen disclosure direct capital.
“A tsunami of capital has hit Australia’s commercial office sector because investors can see that we have a well-managed market, sound governance, resilient stock and a plan for the future.
“And tenants, who are increasingly driving their own ambitious carbon abatement strategies, want healthy workplaces that help, not hinder, their efforts.”
Expanding the CBD Program is a smart move – and a safe move, she says.