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Why Sustainable Real Estate is the Future

The Rise of Sustainable Building

Sustainable building infrastructure has been gaining momentum in recent years. As people worldwide adopt increasingly eco-conscious practices, the demand for sustainable real estate has increased.  

Few trends are as impactful across all industries as the growing need for sustainability, now leading an entirely new era of real estate.  

More and more property owners, developers and property management businesses are seeing value in what sustainable buildings can bring, not just for the environment but for their residents too.  

“Carbon counting and the focus on carbon will define the decade ahead, without a doubt.”  – Dan Winters-Head of the Americas region for GRESB

Sustainable real estate isn’t a new idea. The Green Building Council has promoted more efficient development for nearly three decades. What has changed in recent years, however, is the perception of risk associated with climate change. 

Investors are now steering their money towards safer, higher-performing green assets, and new measurement tools and standards are raising the bar for more sustainable real estate.  

What Makes a Building Sustainable? 

A sustainable building as defined by the World Green Building Council (WGBC) is one that by way of its design, construction and operation reduces or eliminates negative impacts, while creating positive impacts on our environment and its users.  

For a building to be sustainable it must take into account all three pillars of sustainability: the planet, people, and profit. It’s referred to as the “triple bottom line”.  

P for Planet – This means factoring climate change into all aspects that the company does. 

P for People – This measures how socially responsible an organisation has been. 

P for Profit – This is the traditional measure of corporate profit.  

Why Consider Sustainability When Making Investment Decisions? 

Development without regard for people and the planet may compromise the ability of future generations to meet their needs. 

Investors that aim to deliver long-term returns must factor in sustainability. This is because environmental, economic, governance and social factors may impact their profitability. As society begins to prioritise eco-friendly ways of living, the demand for outdated technology is likely to drop.  

Sustainable investing has come a long way. More than one-quarter of assets under management globally are now being invested according to the idea that environmental, social and governance (ESG) factors can materially affect a company’s performance and market value. These factors are of increasing interest for many investors. 

The integration of ESG considerations in investment decisions is becoming a more common practice among institutional investors. , nearly two-thirds of institutional investors believe the integration of ESG factors will become standard in the industry within the next five years. 

Benefits of Sustainable Buildings for Investors 

  1. Increased Asset Value 

As investors and occupiers become more knowledgeable about and concerned with the environment impacts of the built environment, sustainable buildings will have increasing marketability.  

There is already a link between characteristics of buildings and the ability of buildings to easily attract more tenants and to command higher rents and sale prices. As public focus shifts, environmentally-friendly features will be a highly valued asset when choosing somewhere to live.  

  1. Save on Operating Costs 

Green buildings have been shown to be more economical by saving money through reduced energy and water consumption and lower long-term operations and maintenance costs.  

The energy savings alone typically exceed any costs associated with their design and construction within a reasonable payback period. 

  1. Save on Design and Construction Costs 

Overall, there has been a trend towards the reduction in design and construction costs associated with green building. This is because building codes globally have become stricter

At the same time, supply chains for green materials and technologies have advanced as the industry becomes more skilled at delivering green buildings. 

  1. Ensure Energy Access and Reliability 

As energy demand escalates, we need to make the grid greener and smarter. Energy efficiency coupled with local renewable sources improves energy security. 

High-performance green buildings can play an important role: buildings that can both generate and store electricity and push it back out to the grid when it needs it. This ensures reliability and continuity of service. 

  1. Meet Sustainability Regulations, Incentives, and Goals 

Governments worldwide are committed to achieving sustainable development goals (SDGs). The European Commission, for example, has set out the 2030 climate & energy framework. This is a set of laws passed to ensure that the EU meets its climate and energy targets for the period 2021 to 2030.  

Targets include: 

  • At least 40% cuts in greenhouse gas emissions (from 1990 levels) 
  • At least 32% share for renewable energy 
  • At least 32.5% improvement in energy efficiency. 

Here we see how governments are steering towards a more sustainable future – perhaps you should also. 

  1. Global Need to Reduce Climate Change 

Our planet faces an unprecedented energy challenge. The global energy demand is growing faster than the current production capacity. As a result, supplies are diminishing and prices increasing.  

Thus, the need for renewable green energy is at an all-time high.  

High-performance green buildings reduce: 

  • Environmental impacts in water 
  • Materials 
  • Waste 
  • Energy 
  • Carbon emissions 

… whilst not sacrificing functionality, productivity and comfort.  

  1. Attract Prospective Residents 

Today, many renters prioritise sustainability and are interested in green home technologies. 

RentCafe conducted a report which found 67% of renters said they were interested in living in an energy-efficient or green building and were willing to pay more to do so. 

Having a sustainable building or using green technologies will give you an advantage in the property market.  

Prepare now for the future 

Incorporating environment-risk and sustainability into your investor mindset is possible. Now as environmentally friendly investing grows at an exponential rate, take advantage of it and prepare now for the future. 

We can all agree that we need to make changes now to create a better world for current and future generations. 

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