Top retailers demand zero carbon building standard

A group of retailers – whose members include Aviva, BT, Cemex, Ikea, Kingfisher, M&S, Nestle, Sky and Tesco – have criticised the UK government for not doing enough to improve energy efficiency in non-domestic buildings and asked for a zero carbon building standard to be set.

This piece first appeared on The Fifth Estate on 19 March 2018

They want to see a target for the UK’s building stock to be nearly zero carbon by 2050, and the establishment of a new zero carbon buildings target to be enforced by 2020, to be followed by a truly net zero carbon buildings standard.

Known as the Aldersgate Group, they took a year to look at structural challenges in financing the creation of low carbon infrastructure, and, based on interviews with businesses and investors, found that a chief problem is a lack of clear policy goals to help unlock private sector finance in order to meet decarbonisation targets.

As part of 30 recommendations for government, business and investors in their new report, Towards the new normal: increasing investment in the UK’s green infrastructure, they are urging the UK government to commit to support the growth of green investment over the long term, set better targets and to “enforce more strictly” existing energy efficiency policies.

They want an increased ambition to upgrade the UK’s domestic buildings to EPC band C by 2035 broadened to apply to commercial buildings.

Alex White

Alex White, the report’s lead author and senior policy officer for the Aldersgate Group, said: “Over the next three decades, the UK needs hundreds of billions of private investment in green and resilient infrastructure to meet the objectives of the Clean Growth Strategy, Industrial Strategy and 25 Year Environment Plan. But investment isn’t happening fast enough on its own.

“The government must catalyse action on green infrastructure investment now to move the financial system towards a new normal if we are to meet our policy goals cost effectively while maximising benefits for UK plc.”

The group’s report suggests government could engage a wider base of investors by establishing the potential size of the market, and creating tax breaks for energy efficiency investment by businesses. It says government could help boost the uptake of service agreements with energy supply companies by offering short-term guarantees on contractual risks, such as one of the parties going bust.

Government should also lead by example and mandate greater energy efficiency across all publicly owned building stock, the Aldersgate Group says. This would create a project pipeline, increase investment flows and potentially lower costs for private sector firms.

Other recommendations include adjusting financial regulations to encourage long-term investment in green infrastructure, such as introducing a legal duty for all fiduciaries (such as pension fund trustees) to consider financially material environmental and social governance (ESG) risks.

All planned infrastructure spending should pass a “green” test with sustainability requirements in all public procurement, including supporting local government with standardised power purchase agreements and energy management services contracts, Aldersgate Group says, to avoid locking in emissions for the future and to maximise resilience against flooding and future climate-related risks.

Finally, the group wants to see the issuing of a sovereign green bond and municipal green bonds to help fund the delivery of low carbon projects and address a potential drop in financing from institutions such as the European Investment Bank.

The report is released in conjunction with four separate briefings, which explore in detail several of the specific barriers and solutions to key types of green infrastructure investment:

• Increasing investment in domestic energy efficiency
• Increasing investment in commercial energy efficiency
• Increasing investment in low carbon power
• Increasing investment in natural capital

Steve Waygood, chief responsible investment officer for Aviva Investors, welcomed the call to “use the dormant assets within the insurance and investment sectors to introduce a national financial literacy campaign to educate people about how their money is invested and how this shapes the world they retire into”.

“This would help create sustained demand for sustainable investment, helping to grow the UK economy on a longer term and more sustainable basis for the future.”

Emma Howard Boyd

Emma Howard Boyd, chair of the UK Environment Agency, commented that “some businesses are already alive to the risks and opportunities presented by climate change, but not enough”.

She said that the UK could show international leadership “with financial innovation to counter increased risks from droughts and storms”.

“The government’s Green Finance Taskforce is currently discussing how to accelerate investment in resilience, so this report is timely and helpful.”

Boyd is a member of the taskforce herself, which is a cross-departmental initiative working with industry to accelerate the growth of green finance. She says there are plenty of investment opportunities presented by climate resilience.

“Flood protection is good for the economy,” she argued recently. “It allows companies to do business in severe weather by keeping their properties open, and their supply chains moving, as well as the transport links that bring in customers and trade.”

Are pension funds ready for climate change?

But fiduciary bodies such as pension funds have a long way to go before they can appreciate the risks. A self-selecting survey carried out by the trade magazine Professional Pensions suggested continuing widespread misunderstanding. It found that 53 per cent of trustees, scheme managers and pension professionals did not see climate change as a financially material risk to their own or their clients’ portfolios.

Similar, qualitative research by the pensions law firm Sackers indicates that many trustees do not pay significant attention to ESG issues: “[Trustees]… consider ESG and external governance reviews to be low priorities. Some participants were not sure what ESG meant … Some see ESG as a distraction or potentially detrimental to achieving the scheme’s goals.”

The Financial Conduct Authority is currently considering whether to make reviews of such risks mandatory.

Mary Creagh

As part of a wider inquiry, Mary Creagh, the chair of the UK’s cross-party Environmental Audit Committee, last week wrote to the top 25 pension funds in the UK to ask how they manage such risks.

She said in her letter: “The climate change risks of tomorrow should be considered by pension funds today. A young person auto-enrolled on a pension today may be 45 years away from retirement. Over that timescale these climate change risks will inevitably grow. We are examining whether pension funds are starting to take these risks into account in their financial decision making.”

Pension funds have yet to respond to her, as has the government to the Aldersgate Report’s recommendations. Business as usual will not change without concerted effort and stimulus, and legislation, procurement strategies and tax breaks are three tools the government should deploy.

David Thorpe’s two new books are Passive Solar Architecture Pocket Reference and Solar Energy Pocket Reference.  He’s also the author of  Energy Management in Building and Sustainable Home Refurbishment.

UN and IEA tell building sector: 'go zero carbon'

Near-zero energy, zero-emissions buildings must become the global construction standard within the next decade for the world to have a chance of adequately fighting climate change, a joint statement by the International Energy Agency and UN Environment has warned.

“While the energy intensity of the buildings sector has improved it is not enough to offset rising energy demand,” International Energy Agency executive director Fatih Birol said at the launch of the Global Alliance for Buildings and Construction’s Global Status Report 2017 this week.

The floor area of buildings worldwide was 235 billion square metres in 2016. By 2060 a staggering further 230 billion square metres will be added – roughly the floor area of all of Japan’s buildings each year.

Global floor area additions by 2016 by key regions

The report said the urgent task was making these buildings energy efficient to stop them leaking cash and carbon for decades.

“The building sector is seeing some progress in cutting its emissions, but it is too little, too slowly,” UN Environment head Erik Solheim said.

“Realising the potential of the buildings and construction sector needs all hands on deck – in particular to address rapid growth in inefficient and carbon-intensive building investments.”

The increase in demand is caused by population growth but also greater demand per capita for floorspace and a greater demand for energy services.

Erik Solheim

Fatih Birol

The report said more than half of buildings that will be around in 40 years time will be constructed during the next 20 years, and two-thirds of those will be in countries that don’t have adequate building energy codes in place.

“Over the next 40 years, the world is expected to build 230 billion square metres in new construction – adding the equivalent of Paris to the planet every single week,” Dr Birol said. “This rapid growth is not without consequences.”

Pledges by individual countries to meet the ambitions of the Paris climate change agreement are still not sufficient to meet the 4.9 gigatonnes of carbon dioxide (GtCO₂) annual emissions reduction that could be achieved if countries were to pursue strategic low-carbon and energy-efficient building technology deployment.

CO₂ emissions from buildings and construction rose by almost one per cent a year between 2010 and 2016, with the report saying a dramatic increase in energy intensity was necessary to arrest this.

Energy-carbon intensities for the building sector by country in 2015

The bottom line is that near-zero energy, zero-emissions buildings need to become the construction norm globally within the next decade.

In addition, the rate of energy renovations for existing buildings also needs to improve from one to two per cent per year to over three per cent a year in the coming decade, particularly in developing countries where around 65 per cent of all of the building stock expected to be around in 2060 has already been built.

What is to be done

The report goes on to demonstrate many opportunities to install energy efficient and low carbon features and buildings, supported by many examples across the globe.

Four things are needed to achieve these goals, the report said:

1. Ambitious and transparent commitment with policies and market incentives that encourage the construction sector to meet the sustainable development goals
2. Much better building energy codes and certification, labelling and incentive programs, everywhere, with rigorous enforcement
3. Wide-scale adoption and investment in high-performance, low-carbon, energy-efficient solutions
4. A major shift in financing and investments, with a solid business case for investors, information and financing tools that minimise risk and uncertainty

The report also identifies nine areas for priority action:

1. Urban planning policies for energy efficiency and renewables
2. Improve the performance of existing buildings
3. Achieve net-zero operating emissions
4. Improve energy management of all buildings
5. Decarbonise building energy
6. Reduce embodied energy and emissions
7. Reduce energy demand from appliances
8. Upgrade adaptation for climate-change related risks
9. Increase awareness with training and capacity building

Achieving the 2°C-limit for global warming scenario requires a major shift to put global buildings on a highly energy-efficient and net zero carbon pathway to 2060, as seen in the graphic below:

Final energy consumption by scenario and fuel type for the building sector between 2016 and 2060

About half of the emissions reductions will come from decarbonising the power sector. But equally vital are improvements to the building envelope, such as energy renovations that improve energy intensity from inefficient to efficient technologies such as LEDs and heat pumps.

How to reduce emissions in the global buildings sector up to 2060

Energy efficient and low-carbon heating and cooling technology investments would reduce final energy demands in buildings by 25 per cent over current levels, the report said. Air conditioning performance is a crucial area to improve.

And although LED sales are now massive, in the residential lighting market less efficient technologies still prevail.

Guidance is available for a global strategy for the buildings sector for high-efficiency product deployment and fossil-fuel phase out, in the GABC Global Roadmap.

One of the buildings highlighted as an example for others to follow is the Edge building in Amsterdam, which uses digital technologies to maximise energy efficiency.

The zero energy building was designed to maximise natural light intake as well as solar electricity production. Smart technologies such as intelligent ventilation systems and connected LEDs allow people to interact with the building and for it to respond to real-time data sensors or occupants’ commands. This means that lighting levels, humidity and temperature can be adapted to the preferences of the occupants while at the same time improving building energy performance.

Many other examples are in the report from different climate zones.

The report – prepared by the IEA and published by the Global Alliance for Buildings and Construction for UN Environment – can be downloaded from http://bit.ly/2jwEjZ7.

David Thorpe’s two new books are Passive Solar Architecture Pocket Reference and Solar Energy Pocket Reference. He’s also author of Energy Management in Building and Sustainable Home Refurbishment.