In a massive sustainable investment market, energy efficiency offers huge returns

One in every five dollars invested professionally in the US is now invested sustainably. And while investment in projects that reduce greenhouse gas emissions are rising globally, the market for energy efficiency remains under-satisfied compared to its potential and the market for renewable energy investment. Here’s why.

A version of this piece appeared in The Fifth Estate on 6 March 2018

The size of the market

It can be confusing for beginners. There are green bonds; sustainable, responsible and impact investing (SRI); and environmental, social and governance (ESG). But whatever you call it, more and more investors are seeing the benefit of putting their money into sustainability.

According to the last Global Sustainable Investment Review, at the start of 2016, global sustainable investment assets reached US$22.89 trillion (AU$29.47t), a 25 per cent increase from 2014. Europe accounted for over half of these assets (53 per cent) and the United States 38 per cent.

The market size of SRI investing in the United States alone was US$8.72 trillion (AU$11.23t) as of 2016 – double what it was just four years previously – representing one in every five dollars invested, according to SIFMA, an association of broker-dealers, banks and asset managers for businesses and municipalities.

How it works

Impact investing refers to investments “made into companies, organisations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return”.

The Global Impact Initiative is a global champion of impact investing, dedicated to increasing its scale and effectiveness around the world. It was founded by Giles Gunesekera in 2015. Speaking alongside last month’s Cayman Alternative Investment Summit he said he started it “to provide investors – foundations, family offices, pension funds, endowments – with bespoke solutions that would allow them to allocate to impact investing strategies”.

“We map these bespoke impact investing strategies to the UN Sustainable Development Goals (SDGs) and utilise professional investment managers alongside social impact investment firms to ensure the strategies we build for clients meet their financial and social impact targets.”

Schemes often use the ESG framework:

• Environmental: How is the company disposing of hazardous waste? Is it managing carbon emissions? To what extent is it meeting environmental regulations?
• Social: Does the company support philanthropic and community-focused initiatives? Are employees provided with access to health care and other key benefits? Is leadership promoting diversity?
• Governance: Are company leaders appropriately qualified for the role, and are they communicating a coherent strategic vision? Are their compensation packages appropriately aligned with performance? Is the C-suite communicating effectively, and transparently, with shareholders?

Gunesekera says that pension funds hold the key to doing impact investing at scale. Australian and US pension funds are behind those in Europe and Canada when it comes to embracing impact investing because their trustee boards behave very conservatively due to their size. But he adds that “it will only be a matter of time before they catch up”.

His colleague Don Raymond of Alignvest Investment Management believes that “impact investing should be integrated across all investments, and not just part of a separate portfolio.”

Increasing demand and the problem with energy efficiency

While all are in agreement that impact investing is increasing, it must be driven by demand, part of which is the issuing of green bonds by, for example, municipalities to promote investment in energy efficiency.

According to Steven Fawkes of the Investor Confidence Project (Europe), this too is increasing, but he says that “more investing in energy efficiency is going on outside of the green bonds market because green bonds themselves are limiting in terms of what you can use the money for”.

There are also greater transaction costs, principally in terms of verification. Fawkes cites by way of example the fact that in the US “many more buildings are constructed according to the LEED gold standard (the highest certified standard for new energy efficient buildings) than are publicised because while the standard in itself is open access certification is expensive and it is easier for developers not to bother to certify”.

Investment in these projects would not be recognised by impact investment or green bond statistics because they would likely be financed in a more conventional investment market.

For the market to grow, therefore, transaction costs need to be reduced and offerings become more investor-friendly.

It is presently much easier for investors to invest in a renewable energy project than an energy efficiency one because the capital investment, project management, technology and return on investment (ROI) are much more easily accountable. This is partly because the ROI on energy efficiency is less predictable due to the influence of human behaviour on the outcomes.

This is exemplified by the following graphs:

The growth of the portfolio of the GCPF and the types of projects invested in. Renewable energy investments have secured more than double the CO2 savings of those in energy efficiency (buildings and industrial processes), according to their annual report for 2016, (although this is by outcomes not by investment type, which the report does not quantify).

Moreover, especially in developing countries, which are typically way behind in terms of understanding and implementing energy efficiency, the early rewards for implementing an energy efficiency program typically yield between seven per cent and 50 per cent returns in just a few months – without any capital investment at all. The savings come from changes in behaviour. Fine for the company, but of no interest to investors.

Yet this is where the greatest potential lies. Non-OECD economies have a higher energy intensity than OECD economies, partly because they tend to be more focused on growth at all costs, and on energy-intensive industries such as the manufacturing sector.

Returns can be even better than 50 per cent. According to Bettina Schreck, a project manager for the South American industrial energy efficiency program of the United Nations (UNIDO), in Ecuador “a government macroeconomic study assessed the cost-effectiveness of its monetary contribution to an industrial energy efficiency program in terms of direct energy savings by analysing the average savings for all sizes of industries”. This was based on her organisation’s experience in other countries.

The conclusion?

“Whether the viewpoint was from private or public sector, and calculated over the three years of the project or the lasting benefits beyond, the internal rate of return ranged from 50 per cent to 170 per cent and the payback period was approximately one year. The conclusion was that investment was beneficial from both social and private enterprise perspectives.”

For any investor, that would be a massive benefit.

The size of the market for energy efficiency

The potential size of the market for energy efficiency is huge compared to other sectors in impact and climate finance. The global energy efficiency opportunity will require global investments of around US$50 billion (AU$64.4b) a year over the next few decades according to the Global Climate Partnership Fund (GCPF). It also represents a lower cost investment for the same emissions reduction than other types of investment such as renewable energy.

There are many global trends requiring such investment: the increase in energy demand management, storage, renewable and on-site generation, and net metering; the development of value chains in climate-friendly technology; sustainable cities; reducing wastage in the water sector; the growth of the circular economy; and the growth of digitisation – cheaper metering and sensors, the Internet of Things (IoT), cloud computing and big data analytics.

But there is a huge challenge to make unlocking energy optimisation easier than it currently is. It is not always investor-friendly.

In a recently conducted survey, the Global Climate Partnership Fund investment manager responsAbility asked green lending experts from the developing world about their expectations and experiences in the area of green lending. They found that the main drivers were client demand and international support – green branding and regulatory incentives.

Awareness has also improved.

“The most important change is in the knowledge of clients. Previously, most of them had no idea what energy efficiency financing is. Now they know a lot more about it,” head of green lending Luke Franson said.

A lack of green lending expertise was perceived among survey respondents as the greatest threat to scaling-up energy efficiency finance – not, surprisingly, low fossil fuel prices.

“The mindset of entrepreneurs who see capital expenditure as a waste and not a measure to drive efficiencies is a challenge,” said Gustavo Adolfo Calderón Palma of Banco Pomerica.

Impact investment tools are constantly being refined and developed to make these transactions and their attractiveness easier and easier to see.

UNIDO, for example, is working on a more standardised assessment method for projects with cost-benefit analysis at national and business levels, and ways of measuring the non-economic benefits of EnMS implementation at both levels to build the business case. This will include a software tool for companies to identify multiple sources of added value.

The benefit of an EnMS

For energy efficiency, it is vital that a company or organisation has an energy management system (EnMS) in place that uses the ISO 50001 standard.

ISO 50001 was designed “to enable an organisation to establish the systems and processes necessary to improve energy performance, including energy efficiency, use and consumption”.

It is applicable to all types and sizes of organisations irrespective of other conditions and can be applied in all sectors. It dovetails with other management standards such as ISO 9001 (quality management) and ISO 14001 (environmental management).

Although the introduction of EnMS always leads to no-cost and low-cost savings, long-term and larger energy savings will come about through investment projects. According to Marco Matteini, another UNIDO project manager who also worked on developing this standard, “Adopting ISO 50001 can help boost investment by better preparing firms to receive external investment as well as optimising capital expenditure. The use of EnMS also improves the ongoing monitoring of project performance after investment.”

This is because having an EnMS helps management to recognise the value of energy efficiency, therefore making approval of energy saving capital projects more likely.

Presently only 10 per cent of energy efficiency projects are externally financed, and industrial companies often find difficulties with decision making in areas beyond their core business. According to UNIDO’s Rana Ghoneim this means that a desirable tool for investment in the future will be “some kind of underwriting toolkit and templates for energy efficiency investment”.

One new tool is a new version of the European SRI Transparency Code, which is geared towards guiding asset managers to meet relevant requirements for their products in SRI. It’s been developed by Eurosif to be in line with the recommendations made by the Task Force on Climate-related Financial Disclosure.

A free, online database for investors and financial advisors has also just been published by Impact Assets, a subsidiary of Calvert Impact Capital, listing 50 private capital fund managers that deliver social and environmental impact as well as financial returns. If you’re new to this, then it’s a good place to start to begin research on the impact investing sector.

Impact investment is clearly growing, from being a small kid on the block to a major player.

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.

Barcelona: The world’s most radical city?

Spain’s Barcelona is spawning a new era of citizen-led activities that rely on co-operatives organising a range of activities, often based on barter markets and including a network of common stores, an alternative currency called the “eco”, a cooperative social fund for financing community projects and a “basic income program” for paying members for their work – all while heading down the smart city/low energy route. What does it mean to be a self-proclaimed “fearless city”?

[First published on The Fifth Estate on 27 February 2018]

Barcelona has a long and radical tradition going back to the anarchist collectives documented by George Orwell in Homage to Catalonia, his book about his experiences fighting alongside anarchists against the fascist forces of General Franco. It is unsurprising, then, that, following the particularly severe effect upon Spain of the banking crisis of 10 years ago, creative grassroots responses to austerity have emerged.

Grassroots mayor

Barcelona's mayor Ada Colau

Barcelona is home to a radical grassroots and citizen-led movement that coalesced in June 2014 under the “Yes we can” (Podemos) slogan into the platform Barcelona en Comú, an organisational structure for individuals, activist groups and political parties. This linked networks of local assemblies allowing people to engage in policy decisions.

Ada Colau, a former housing activist, astonished everyone when in June 2015, as part of Barcelona en Comú, she was elected mayor – the first woman to hold the office.

“Democracy was born at local level, and that’s where we can win it back,” she declared.

She had been a founder of the Plataforma de Afectados por la Hipoteca (Platform for People Affected by Mortgages) that was set up in 2009 in response to the rise in evictions caused by unpaid mortgage loans and the collapse of the Spanish property market (she co-wrote a book, Mortgaged Lives, based on her experiences).

In one of her first speeches Colau called for “an end of the political class removed from the people”.

She was not alone: the same year saw radical mayors elected in Madrid, Valencia, Zaragoza and La Coruña and together they announced the Rebel Cities network – a group of cities confronting central government, devising their own policies, and making a worldwide plea for other cities to join. A handbook is available for other cities to follow.

The Catalan Integral Cooperative

From the same movement that gave birth to Colau came the Catalan Integral Co-operative (Integral is perhaps best translated as holistic). Its goal is to build an anti-capitalist co-operative structure not just for the benefit of its own fee-paying members but for the commons as a whole.

“The main objective of the CIC is nothing less than to build an alternative economy capable of satisfying the needs of the local community more effectively than the existing system, thereby creating the conditions for the transition to a post-capitalist mode of organisation of social and economic life,” writes George Dafermos, author of a new report on the co-operative.

The AureaSocial building

Since its formation seven years ago, headquartered in the AureaSocial building, it has been actively involved in developing infrastructures as diverse as barter markets, a network of common stores, an alternative currency called the “eco”, a cooperative social fund for financing community projects and a “basic income program” for paying members for their work.

Its activities are not confined to Barcelona, but extend across Catalonia.

The CIC is a collection of about 10 committees with responsibilities for different topics. For example, the economic management committee, the legal committee, the IT committee and so on. Each works largely autonomously but to coordinate their activities, the co-op holds “permanent assemblies” once a month where members make collective decisions based on consensus.

It has about 600 “self-employed members”. There are also 20 self-managed pantries run by local consumer groups wishing to purchase products made locally or by producers associated in other parts of Catalonia, chosen through an online list of over 1000 items supplied by currently 70 producers and distributed by vans.

According to Dafermos, the co-op is “based on direct exchange and the use of alternative community currencies”.

“The way this ecosystem operates represents the model of the autonomous public market envisioned as a means of satisfying the needs of the local community… a model for the transition to a post-capitalist economy.”

A minimum income scheme

This radicalism extends to the official level. The city is one of several places in the world that are trialling a minimum income scheme – B-MINCOME – in two of the city’s poorest barrios. Here, citizens receive a guaranteed minimum level of income. Receipt for some of them is conditional upon agreeing to some level of community work, by volunteering. Others have other conditions, or none at all, and the results of the trial will be evaluated to determine the most successful model.

The designers of the scheme – which is supported by a grant from Urban Innovative Actions, a European Commission initiative that supports projects investigating “innovative and creative solutions” in urban areas – took experience from the governments of Finland, the Canadian province of Ontario and the Dutch municipality of Utrecht, all of whom have designed guaranteed income experiments in their own areas.

Barcelona is going smart city as well

Barcelona is also smart in the digital and eco senses of the word. As one of the leading smart cities worldwide, 50 per cent of street lighting are LEDs fitted with sensors to switch on when they detect motion and dim when streets are empty, saving 30 per cent of previous energy.

Around 19,500 smart meters monitoring and optimising energy consumption have been installed across the city, including a sensor system helping drivers to locate available parking spaces, reducing congestion and emissions.
There is a Bicing app, providing updated information on the location of public bike stations and bike availability, and the city has one of the biggest free public WiFi networks in Europe.

Smart technology is also used to improve the speed and efficiency of the city’s new orthogonal bus network, and digital bus shelters are also in place. The proposed new bus network is based on an orthogonal grid scheme, which has emerged as the most efficient in urban systems. This network ensures the isotropy of the territory – equally covering all parts of the municipality. This improves connectivity between the lines and accessibility for all users.

The new scheme is not only functional but also more “readable”, and is structured similarly to the metro and a network becomes easily understandable. Furthermore, the great majority of targets are achieved with a single transfer, simplifying use of the bus network and avoiding the current need to know each line individually.

Superblocks road de-trafficking scheme in Barcelona

Superblocks cutting traffic

All of this is helping with the superblock project, to be piloted in four areas in the city.

This will remove traffic from city streets to create pedestrian-centric neighbourhoods that improve health and sustainability, and reduce pollution. It was adopted as a centrepiece of the city’s mobility plan in 2015 to remove cars from within the superblocks, “liberating” 70 per cent of the city’s land for public use, according to Salvador Rueda, director of the Urban Ecology Agency of Barcelona.

Focus for change

Now calling itself a “fearless city”, Barcelona is positioning itself as a focus for a movement, hosting a Fearless Cities summit in June and a Smart City Expo in November, on defining cities as radical, citizen-empowering places.
According to Dr Bertie Russell, research fellow at the Urban Institute in the University of Sheffield in the UK, Barcelona and Madrid’s decidim process of citizen involvement in decision-making is good because it allows citizens to set the policy agenda, not just react to it.

He supports the trend to “establish non-market, non-public sector initiatives – urban commons – and recognises their right to self-determination”, citing as another example, “Naples’ decision to create a Department of the Commons and provide a legal status for previously squatted social centres.”

A mayor who has reduced her salary and invites other mayors to visit

Local activist Edu Salvador also thinks this is a good approach: “Through her leadership in international conferences of cities, Colau has been active in bringing to Barcelona mayors from main progressive cities of the world. She is a responsible mayor, and has reduced her salary – the salary of the previous mayor was outrageously high.”

Barcelona – home of Antoni Gaudí – is continuing to be every bit as revolutionary as that unique man’s architectural style, pioneering 21st century solutions that address the kind of citizen disillusionment with power that has fuelled reactionary movements elsewhere in the world in the past few years. But by positioning itself within an alternative movement, it is determined that its ideas can be replicated and supported elsewhere.

Read David Thorpe’s surprisingly uplifting post apocalyptic short fiction work set in Barcelona here: For The Greater Good.

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.

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Financiers tell EU to get radical on financing green projects

A high-level group on sustainable finance has advised European regulators to incentivise a more favourable treatment for energy saving loans and mortgages, which could unlock billions in lending for green building renovation programs and other green projects.

Note: This article first appeared on The Fifth Estate on 19 February.

The group’s final report says that almost three-quarters of the EU’s 2030 clean energy investment gap – estimated at around €130 billion a year (AU$204b) – is accounted for by energy efficiency in buildings, most of which is concentrated in central and east European countries where the leakiest buildings are found.

It calls on policymakers to support efforts to “exploit potential links between energy efficiency savings and mortgage loan performance”.

Some banks are already looking at ways of providing better approaches to financing energy saving programs, such as building renovation loans to homeowners. For instance, the European Mortgage Federation is developing a standardised “energy efficient mortgage”, which links efficiency improvements with a lower probability of default of borrowers.

Europe already has an energy efficient mortgages action plan.

The high-level group believes that directing investment into long-term, sustainable projects will also improve the stability of the financial system as a whole. It proposes:

• a classification system, or “taxonomy”, to provide market clarity on what is “sustainable”
• clarifying the duties of investors’ when it comes to achieving a more sustainable financial system
• improving disclosure by financial institutions and companies on how sustainability is factored into their decision-making
• an EU-wide label for green investment funds
• making sustainability part of the mandates of the European Supervisory Authorities
• a European standard for green bonds, with the establishment of a new Green Bonds Technical Committee in 2018, to develop a long-term governance structure for the EU Green Bond Standard

It also recommends:

• supporting the growth of social enterprises and the financing of social-related projects
• revaluing natural and environmental capital in economic and financial decisions
• re-orienting agriculture to a way that is more sustainable for the economy, the environment and public health

Radical advice

It’s quite radical for a bunch of high-level financiers.

The EU executive is to follow up on the report’s recommendations during the first half of March with a comprehensive action plan on green finance that will include more steps to encourage investments in energy efficiency. This will include a “harmonised taxonomy” for banks to classify different types of financial products according to their environmental performance and to prevent “greenwashing”.

Christian Thimann, head of sustainability at French insurer AXA, who chaired the group, said: “There is no claim that everything green is necessarily less risky. But the group does make the claim that taking account of environmental and climate risk and long-term sustainability may have – and in some cases must have – a positive impact on your risk analysis.”

Energy efficiency investments affect the value of a building or industrial facility “by more than just the present value of the expected energy savings”, the authors note, saying banks should be able to better identify these multiple benefits. Measuring those “would help de-risk energy efficiency investments”.

EU can easily miss its 2020 energy efficiency target

The report is timely because the EU is in sore danger of missing its target of a 20 per cent reduction of energy consumption by the year 2020 compared to baseline projections, according to the latest figures.

EU28 primary energy consumption: progress towards the energy efficiency target between 1990 and 2016

Meeting the target would mean achieving a primary energy consumption of no more than ,483 million tonnes of oil-equivalent (Mtoe) and a final energy consumption of no more than 1086 Mtoe in 2020.

But, in fact, primary energy consumption, while going lower in the interim, has decreased between 1990 and 2016 by just 1.7 per cent.

Consumption of solid fossil fuels (coal and coal products) decreased by 47 per cent and oil (including petroleum products) decreased by 12 per cent. Renewable energy use increased by 200 per cent, natural gas and manufactured gases by 31 per cent and nuclear by six per cent.

Overall energy efficiency gains in European countries since 2000

Final energy consumption in 2015 was approximately the same as in 1990, but in 2016 it had risen to 2.1 per cent above that level.

The actual final energy consumption in year 2014 was lower than the 2020 energy efficiency target level of 1086 Mtoe, but it’s gone up since then. This temporary dip was most likely due to the economic recession.

Overall energy efficiency gains in European households since 2000

Figures also show that 8.7 per cent of Europe’s 28 countries’ population on average is in fuel poverty, down from a 10.8 per cent peak in 2012, but this varies wildly by nation, with Greece being amongst the worst performers, and Norway and Switzerland amongst the best.

As a result, the high-level financiers’ report recommends that the new Sustainable Infrastructure Europe body should have a particular focus on the Central and Eastern Europe area, and have Eastern European offices.

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.

Lendlease London project on hold after “social cleansing” claims

Demo against the Haringey Development Vehicle project

A £4 billion urban renewal project in north London that was to be developed by Lendlease is now unlikely to proceed following fierce political opposition.

NOTE: article first appeared on The Fifth Estate on 13 February

The developer has fallen victim to a sea-change in attitudes to private sector involvement in urban renewal projects, which has come to the fore amidst a growing affordable housing crisis in London.

The project, called the Haringey Development Vehicle (HDV), was a 20-year joint venture between Lendlease and Haringey Council that would have led to the creation of 6400 homes built at a value of £4 billion. Forty per cent of homes were set to be “affordable”.

But the project has become stuck at the centre of an ideological war about the delivery of public housing, which this month led to the resignation of Haringey council leader Claire Kober, who had campaigned to push through the Lendlease deal.

Claire Kober, the former leader of Haringey Council

Kober is a Labour leader whose laudable desire to improve living conditions in some of the capital’s worst estates led her to make a deal with Lendlease. The deal, though, was criticised by tenants and activists for encouraging “social cleansing” – because many occupants of homes to have been demolished for the project could not have been rehoused in the borough following completion of the new scheme.

Kober’s dilemma, which faces all councils in London and elsewhere, was how to finance such massive regeneration schemes when central government does not offer sufficient support and land prices are so high.

Councils usually turn to the private sector, but the trade-off is typically the loss of publicly owned land to the private sector and the loss of homes for social rent.

The loss of affordable housing

According to figures on London’s delivery stream of housing regeneration schemes obtained by the London Green Party in early 2016, were all projects to go ahead, it would lead to a net loss of 7326 social rental homes – those with the lowest rent levels.

They are disappearing in favour of so-called “affordable rent” homes, where tenants can be charged up to 80 per cent of private market rents. Even these are disappearing: the Greens calculated a net loss of 1389 across London.

“With a few exceptions, estate regeneration has been a complete disaster in London and has made our housing crisis worse,” Green’s London Assembly member Darren Johnson said.

Now this historical trend, led by private developers, is being challenged.

The tide is turning

Since the collapse of government-contracted services outsourcing giant Carillion and the protests in Haringey, the tide is turning against public-private partnerships.

On 18 December 2017 London mayor Sadiq Khan refused permission for an estate regeneration in the borough of Barnet that would have seen the loss of 257 social homes.

Khan said: “This is a classic example of how not to do estate regeneration. I fully support improving social housing on this estate and across the capital, but this scheme falls far short of what I expect of London boroughs.”

The developer in this case was a housing association, Genesis, who is also the developer and resident social landlord for the scheme.

“As I have made clear in my new London Plan, estate regeneration projects must replace homes which are based on social rent levels on a like-for-like basis,” Khan said.

“Londoners so urgently need more high-quality housing, not less, which makes this scheme completely unacceptable in its current form.”

The mayor’s newly-launched draft London Plan (published in December) requires applications for housing estate renewal to include the replacement of existing affordable housing on a like-for-like basis, and no net loss of existing social housing.

It envisages the following split of affordable homes being applied to new development:

• a minimum of 30 per cent low-cost rented homes, allocated according to need and for Londoners on low incomes (social rent/London affordable rent)
• a minimum of 30 per cent intermediate products that meet the definition of affordable housing, including London living rent and London shared ownership
• 40 per cent to be determined by the relevant borough based on identified need, provided they are consistent with the definition of affordable housing.

If a development supplies this it is eligible for being “fast-tracked” through the planning process.

A London-wide strategic housing market assessment (cited in the plan) has identified a need for 66,000 additional homes a year, of which 43,500 should be affordable.

Balloting residents

Khan has also announced plans to force councils to ballot residents on housing estates earmarked for demolition as a condition of obtaining funding for the work from City Hall. He said the broad support of tenants, leaseholders and freeholders living on estates is a necessary requirement.

There are estimated to be about 25 estate regeneration schemes underway at any one time in London involving funding from City Hall, and under the mayor’s plans all such schemes would, in future, require a successful ballot outcome before their funding could be approved.

Where demolition is proposed, the mayor wants to see councils and housing associations follow his “Better Homes for Local People” principles by providing:

• an increase in affordable homes – and, as a minimum, no loss of social housing
• full rights to remain or return for tenants
• a fair deal for leaseholders and freeholders

“We need more social housing in London, not less, which is why I will use all my powers to make sure that any plans for estate regeneration protect existing social housing and take every opportunity to build more,” Khan said.

“My guide sets out how I will use my investment powers in a way they have never been used before, by requiring resident support through a ballot for new plans involving demolition where City Hall funding is involved.

“I want to make sure people living on social housing estates, who have the greatest interest in their future, are at the heart of any decisions from the outset.”

Living Rent scheme

This week Khan also announced the London Living Rent scheme, an intermediate affordable housing product with low rents that vary ward by ward across London. Eligibility is restricted to households that are currently renting, with a maximum income of £60,000 and who are not currently able to purchase a home in the local area.

It will help middle-income earners who would otherwise typically be struggling in the private rental sector to save for a deposit by offering rents based on a third of local average wages and makes home ownership in the capital a realistic prospect for the many Londoners who feel priced out of the property market.

Rents in the first such project, The Sugar Works at Royal Wharf, Silvertown, are up to 50 per cent cheaper than local market rents, and range from £730 a month for a studio flat and £821 a month for a one-bed flat up to £1094 a month for a four-bedroom property. They are provided by housing association London & Quadrant.

Meanwhile, back in Haringey, residents of the sub-standard homes Kober wanted to replace, where sometimes three generations are living in the same crowded conditions, face an uncertain future until after local elections in May, where a new administration will be challenged with finding a more equitable solution to residents’ plight.

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.

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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.

How can cities reduce their ecological footprint?

Is this the future of cities?

The last post in this series looked at the vital role of ecological footprinting in ensuring that our individual actions are truly sustainable – i.e. within the limits of what the Earth's resources can provide. This is called 'one planet' development.

This post will begin to look at how communities of varying sizes might transition to one planet living, in other words, how towns and cities can reduce their consumption levels.

The challenge

The world's citizens must reduce their collective footprint to one planet equivalent or face various catastrophes: out-of-control climate change, mass extinctions, famine and the death of the oceans to name but four on the agenda.

The global population is now 7.5 bn. and is predicted to peak at 11.2 bn by 2100 (UN). By this time up to 84% of us may be dwelling in cities. A frightening thought.

Yet all around the world, many different projects and initiatives to tackle their impact – both top-down and bottom-up – are evolving, especially in urban areas, as cities gain more confidence. They are supported by a plethora of pan-global organisations such as C40, ICLEI and the World Future Council.

These initiatives cover most fields from energy and water to transport, buildings and industry, with the latter being particularly tough to tackle.

Cities hoover up resources from the rest of the world. Unless those resources are both replenished in their place of origin and reclaimed for reuse in closed loop systems within cities, then cities cannot survive indefinitely.

So it is in cities where the battle for the future will be most harshly fought.

>Standards? What standards?!

To help us fight this battle effectively, we need assured processes. Enter the role of standards.

Standards are essentially manuals containing a set of guidelines and metrics to be followed and met in pursuit of whatever goal you're setting yourself.

There is a new standard to measure the sustainability of cities: Indicators for City Services and Quality of Life (ISO 37120). It is being piloted as part of an integrated suite of standards for sustainable development in communities by such as Mexico City.

There are many other indicators and standards for measuring sustainability: for example the United Nations Sustainable Development Goals contain a goal specifically about cities, and there is the New Urban Agenda, not to mention the Global Footprint Network's Ecological Footprint Standards 2009

Which standards should we use?

Standards can be relative or absolute. In other words, they can set a target of, say, a (relative) 50% reduction from a certain baseline, or an (absolute) target of, say, zero waste to landfill.

Absolute targets enable comparison and ranking between different cities or projects; we can compare the performance of communities by dividing their consumption by their population.

Absolute targets can also be linked to the (absolute) resources of the planet. In fact, standards must refer to planetary boundaries.

Standards should also be simple to communicate and implement – especially in relation to the gathering of the necessary data.

They might be designed to make it easy automate the gathering of data from existing data collection methods.

According to John Delaney of the British Standard Institute, "What option is chosen depends on what suits a city and/or what they are most comfortable with."

Mathis Wackernagel, president of the Global Footprint Network, says that, “Perhaps the driving question becomes – what do places need to know in order to operate safely in an ecologically ever more constrained world. Cities need to have the critical information.”

Back to Wales

Back in Wales, the home of One Planet Development, its Well-Being of Future Generations Act is its very own charter to make Wales sustainable within a generation or two. It uses various metrics and standards to measure this and some have yet to be decided at the local level.

The seven Well-Being Goals in the Well-Being of Future Generations Act

It is essentially about spending. The Act means to ensure that the spending of public money is done in a sustainable way. That is to say, it does not jeopardise the ability of future generations both to live well and within planetary limits. The list of metrics includes:

• Economic output – Gross Value Added
• Social Justice - percentage of the population in relative low-income households
• Biodiversity conservation – status of priority species and habitats
• Ecological footprint – national EF against the UK and global average
• Wellbeing - a standard set of 36 health questions which ask respondents about their own perception of their physical and mental health.
• UN’s Sustainable Development Goals
• Carbon footprinting.

To try and ensure this is done, procurement strategies still need to be thrashed out.

And there is an independent Commissioner for Future Generations, who acts as a government watchdog.

(In England, the Tory Government abolished this role, which was held by Jonathan Porritt, in 2011).

The path towards One Planet Towns and Cities

So here is my deceptively simple six-step process for a town or city that decides it wants to reduce its ecological footprint to a fair and sustainable level:

1. Decide which standards to use
2. Obtain buy-in from citizens and all branches of government and obtain feedback at all level
3. Set the baseline – identify the current situation for each of the impacts (energy, water, food, minerals, biodiversity, carbon, pollution, health, income inequality, etc.)
4. Decide the objectives to be set for each aspect of the footprint over realistic timescales. These should ratchet down consumption in stages over one or two generations.
5. Set in place ways to measure them and to independently enforce them.
6. Celebrate all your achievements!

This makes it sound easy. But the task ahead is momentous. Above all it requires skills, knowledge and leadership.

You know, anyone can become a leader. You just have to decide to do something.

If you doubt this, look for a moment at the enormous difference a small group of people in Todmorden have made. They started the 'Incredible edible' guerilla food-planting movement now copied all over the world.

One Planet Towns vs. Transition Towns

I believe that 'one planet' towns should be what 'transition towns' transition towards.

Transition towns do not generally measure the efficacy of their actions. While they may very well be doing lots of good work, it may be that the efforts of some are only scratching the surface of what needs to be done, and at worst, wasting their time.

They would have to account for the whole picture of consumption of their community in order to be sure, and then check what difference their actions are making over time. This is hard for voluntary organisations to do, and indicates why it is crucial to work with the authorities.

But the authorities often do not want to know. In such cases they need to be trained to see the benefits that would accrue to their communities. Success depends on both top-down and bottom-up co-operation.

The need for training

In 2018 I am setting up a new body called The One Planet Institute that will contribute to this work. Contact me for more information or to get involved.

Measurement and verification may be boring. It may be hard work. It might even seem a waste of time to some people.  But I know from my experience in energy management and in the post-occupancy evaluation of buildings that were intended by architects to be low-carbon, that it is the only way to be absolutely sure we are NOT wasting our time.

In short, that we are targeting our efforts in the most worthwhile directions.

Next article

The next article in this series will look at the hardest component of the ecological footprint to reduce – food production and consumption.

One Planet Living is about showing the way:

• To buy The One Planet Life, click here.
• To enquire about hosting a workshop or training in One Planet Living, or anything else, email David.

Europe inches closer to strong energy efficiency target

Members of the European Parliament’s industry and energy committee have voted by a narrow margin for a legally binding 40 per cent energy efficiency goal and a 35 per cent renewable energy target for 2030.

{Note: a version of this article appeared one week ago on The Fifth Estate]

The energy efficiency vote was won by only one vote (33 in favour and 32 against). German conservative Markus Pieper (above) sided with the ECR Group, a 74-strong Eurosceptic alliance of European conservatives and reformists, and the far-right Europe of Nations and Freedom group, which includes France’s National Front and the coal-favouring Visegrad Group.

Pieper’s compatriot, Socialists and Democrats Group member Martina Werner, siding with the committee’s rapporteur Adam Gierek, hailed the vote as “a great political victory after a fierce battle between the political groups”.

“We had to face serious attempts to water down the Energy Efficiency Directive. Even the Commission acknowledged that their amendments, for example on the annual savings rate, would amount to 0 per cent, for the period 2021-2030. This is not acceptable.”

With the European Council having already agreed on its approach on the Energy Efficiency Directive, the three European institutions must now agree on one joint position under the Bulgarian presidency next January, after the adopted report has been passed by a full plenary session.

Renewable energy sails through

By contrast, the Renewable Energy Directive vote was backed by 43 in favour and only 14 against. However, this motion already contained compromises. Although Members of the European Parliament (MEPs) wanted to increase the Commission’s 27 per cent target to 35 per cent, many, including the Greens, believe that 35 per cent is “the strict minimum” needed to let the EU meet its commitments under the Paris Agreement.

WWF Europe renewable energy expert Alex Mason slammed the proposal as “toothless” and claimed that the inclusion of a 10 per cent “flexibility margin” sent a signal to investors that “the EU is scaling back on renewable energy”.

Adair Turner, chair of the Energy Transitions Commission (ETC), a coalition of leading organisations from the worlds of business, energy and finance, said the ETC had come to the conclusion that a 100 per cent renewable energy system was now clearly within reach – probably sooner than we think.

“We are pretty confident that in 10 or 15 years you would be able to do a near total renewable system – 85 or 90 per cent – based on intermittent renewables. We said 2035 but this is probably ludicrously conservative.”

Energy efficiency remains controversial

But opponents of the target vowed to fight on to prevent it from becoming law. Opposition to the target is based on the belief that energy efficiency is not cost-effective.

Van Bossuyt, chair of the European Parliament’s internal market committee and member of the ECR Group, after the vote said: “We all want to see an ambitious strategy for improving efficiency, but there is no point introducing targets and policies if countries and companies are unable to implement them.

“A policy that is affordable and works in one country may be completely inappropriate and expensive in another. Governments and local authorities need to step up efforts to renovate their building stocks but this is expensive and places huge pressure on budgets that are already stretched.”

But this belief is not shared by industry. Philippe Dumas, secretary general of geothermal heating association EGEC, said: “The vote … puts the heating and cooling sector on track to be freed from fossil fuels. Decarbonising the heating and cooling sector can only be done by exploiting synergies between energy efficiency and renewable policies in terms of actions, technologies and ambitious policies.”

French energy group Engie’s CEO, Isabelle Kocher, said she supported the 40 per cent target: “We are very supportive of setting energy efficiency targets that are both very high and which are binding.”

So did members of the European Alliance to Save Energy, who include Veolia, Siemens, Philips Lighting and Danfoss, who had said that any target below 40 per cent energy savings “would set policy goals below the business-as-usual energy efficiency improvement trajectory and will have no impact on the ground”.

And the CEO of the Institutional Investors Group on Climate Change, Stephanie Pfeifer, said the 40 per cent target would “send a clear and positive signal to investors swiftly enough to ensure a smooth transition to a low carbon economy”.

The Coalition for Energy Savings welcomed the energy efficiency vote. Its secretary general Stefan Scheuer said: “Energy efficiency policies have been the bedrock of the EU’s common energy policy, and a major tool to address environmental, competitiveness, social and geopolitical challenges.

“MEPs across the political spectrum who acknowledge these benefits should overcome their divisions and agree on a solid common energy efficiency policy post 2020 in view of the negotiations with the Council.”

He said the EU could achieve this energy efficiency target cost-effectively, according to research findings presented in the impact assessment for the Energy Efficiency Directive revision proposal.

The need for investment

Seventy-five per cent of the EU’s building stock is inefficient and buildings account for 40 per cent of the EU’s primary energy demand. Even if the target becomes law, a major obstacle to increasing the rate of renovation is access to finance, an issue for both businesses and households.

The Energy Efficiency Financial Institutions Group (established by the European Commission Directorate-General for Energy and United Nations Environment Program Finance Initiative) says that to reach the EU 2030 energy and climate targets about €379 billion (AU$591.7b) is needed each year between 2021 and 2030.

Where could such a massive amount come from? Part of the answer might be from energy companies themselves, who stand to save hundreds of billions of dollars from the easing of network constraints and of the need for new infrastructure that is being caused by the ongoing digitalisation of the energy sector.

Those savings are highlighted in a recent report from the International Energy Agency, which puts the savings to be achieved from a more connected, intelligent, efficient and reliable energy system at around US$80 billion (AU$105b) – approximately five per cent of total annual generation costs worldwide.

Furthermore, it says that as much as US$270 billion (AU$355b) in necessary infrastructure costs could be saved by realising up to 185GW of worldwide flexibility via smart demand response.

These savings could usefully be translated into investments in energy efficiency programs, which would achieve a return on investment over similar long time frames.

Another, admittedly much smaller, type of solution is to be found in places like Bucharest, where EU investment programs have contributed to the renovation of around 1200 flats. The Dutch approach of “Energiesprong” undertakes housing retrofits and installing photovoltaic panels and boilers in order to create Net Zero Energy houses, focusing on the social housing sector. In the Netherlands there have so far been about 1800 refurbishments with a further 15,000 in the pipeline.

If the European Union does finally succeed in setting the 40 per cent energy efficiency goal in law next year, that will only be the beginning. It will be up to the market to step up to the challenge of meeting the requirements.

David Thorpe is author of Passive Solar Architecture Pocket Reference and Solar Energy Pocket Reference.

What is One Planet Development?

Something special is happening in Wales. The country is using legislation to shift itself into a very different direction from England. It wants to be more sustainable. It wants to reduce its ‘ecological footprint’ to a level that’s fair compared to the rest of the planet’s population and resources.

Spearheading this approach is the notion of One Planet Development.

What is One Planet Development?

Through its Technical Advice Note 6 (TAN 6) and Planning Policy Wales (PPW) the Welsh Government sets out land use planning policies to support sustainable communities. Planning Policy Wales (2016) says:

4.5.11 Closely aligned to the commitments to tackling climate change is the Welsh Government’s approach to reducing the ecological footprint of Wales. Our Sustainable Development Scheme sets out an ambition for Wales to use its fair share of the Earth’s resources, where, within a generation, our ecological footprint is reduced to the global average availability of resources – 1.88 global hectares per person. The current footprint shows that, if everyone on the Earth lived as we do, we would use 2.7 planets worth of resources. Reducing Wales’ ecological footprint will require a large reduction in the total resources used to sustain our lifestyles. The policy and guidance set out here in PPW will make an important contribution to reducing our footprint, whilst delivering sustainable development and tackling climate change.

Section 4 of TAN 6 defines One Planet Developments (OPD) as being exemplars of sustainable development:

4.15.2 One Planet Developments may take a number of forms. They can either be single homes, co-operative communities or larger settlements. They may be located within or adjacent to existing settlements, or be situated in the open countryside.

In other words, anywhere.

However planning guidance exists currently only for OPD in the open countryside. The criteria include:

1. An initial ecological footprint of 2.4 global hectares per person or less and clear potential to move towards 1.88 global hectare; the Welsh Government provides an Excel-based calculator on its website to help you work out your own footprint
2. Buildings being zero carbon over their lifetime;
3. Carbon analysis and improvement plan for the plot;
4. Biodiversity and landscape improvement;
5. A community impact improvement;
6. Transport assessment and travel plan to minimise carbon impact of travel;
7. Sustainable water supply;
8. Zero waste (including biological waste – sewage treatment)
9. 100% renewable energy.
10. Over a reasonable length of time (no more than 5 years), to provide for the minimum needs of the inhabitants in terms of income, food, energy and waste assimilation from land-based employment.

No criteria of this nature have yet been determined for urban or peri-urban developments but something comparable is anticipated at a collective community level. I believe it is therefore urgently necessary for planning guidance to be set for making both new and existing settlements satisfy, collectively, the criteria to be measurably ‘one planet’ within a generation.

Meanwhile, I run courses on how to do this, based on my book, The One Planet Life, which is a kind of manual and ‘big book of everything’ for sustainable living.

The One Planet Council, of which I am a co-founder and patron, is also a great source of help, both on its website and Facebook page for anyone wanting to do this or find out more.

How to do it

Anyone wanting to pursue this life in Wales, in the open countryside, where one is not normally permitted to build a home, must satisfy the above criteria. In England, sometimes a Local Development Plan can have similar criteria, or an authority can use a Section 106 agreement to permit it, as with Hockerton Housing Project.

To prove their claim in Wales, applicants must submit a planning application containing a ‘management plan’ that sets out their plans to meet these criteria. This includes detailing the land-based businesses they will run to support themselves.

When you have secured planning permission you have five years to meet the criteria. You can also use the ‘one planet’ label on your products that has been developed for marketing purposes by the One Planet Council.

Measurable and provable

The great advantage of this approach, and its ‘unique selling point’, is that it is measurable and provable. There is no doubt that your life will be a little more sustainable. Many times you hear claims about the sustainability of lifestyles or products and developments, but there is no way of knowing how true they are.

Above: a screenshot of the Excel-based calculator. It uses your expenditure as a way of working out your ecological footprint (click to enlarge).

What is an ecological footprint?

The global population is now 7.5 bn. and is predicted to peak at 11.2 bn by 2100 (UN). But the ability of our lovely planet Earth to support life depends on us staying within a number of ‘planetary boundaries’. Humanity passed this ‘biocapacity’ limit way back in the early 1970s. Our collective footprint has been rising ever since:

As defined by the environmental charity WWF, there are nine ‘planetary boundaries’. Every couple of years WWF produces a brilliant survey called a ‘Living Planet Report’. The last one, in 2016, said that of these nine limits to growth, four have passed safe levels: climate change, biosphere integrity, biogeochemical flows and land-system change.

WWF says that humanity now needs the regenerative capacity of 1.6 Earths to provide goods and services we collectively use. But the per capita ecological footprint of high-income nations dwarfs low- and middle-income countries. What will happen if 11.2bn people want North America’s standard of living?

Ecological footprint is measured in ‘global hectares’. It divides the ‘biocapacity’ of land (supply) by human consumption levels (demand). The biocapacity is a measure of the pollution land can absorb and the services and resources it can provide. The demand is the population level times the consumption level. The result is an average of hectares per person, if it were distributed equally between everyone alive. A hectare is 2.47 acres or 10,000 square metres or 0.01 square kilometers.

According to the last report, the fair level is 1.7 global hectares per person.

Not very much. It is the level of the world’s lowest consuming countries, in Africa and the Indian sub-continent.

So we in the UK must move from an average level of three times this (as if, if everyone were living this way, we had three planet Earths – if only!) to one.

Back to Wales

To go back to Wales, the law there contains a goal to make this shift in one generation.

One Planet Living is about showing the way. It is the start of an immense and difficult journey.

• To buy The One Planet Life, click here.

• To enquire about hosting a workshop or course in One Planet Living, email David.

• The next post in this series will be about moving from individual to collective one planet living, in other words show towns and cities can shift their consumption levels.