Developers are being pushed by communities all over the world to create new opportunities. build sustainably and governments are introducing new measures to demand it. Now, the pressure is building from those who pull the purse strings for developers to really prove they are trying to tread carefully on the environment.
“We’re facing increased insurance premiums and we’re facing increased risk from financial lenders,” Stantec Senior Principal Andrew Burnett said during a panel discussion at the National Association of Real Estate Editors conference in Miami this week. “Projects are starting to realize there is a financial demand and feasibility of getting a project to move forward to show how you’re addressing a changing planet.”
In August, the Intergovernmental Panel on Climate Change (UN) released a disturbing report. found the past five years have been the hottest on record since 1850, and the recent rate of sea level rise has nearly tripled compared with the years between 1901 and 1971.
In short, the report sounded the alarm on what it described as “code red for humanity” — though it stressed slashing global emissions could halt the damage. It is important that builders and developers make the right choices in order to reduce these emissions. They also have a lot of responsibility.
New York City’s Lower Manhattan is one example. By 2050, 37% of Lower Manhattan buildings will be at risk from storm surges. Annual flooding in Miami-Dade County, Florida, is expected to double by 2050, and 61% more properties would be at risk from chronic flooding than are at risk today.
The climate crisis is no longer something that developers can afford to ignore.
“The lenders are asking, and insurance providers are asking, ‘What are you doing to address a more resilient built environment?’” Burnett said. “Financial pressure may be one that’s coming in as one, and I think our clients are starting to realize, and they’re asking us, ‘What can I do to show my financial vendor I’d partner that I’m addressing it appropriately?’”
For Tony Cho, the founder of Metro 1, a real estate development firm focused on developing sustainable cities, one of his “life’s missions” is to demonstrate that meeting environmental, social and governance outcomes can have outsized returns. He stated that there is a will to fund responsible developments, but it needs the right infrastructure to make it possible.
“There needs to be a new innovative model that funds housing that is environmentally and socially forward … we need to prototype them, and that’s what I am doing using opportunity zones, Covid funds, brownfields, green infrastructure dollars,” he said, adding that the next generation of successful projects needs to avoid negative outcomes like gentrification.
“Family offices and institutions, they all want to have an ESG strategy,” Cho said. “People are not interested in investing in sin businesses as much as they were before. They want to be part of the solution, not the problem.”
Jon Banister from Bisnow and Andrew Burnett from Stantec
New incentives and regulations are being implemented across the country to encourage builders and real estate owners to improve their buildings.
In New York City, starting in 2024, landlords could face large fines if they don’t reduce their buildings’ emissions. Local Law 97 establishes caps on greenhouse gas emissions for buildings 25K SF and larger citywide; it could cost building owners up to $20B collectively, according to an analysis by The Urban Green Council. While some landlords are opposed to the regulations, others believe that they force the industry to strategize and discuss climate change. more concrete way.
Galina Tachieva is the managing partner of DPZ CoDesign, an urban planning firm. She expressed optimism about the efforts made to adapt to the sea level rise.
“I think that we started a long time ago to work on these climate change issues and sea level rise. I mean, there’s so many initiatives currently available,” she said. “The people who are here look at Miami as the next tech hub and not a sinking city.”
Cho countered, saying that it’s not the right time to be optimistic.
“There is a beginning of awareness around the need and the urgency of the situation, but I certainly don’t think the investment matches the severity of the issues,” he said. “I do think that we have the opportunity to reinvent ourselves, but I think more investment needs to be made into the built environment into both the strategy of mitigation and adaptation.”