_ESG perspectives: Net zero neighbourhoods

In the run-up to COP27, Knight Frank convened a panel of senior real estate experts leading on some of the UK’s most exciting regeneration schemes to discuss net zero neighbourhoods; transitioning to net zero and why it is important; as well as attitudes to ESG in the current economic climate.

Chaired by Jonathan Hale, Head of ESG Consulting at Knight Frank, the panel included:
• Emma Cariaga, Joint Head of Canada Water and Head of Residential at British Land;
• Matt Flood, Office Lead Brent Cross town at Related Argent and;
• Chris Botten, Head of Sustainability, Urban Regeneration at Lendlease

As leaders of major urban regeneration projects, how are you ensuring that these schemes have a lasting positive impact on the environment and local area?

Emma Cariaga jointly leads the development of Canada Water, a 53-acre regeneration scheme in Central London that will deliver a new town centre for London and is targeting net zero by 2030. She says, “We have set ourselves incredibly bold targets both on the environmental and social side. Given the ten-year build period, we by no means have all the answers now, but technology is evolving rapidly as is materials innovation, and our aim is to adapt and implement these throughout the project.”

Emma notes that in the first three buildings, which are currently under construction, an all-electric energy strategy which uses 100% renewable electricity is in place as well as the use of earth friendly concrete and heat sharing between offices and homes.

British Land has spent the last decade getting to know the local community and together with Southwark Council, has created a Canada Water Social Regeneration Charter to ensure that local residents are the beneficiaries of the opportunities the regeneration will provide. “Canada Water is already a vibrant community, home to people from all walks of life and we want to ensure the development will not only preserve but enhance all of the local history and character that’s already there,” Emma adds.

Matt Flood opened up with a quote from Frozen Planet 2, “Penguins are the canaries down the coal mine and we need to sit up and take notice”. Related Argent has been working in partnership with Barnet Council on a regeneration project for the past decade. A key focus of this project, jointly driven by the local authority, has been the social aspect. They developed four pledges of what they want the neighbourhood to be – a place where all can flourish. Grounding their decision-making was asking how they can ensure they make the right decisions for the planet.

While admitting substantial environmental challenges continue to present themselves, and reference was made to corporate and project level aspirational operational targets, it was acknowledged that there are many routes available in order to achieve the desired outcome. For instance, using recycled building materials such as concrete, reclaimed steel, and timber has been a big part of the project. Air source heat pumps and renewable power are being developed, which is particularly poignant. Matt highlighted that creating a partnership with occupiers and positioning them as aligned partners is key to helping them deliver. As part of their arts and culture initiative, they have even implemented a music and sound strategy to encourage wellbeing and create a more enjoyable atmosphere.

Chris Botten is from Lendlease, a globally integrated real estate group with core expertise in shaping cities and creating strong and connected communities. As a 1.5°C aligned company, Lendlease have an aspirational goal of meeting Absolute Zero Carbon, with no offsets by 2040, including Scope 1, 2 & 3 emissions. They call this their Mission Zero, sending a clear message to stakeholders and partners that they are committed to leading industry transformation.

He highlights how the transition to a zero-carbon future should be delivered in a way that is just. To help achieve this, Lendlease is committed to creating social value in the communities where they operate. They do this by supporting and partnering with not-for-profit organisations, targeting the creation of A$250m of social value globally by 2025. As well as providing opportunities for local people from all backgrounds to experience ‘good work’ on a Lendlease project, creating safe and inclusive places where people choose to live, work and play, and supporting resilient and diverse local economies that encourage and sustain entrepreneurship, innovation and creativity.

Biodiversity is another critical component in creating of places where communities thrive. Here Chris provided an example of Elephant Park, a £2.5bn mixed-use regeneration project in Southwark that will feature over 1,300 trees planted across the development and surrounding streets, as well as 128 mature trees from the original site and abundance of soft landscaping and wildflower meadows across the 11 acres of public realm. At the heart of the development is a new 2-acre public park which makes for a publicly accessible, biodiverse space for people to socialise and spend time outdoors.

To add, Related Argent wants the community to truly be at the heart of what they do, enabling them to grow organically rather than going in and telling them what to do.

Why is having ESG targets important and how can you catalyse change?

For British Land, delivering net zero buildings and ensuring the communities in which we operate thrive, isn’t just the right thing to do, it makes commercial sense. “What we are seeing is that demand for the best, most sustainable real estate is rising, with businesses and retailers increasingly focussed on buildings that minimise their own carbon footprints and have a positive impact on their people,” says Emma Cariaga.

Emma suggests that an effective way to catalyse change could be through the introduction of surcharges or penalties on embodied carbon in developments. “At British Land, we have introduced a Transition Vehicle where an internal carbon levy of £60/tonne is applied to the embodied emissions of future developments to incentivise minimising emissions. When the development completes, the £60/tonne internal levy is applied, and the resulting funding is used to either offset the embodied emissions of the project or finance the retrofitting of our standing portfolio. 100 Liverpool Street is an excellent case study of our approach to delivering sustainable buildings and provides a blueprint for sustainable development going forward.”

Has ESG slipped in priority given the last 6-12 months?

“With increasing political and economic uncertainty both in the UK and abroad, it may be a time for businesses to take their eye off the UK’s net zero goal,” Emma Cariaga says. “However, now more than ever, businesses have a huge opportunity and responsibility to lead the way, as consumers continue to feel the impacts of rising inflation and interest rates. It is certainly something that British Land is focussed on now more than ever.”

Chris highlighted that these are “relatively short-term issues, and we know climate change is our greatest challenge”. He pointed out that “conversations, from an ESG perspective, is much easier, common and more sophisticated from a commercial perspective, with investors and occupiers having their own ESG goals”, however, noted that the same cannot be said from a residential perspective, where occupiers are more constrained by wider issues that exist within the UK housing market.

Are we personally taking the right amount of responsibility?

Jonathan nods to the earlier mention of Frozen Planet. “It shows us to make it personal. Could we be doing more?” Matt comments that we can always do more and to keep striving for more. He believes that as an industry, it starts with individual commitment and that we all must understand how it applies to our roles and use it as an ESG lens. “Without collective responsibility, we won’t reach those goals.”

“Taking personal responsibility is the right thing to do,” Emma Cariaga says. “However, this is still relatively new for all of us – we are going to make mistakes – and collaboration is going to be critical to us succeeding.”

How can we all make this a collective responsibility to educate all and operate with embedded thinking on ESG?

Chris believes upskilling is required at large across the sector. He said, “we’re upskilling internally to empower our people to be able to speak with confidence on sustainability, but we’re also looking to be challenged by our design team consultants on how we can go further – particularly the architect community”. He highlighted the importance of sharing best-practise and “how collective action will help provide confidence and drive change within the supply chain to deliver zero carbon products”

Matt highlighted that these approaches are spot on for collaboration and knowledge sharing – “none of us will solve this on our own.”

What about the future of embodied carbon?

During his initial presentation, Matt mentioned that reducing the embodied carbon in their buildings was a critical priority for Related Argent and would be addressed with innovative construction methods.

Chris added that it’s vital to “set who is responsible for what and ensure everyone understands how they can contribute to ESG goals”. He stated that “although we don’t have all the answers in how we’re going to deliver our Mission Zero, we’re clear in where we need to be by 2040”.

How can we measure social value and its significance?

Jonathan highlighted the importance of good working relationships with local authorities and stakeholders as a common thread and key driver throughout the discussion. When thinking of social themes, he poses the question: Is it driven towards value quantitively by monetary terms, or is there more of a qualitative approach?

Matt suggested that there has to be a balance between the two. Companies and partners will need figures from a reporting aspect, but this won’t be a one size fits all approach. There is also the drive to deliver value to a community and understand its needs. “We’ve got to listen and understand how you can support the community and serve them.”

Chris added that “it can become dangerous when using a simple monetary KPI as the sole factor in the decision process for social value initiatives. There’s no one size fit’s all approach. In simple terms, the community needs must be considered and sits at the centre of any tailored solution.

Emma agrees about the difficulties of quantifying social value. “This is an area that should be exercised with care. We shouldn’t look at social value purely from a monetary perspective. Listening to communities and being able to respond to hyper-local needs is paramount for our industry to move forward.”

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