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What is a Net Zero Carbon Building?



The UK and many other countries have committed to achieving Net Zero by 2050. This is a fundamental transformation of our global economy including the transition away from fossil fuels.


The built environment is responsible for roughly 40% of global emissions and plays a fundamental role in successfully delivering decarbonisation.


The real estate market is constantly changing and the ESG performance of both funds and assets has become of fundamental importance to funders, investors & occupiers. It comes as no surprise therefore that many buildings are being labelled as ‘net zero carbon’ or ‘carbon neutral’. What’s clear is that many of these labels have little detail behind them with significant degrees of inconsistency.



Net Zero - what does it mean?


‘Net Zero Carbon’, ‘Carbon Neutral and ‘Low Carbon’ are terms frequently used when referring to the environmental credentials of an organisation or an asset.


Despite sounding similar, these terms are distinctly different in how they are defined as well as their level of ambition.

Net Zero Carbon Buildings


Emissions associated with the built environment are broken down into two categories: ‘Embodied Carbon’ and ‘Operational Carbon’.


Embodied carbon is the amount of carbon emitted during the construction of a building. This includes extraction of raw materials, manufacturing and refinement of materials, transport, building phase, deconstruction and disposal.


Operational carbon refers to the GHG emissions arising from all energy consumed and from water supply and wastewater treatment for an asset in-use, over its life cycle.


In 2019 the UK Green Building Council (UKGBC) published the report ‘Net Zero Carbon Buildings: A Framework Definition’ to provide a definition for net zero carbon building. The report outlined three scopes:



1. Net Zero Carbon – Construction

“When the amount of carbon emissions associated with a building’s product and construction stages up to practical completion is zero or negative, through the use of offsets or the net export of on-site renewable energy.”


2. Net Zero Carbon – Operational Energy

“When the amount of carbon emissions associated with a building’s operational energy on an annual basis is zero or negative. A net zero carbon building is highly energy efficient and powered from on-site and/or off-site renewable energy sources, with any remaining carbon balance offset.”


3. Net Zero Carbon – Whole Life

“When the amount of carbon emissions associated with a building’s embodied and operational impacts over the life of the building, including its disposal, are zero or negative.”


UKGBC's Scopes for Net Zero Carbon Buildings

Despite these definitions (and others), the market frequently uses ‘net zero’ to describe the environmental credentials of new builds and redevelopment project irrespective of the scope of emissions data collected.


Achieving net zero carbon operational energy is clearly very different from achieving net zero carbon whole life, yet this is not being clearly translated to owners / occupiers.



Summary


Investor pressure, occupier demand, evolving regulation and the potential impacts on asset value & liquidity mean that the carbon performance of buildings will be of fundamental importance.


What’s very clear is that the carbon performance of a building is not just about a label. There is clear evidence in the market of carbon assessments being required during the due diligence process and this requirement for data driven insight will increase over the short and medium term.


As the market continues to inundate purchasers and occupiers with net zero terminology - measurable and verifiable performance will stand out as a key commercial differentiator.



How Governex can help


Governex is an ESG advisory business that helps businesses across all aspects of ESG. We provide ESG validation, assurance and verification services.


We help organisations implement the right shift in focus from a purely financial commitment to include environmental, social and governance commitments. All in the context of meeting business purpose, strategy, integrity and diversity.


For further information, please get in touch.



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