Climate Change Initiatives And Real Estate

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With ship loads of money committed towards reversing the damage we have collectively caused to the planet, real estate is going to be directly affected. 

But how exactly will green earth initiatives affect the real estate sector?

City City Bang Bang

Cities consume more than 70% of the world's energy and naturally generate an approximately equal amount of global emissions, making them prime for focusing future decarbonization efforts. 

And cities don't mean sprawling meadows and green fields, so these concrete jungles are now in the crosshairs of large corporates, city planners, developers, investors and governments - all huddled together to find a solution to a third of the world's atmospheric gunk.

Per this Motley Fool article, UN Secretary Guterres called for cities to align "procurement, infrastructure development, zoning, urban planning, building codes, transport systems, waste disposal and investments with the Paris Agreement, the New Urban Agenda, and the Sustainable Development Goals." 

While it is impossible for our cities to adopt every measure, reform is likely on these fronts. 

• Minimum heating/cooling standards or alternative energy solutions. 
• Increased requirements for water runoff and catchment on commercial properties. 
• Rezoning residential to multi-use or commercial to create more walkable cities.

Greener Buildings Are More Expensive To Build

Environment friendly changes to building regulations and incentives within these urban domains can profoundly impact the cost of doing real estate business. 

Depending on the location and scope of business, initiatives could range from new building codes to change in core materials, a paradigm shift in construction techniques and thus, inflated interest and insurance costs for builders.

With Indian developers crying murder and getting all weak-kneed with the thought of a 15% price hike due to runaway construction costs, going green will require a sort of an all-new-wardrobe approach. 

The COP26 Promise

Funding a sea change in real estate is the critical component for putting many of the initiatives discussed in place. At COP26, 450 major banks signed an agreement to decarbonize their portfolios and invest billions to fund green initiatives. 

Does that mean that the average builder, balking under the stress of existing debt can now get a fresh and much higher line of credit with a green building plan? 

The money faucet is clearly flowing, but is the financial commitment valid for everyone building the tiniest corner of a city? Time will tell, of which the climate has none.