Peace of mind: delivering net zero buildings, avoiding stranded assets

Peace of mind: delivering net zero buildings, avoiding stranded assets

6 December 2022

Once a concept which seemed largely hypothetical, a stranded asset is a building unable to deliver its original economic return as a result of societal changes.   

But now the talk of properties becoming stranded if they don’t meet carbon performance is commonplace across the industry.

Changes to the physical environment driven by rising temperatures and society’s response to the climate emergency could potentially strand some buildings within a short timeframe.

And while delivering net zero buildings is clearly the right thing to do, the risk of property assets becoming stranded if they don’t meet sustainability criteria is naturally a commercial driver to delivering greener buildings.

The post Grenfell cladding crisis has demonstrated how previously perceived safe investments can become stranded, highlighting how sustainability is only part of the equation.

Property developers now find themselves vulnerable to stranded assets and their assets turning into liabilities.  Materials such as concrete can minimise this risk by providing greater resilience and scope for climate change adaption, with the potential for upgraded energy performance.

Striking the right balance

It now seems against the backdrop of the Environmental, Social, and Governance agenda, that the priority is to decarbonise and reduce the threat of stranded assets across portfolios while considering transition risk in a changing climate, but concerns still remain.

The property community need to consider carbon over an asset’s lifecycle and balance fire protection, occupant safety and resilience for a changing climate.

Selecting durable materials, like concrete, can offer longer life potential which may be more sustainable than ultra-low embodied carbon construction with a shorter building life span.  Reducing embodied carbon has to go hand in hand with having a building that functions and delivers return on investment.

The Government and industry must take the necessary steps to deliver net zero buildings, through designing structures which are designed for a long life and loose fit, especially with the current uncertainty surrounding future market trends.

But how should industry and wider stakeholders assess the risk of an asset becoming stranded in the age of climate adaptation and net zero?

Buildings with extensive glazing or M&E systems, which cannot be easily replaced or retrofitted, need to be considered, but it’s vital to consider the best combination of materials to deliver on sustainability, functionality and safety.

Bringing industry experts together

In an attempt to try alleviate these concerns we recently brought together a diverse group of experts from within the property, insurance and sustainability sectors to discuss the key drivers behind decisions, what isn’t being properly considered and what needs to happen next.

Attendees agreed that it’s a combination of sustainability targets, reporting on sustainability and the risk of stranded property assets which are currently driving decisions and behaviour for property development, particularly in London.

It also became clear that embodied carbon needs to become a bigger part of the conversation and there is greater scope for a more detailed understanding, although this should not come at the expense of greater outcomes and performance.

The debate around whether developers should refurbish or build from scratch to higher sustainability standards was also considered, as well as the role that construction materials including concrete can play in helping to reduce risk.

You can read all about the group’s findings and discussion here [Download].