Sustainablebuiltenvironmentsforeveryone,everywhere1AHEADOFTHEWAVEFinancingthetransitiontoadecarbonisedbuiltenvironment#BUILDINGLIFEFebruary2023Sustainablebuiltenvironmentsforeveryone,everywhere2OpeningAboutWorldGreenBuildingCouncilAbout#BuildingLifeTheWorldGreenBuildingCouncil(WorldGBC)#BuildingLifeisaprojectconvening10Europeanisthelargestandmostinfluentiallocal-regional-GreenBuildingCouncilstosupporttheEuropeanglobalactionnetwork,leadingthetransformationGreenDeal.TheseGreenBuildingCouncilstosustainableanddecarbonisedbuiltgalvaniseclimateactionthroughnationalandenvironmentsforeveryone,everywhere.regionaldecarbonisationroadmaps,whichtacklethewhole-lifeenvironmentalimpactsoftheTogether,with75+GreenBuildingCouncilsandbuildingandconstructionsector.industrypartnersfromallaroundtheworld,wearedrivingsystemicchangesto:#BuildingLifefocusesnotonlyontheoperationalemissionsofbuildings,butalsothe■Addresswholelifecarbonemissionsofenvironmentalimpactofthemanufacturing,existingandnewbuildingstransportation,construction,andend-of-lifephases–oftencalledembodiedemissions.■Enableresilient,healthy,equitableandinclusiveplacesTacklingtheseemissionsisessentialtoaddressthetotalimpactofthebuiltenvironment,and■Secureregenerative,resourceefficientandprogresstowardstheEuropeanGreenDeal’saimwaste-freeinfrastructureofaclimateneutralEuropeby2050.Weworkwithbusinesses,organisationsandTheGreenBuildingCouncils(GBCs)governmentstodeliverontheambitionsofspearheadingtheprojectare:Croatia,Finland,theParisAgreementandUNGlobalGoalsforFrance,Germany,Ireland,Italy,theNetherlands,SustainableDevelopment(SDGs).Poland,SpainandtheUK.TheEuropeRegionalNetwork(ERN)isa#BuildingLifehasreceivedfundingfromthecommunityofover20nationalGreenBuildingIKEAFoundationandLaudesFoundationCouncils,8RegionalPartners,andclosetoaswellasfromEuropeanBankfor5,000membersacrossEurope.GreenBuildingReconstructionandDevelopmentandtheCouncilsintheERNarefrombothEUandEuropeanClimateFoundation.non-EUcountries.#BuildingLifeFundersSustainablebuiltenvironmentsforeveryone,everywhere3Foreword“Greeninvestingisano-brainerforthebuildingandconstructionsector;formitigatingagainstclimateandfinancialrisks,aswellascreatingbettersocialvalueforourcommunities.Simplyput,ifyou’renotinvestinginsustainablebuildingsnow,thenyou’renotlong-terminvesting.Weneedadeepsystemicshifttotransitionfinancialflowstowardsdecarbonised,resilientandequitablebuiltenvironments.AndIamproudoftheworkthatourEuropeanGreenBuildingCouncilshavebeendoingtoacceleratethisshift.”CristinaGamboa,CEO,WorldGreenBuildingCouncil“Greeninvestingiskeyintheracetostopcatastrophicclimatechange.Theinsuranceindustryisalreadyfacinglossesduetomultiplyingclimatehazards.ShiftingcurrentfinanceflowstowardsadecarbonisedbuiltenvironmentisthereforecriticalandIwelcometheworkthatWorldGBCandnationalGBCshavebeendoingtoenablethis.”SeanKidney,ClimateBondsInitiativeCEO&memberofWorldGBCBoardofDirectorsTeamLeadauthor:JulieEmmrichContributingauthors:StephenRichardson;CarolinaMontano-Owen;MilesRowlandEuropeanmemberGreenBuildingCouncilsandRegionalPartnersSustainablebuiltenvironmentsforeveryone,everywhere4WorldGBC’scalltoactiontotheEuropeanfinanceandrealestatesectorsDon’twait,investRoadmapsandvoluntaryframeworkspavethewayInlightoftheclimate,energyandresourcecrises,thereisnoexcuseforinaction:stakeholdersinEvidencesuggeststhatfinancialmarketsarethefinanceandrealestatesectorsneedtoinvestincreasinglydirectingtheirinvestmentstowardsinthetransitiontowardsadecarbonisedbuiltprojectsandcompaniesthatguaranteetheenvironment.Financialactorsshouldmakeuseofachievementofsocialandenvironmentalexistingdata,tools,frameworksandbestpracticedevelopmentgoals–inadditiontoeconomicinthemarkettoinformtheirdecision-making.profitability.However,thereisstillconfusioninthemarketonwhatshorttermactionstotake,TheEUanditsMemberStatesaredevelopinghowtodevelopmidtolongtermdecarbonisationcomprehensivesustainablefinancepolicies,pathwaysandhowtodemonstrateprogressmostprominentlytheEUTaxonomythatstartedtowardssettargets.takingeffectin2021.TheEUTaxonomyandotherkeypoliciesarestillworks-in-progressandGreenBuildingCouncilsin10EuropeancountriesalackofclarityanddataposesdifficultiesinhavepublishedNationalDecarbonisationimplementingthepolicies.Roadmapstoguidethetransitionofthesector.Theseroadmaps,producedundertheWorldGBCRealestateandfinancialactorsdonotneedto#BuildingLifeproject,clearlysetoutshort,waittotakeactionuntilmoreclarityisgivenmediumandlongtermactions.Theyarean–theyshoulduseexistingresourcestoguideinvaluableresourceforinvestorsseekingclear,theirfinancialdecisionstowardsasustainableactionableguidancetostartmakingimmediatebuiltenvironment,suchasrobustvoluntarycarbonreductions.frameworks.Investmentsinno-regretmeasuresthatfollowtheenergyefficiencyfirstprincipleandtakeawholelifecycleapproachcanbetakennowdespiteaperceivedlackofdata.Preparingtheshiftoffinanceflowsandfinancialactivitiestowardsasustainablebuiltenvironmentrunsalongthreekeypillars:DiscloseSettargetsImplementportfoliodataandtowardsazeroemission,no-regretsactionstohaveinformationresilientandcircularbuiltfirstimpacts,kick-starttheenvironmentlearningcurve,andbuildand/orincreaseinstitutionalcapacities.Nationalorregionalroadmaps(likethoseinthe#BuildingLifecampaign)canhelpidentifytheseactionsSustainablebuiltenvironmentsforeveryone,everywhere5FinlandIrelandUKPolandGermanyFranceItalySpainFigure1:Overviewof10BuildingLifenationalroadmapstodecarbonisethebuiltenvironment.Complementarytonationalroadmaps,voluntaryTheuseofvoluntaryframeworksiskeytoframeworks,likeGBC-runsustainablebuildingshowcaseactionbyfront-runnersandtocertificationschemes,canguidesustainabledemonstrateprogresstowardstargets–actionsandtheshifttosustainablefinance.especiallywhencloselylinkedtopolicies(e.g.Voluntaryframeworksallowacommoncompatiblemethods,toolsanddata).FirstlanguageamongststakeholderssuchasevidencesuggestsacorrelationbetweenEUbetweenarchitects,constructioncompanies,taxonomyeligibilityandvoluntarycertificationmanufacturingcompanies,investorsandfunders.schemes:certifiedprojectsseemtohaveahigherrateofeligibilityincomparisonwithnon-certifiedprojects,bothfortheclimatechangemitigationandtheDoNoSignificantHarm(DNSH)criteriaoftheEUtaxonomy1.1DGNB,DK-GBC,GBCe,ÖGNI,2021.EUTaxonomyStudy:EvaluatingthemarketreadinessoftheEUtaxonomycriteriaforbuildings.Sustainablebuiltenvironmentsforeveryone,everywhere6ThefasterwemobilisetherealestateindustryinTobuildtherequiredknow-how,buildacollectivemanner,thefasterwewillcatalyseinstitutionalcapacitiesandpushforacollectivechange–costswillfall,skilledlabourandknow-effortforrobustandambitioussustainabilityhowwillincreaseandawarenessamongstallclaims–wecallontherealestateandstakeholderswillbehigher.financesectortocommittoactionthatalignswithexistingroadmapsandvoluntarysustainabilityframeworks.Whatisasustainablebuildingcertification?Sustainablebuildingcertifications–alsoknownasgreenbuildingratingtools–areusedtoassessandrecognisebuildingswhichmeetcertainsustainabilityrequirementsorstandards.Buildingcertificationsrecogniseandrewardcompaniesandorganisationswhobuildandoperategreenerbuildings,therebyencouragingandincentivisingthemtopushtheboundariesonsustainability.Theykick-startthemarketbysettingstandardsthatinturnelevatetheambitionofgovernmentbuildingcodesandregulation,workforcetraining,andcorporatestrategies.Certificationsvaryintheirapproachandcanbeappliedtotheplanninganddesign,construction,operation,maintenance,renovation,andeventualdemolitionphasesofabuilding.Sustainablebuildingcertificationscanalsodifferinthetypeofbuildingstheyareappliedto,withspecifictoolsorsubsetsoftoolsusedfordifferentbuildingtypessuchashomes,commercialbuildings,orevenwholeneighbourhoods.Sustainablebuiltenvironmentsforeveryone,everywhere7BackgroundTheEuropeanbuildingsectoriscurrentlyCarbonemissionsarereleasednotonlyresponsiblefor42%ofthefinalenergyduringoperationallifebutalsoduringtheconsumption2andcloseto36%ofemissions3manufacturing,transportation,constructionand–withhalfofemissionsduetotheon-siteendoflifephasesofallbuiltassets–buildingscombustionoffossilfuelsandtheotherhalffromandinfrastructure.Theseemissions,commonlytheuseofelectricityandheat4.referredtoasembodiedcarbon,havelargelybeenoverlookedhistoricallybutcontributeThecurrentgasandoilcrisisinEuropehasalargeatleast9%ofallglobalcarbonemissions1011.impactonhousingcostsanddisproportionallyEmbodiedcarbonwillberesponsibleforhalfofaffectsvulnerablehouseholds.Ofhouseholds’theentirecarbonfootprintofnewconstructionfinalenergyconsumptiontwo-thirdsistoheatbetweennowand2050,threateningtoconsumetheirhomesandonethirdcomesfromnaturalalargepartofourremainingcarbonbudget.gas5.In2020,8%oftheEUpopulationsaidthattheywereunabletokeeptheirhomeadequatelyOurnetworkofGBCsismobilisedtosupportwarm6andsinceMarch2022theaverageinflationinvestorsandassetowners,ensuringESGrateonnaturalgasacrosstheEuropeanUnionreportingandverificationoftheperformancehadrisenbycloseto40%comparedtotheofbuiltassets–acrosstheirwholelifecycle–ispreviousyear,althoughitwenttoa25%increasestreamlinedandrobust.inDecember20227.Asustainablebuiltenvironmentisnotonlyanecessitytolimitglobalwarming,butitalsostrengthenspoliticalstability,energysecurity,andcomeswithawiderangeofsocialbenefitssuchasreducedpollution,betterthermalcomfort,jobcreationandreducedenergybills8.TheIEAestimatesthatshiftingfinanceflowsawayfromfossilfuelsinbuildings(includingenergysystems)towardsenergyefficiencymeasureswouldreducehouseholdspendingonenergybyhalfby20509.2EuropeanEnvironmentAgency(EEA),2020.Finalenergyconsumptionbyfueltypeandsector.3EuropeanParliament,2021.DraftReportontheimplementationoftheEnergyPerformanceofBuildingsDirective(2021/2077(INI)).4EuropeanEnvironmentAgency(EEA),2022.GreenhousegasemissionsfromenergyuseinbuildingsintheEU.5Eurostat,2022.Energyconsumptioninhouseholds.6Eurostat,2021.8%ofEUpopulationunabletokeephomeadequatelywarm.7Eurostat,2022.HICP–monthlydata(annualrateofchange).Valuesretrieved19January2023.8ClimateActionNetwork(CAN),2022.Howtomaximisethesocialbenefitsofclimateaction–Scopingexercise.9InternationalEnergyAgency(IEA),2019.TheCriticalRoleofBuildings–PerspectivesfortheCleanEnergyTransition.10WorldGreenBuildingCouncil(WorldGBC),2019.BringingEmbodiedCarbonUpfront.11UNEP,2022.2022GlobalStatusReportforBuildingsandConstruction:TowardsaZero-emission,EfficientandResilientBuildingsandConstructionSector.Sustainablebuiltenvironmentsforeveryone,everywhere8ThepowerofcollaborativeeffortsWorldGBC’sEuropeRegionalNetwork(ERN)hasleveragedthispioneeringworktocementToachieveadecarbonisedbuiltenvironmenttheourroleandinfluenceintheimplementationofacademic,public,privateandfinancialsectorssustainablefinanceforthebuiltenvironment.mustcometogether.TheactiveparticipationWehaveshapedanddefinedgreenmortgageofthefinancialsectorensuresprojectscanbestandards,influencedtherecommendationsofdeliveredwhiletheotherstakeholderscancreatethefirstTechnicalExpertGroup(TEG)onclimatethetechnologicalandpoliticalframeworkstomitigationcriteriafortheEUTaxonomyandguidethebestcourseofactions.subsequentlysteeredthedefinitionoftechnicalscreeningcriteriaforthebuildingsectorintheEUGBCsprovidebottom-uptechnicalexpertisePlatformonSustainableFinance.thatcanguidesustainablefinancinginthebuiltenvironment.NationalGBC-runcertificationOurrecognisedexpertiseinsustainablefinanceschemeshavebeenattheforefrontofenablingcomesfromdecadesofexperienceindefiningsustainablefinanceandESGreporting,theenvironmentalperformancestandardsforunderpinningtheESGbenchmarkGRESB,forbuildingsandinfrastructure,ournetwork’sroleasmorethanadecade,formingthebasisformanyacatalystforpoliticalandindustryactionthroughofthefirstgreenbondsandsustainabilitylinkedadvocacy,trainingandawarenessraising.loansandgreenmortgages,forexamplethroughtheEeMAPproject.GBC-runcertificationschemesareanestablished,defactogoldstandardintherealestatemarket.Sustainablebuiltenvironmentsforeveryone,everywhere9FinancingthetransitiontoadecarbonisedbuiltenvironmentSustainabilityisbecominganintegralpartenvironmentalsoconsidertransitionrisksfromofthebusinesscasefortherealestatemarket.newandupcomingEUandnationallegislationsMarketparticipantscannotaffordnottobeaswellastechnology,marketandreputationriskspartofthesustainabilitymovement–from(seeTable1formoreinformation).anethical,financial,riskmitigationorfuture-proofingperspective12.Thecreation,renovationandmaintenanceofasustainablebuiltenvironmentofferslargeFinancialmarketsareincreasinglydirectingtheirscalefinancialopportunitiesfrombothainvestmentstowardsprojectsandcompaniesmarketcompetitivenessandriskmitigationthatguaranteetheachievementofsocialandperspective.Financialinstitutionsneedtoenvironmentalgoals.AfirstsetoffinancialconsiderkeyenvironmentalobjectivesinallinstitutionscommittedtoalignUSD130trillionfinancialdecisions.Achievingtheseobjectivesofprivatecapitalwiththegoalsofthe2015inthebuiltenvironmentrequiresenormousParisAgreementby2050throughtheGlasgowamountsofupfrontinvestmentsandtheseFinancialAllianceforNetZero(GFANZ)13.investmentsrequireadrasticupscalingoffundingoptionssuchasstandardisedandThefinancesectoriswell-positionedtoboosttheinnovativefundingmodels.Thefinancesectortransitiontoasustainablebuiltenvironmentandneedstoprepareforadeeptransformationoftheitshouldtakeadvantageofitsleverage.Financialrealestateandbuiltenvironmentsectors–thisactors’investment,lending,andinsuranceincludesunderstandingthefalloutsoftheseunderwritingdecisionsshapetomorrow’srealtransformations.economy.InvestmentdecisionstakentodaywillhaverepercussiononthebuiltenvironmentinHowever,currentlythefinancesector’stheyearstocome,sosustainabilityneedstobepotentialtosupportincreasedclimateactioninanchoredinthefinanceandrealestatesectorsbothdebtandequitymarketsisunderutilisedassoonaspossible.andthelinksbetweenfinancialactivitiesandtheirimpactonemissionsintherealeconomyClimatechangepresentsoneofthemostseverearepoorlyunderstood16.financialriskstotheglobaleconomybutthe‘exacttimingandseverityofphysicaleffectsaredifficulttoestimate’14.Realestateisamajorassetclassaccountingfor10%ofglobalGDPandisatriskfrombothphysicalandtransitionrisks.ThepotentialimpactofclimatechangerelatedeffectsisintheorderofUSD16trilliononresidentialassetsandUSD5trillionforcommercialassets15.Itisimportantthatfinancialactorsinthebuilt12WorldGBC,2021.BeyondTheBusinessCase.13GFANZ,2021.Amountoffinancecommittedtoachieving1.5°Cnowatscaleneededtodeliverthetransition.14TCFD,2017.RecommendationsoftheTaskForceonClimate-relatedFinancialDisclosures.15Muldoon-Smith&Greenhalgh,2019.Suspectfoundations:Developinganunderstandingofclimate-relatedstrandedassetsintheglobalrealestatesector.16NewClimateInstitute,2022.Makingfinanceconsistentwithclimategoals?Takingstockofthefinancialsector’sclimaterelatedinvestmentcommitments.Sustainablebuiltenvironmentsforeveryone,everywhere10Table1:Keyfinancialactorstofinancethetransitiontoasustainablebuiltenvironment17.FinancialactorKeycharacteristicswithregardtoaKeyphysicalandtransitionriskssustainablebuiltenvironmentBanksBanksofferdebtproductstoClimatechangeinducednaturalindividuals(e.g.housingloan,disastersandchronicclimatemortgage)andbusinessestofinancepatternsmayaffectassetsandthepurchase,constructionand/orhinderborrowers’abilitytorepayrenovationofbuildings.borrowedcapital.AssetmanagersAssetmanagersperformtheserviceAssetmanagersthatdonotprepareofincreasingtotalwealthovertimefortransitionrisksmayhavereducedbyacquiring,maintaining,anddemandforproductsandservicestradinginvestmentsinrealestate.andmaybesubjecttowrite-offsandearlyretirementofexistingassets.InstitutionalInstitutionalinvestorscanbeInvestmentportfoliosmaybesubjectinvestorsmutualorpensions,andinsurancetowrite-offsandearlyretirementcompaniesthatinvestonbehalfofexistingassets(e.g.,damagetooftheirclients.Theyhavethepropertyandassetsin“high-risk”resourcesandexpertisetoresearchlocations)aswellasreducedrevenueavarietyofinvestmentopportunitiesandhighercostsfromnegativeandcanfavourlarge-scalelong-impactsonportfolioassets.terminvestmentsrequiredforasustainablebuiltenvironment.PropertydevelopersPropertydevelopersbuyand/orProjectopportunitiesmaybeconstructbuildingstoselland/orsubjecttodecreasedvaluefromrentfloorspace.transitionrisksandincreasedcoststoadopt/deploynewpracticesandprocesses(e.g.highermaterialscostsduetoadditionalresearchanddevelopment(R&D)forlow-carbonmaterials).RealEstateREITsarepubliclytradedcompaniesREITsmaybesubjecttoincreasedInvestmentTrustthatown,operateorfinanceincome-operatingcosts(e.g.,higher(REITs)producingpropertiesandtypicallycompliancecosts,increasedhavemorecapacitytoactonalargerinsurancepremiums),tohigherscaleandmanagelargepropertiescapitalcostsforenergyintensivesuchasbuildingcomplexes.assets,andtotheriskofstrandedassets(e.g.assetstooexpensivetoretrofit).(Re-)InsuranceIndividualsandbusinessesAcuteandchronicphysicalriskscompaniesuseinsurancecompaniestomayrequireincreasedinsuranceprotectagainstfinancialloss,premiumsand/orreduceavailabilityforexampleduetoaccidentsorofinsuranceonassetsin“high-propertydamage.risk”locationstocompensateforincreasedinsurancecosts.17Tablebasedon,andadaptedfrom,theRecommendationsoftheTaskForceonClimate-relatedFinancialDisclosures(TCFD,2017).userid:572586,docid:151205,date:2024-01-11,sgpjbg.comSustainablebuiltenvironmentsforeveryone,everywhere11TheEU’ssustainablefinancepolicypackageThefinancialsectormusttakeswiftactiontoTheEuropeanGreenBondStandardisapreserveitsstabilityandlimitdamagescausedcomplementarypolicyofthesethree.Itisbyclimatechange.Aspolicymakersmovetoavoluntarystandardtohelpscaleupandenhancesustainabilityconsiderationstherealraisetheenvironmentalambitionsoftheestateandfinancesectorsneedtoeffectivelyandgreenbondmarket.proactivelyconsiderpotentialregulatoryrisks.TherearefourkeyrequirementsundertheWiththelandmarkParisAgreementtolimitproposedframework.globalwarmingwellbelow2°Caimingfor1.5°Citbecameclearthatallsectorswillhavetotake■Thefundsraisedbythebondshouldbeaction.TheEUsetuptheHigh-levelExpertGroupallocatedfullytoprojectsthatarealignedwithonSustainableFinance(HLEG)inDecember2016theEUTaxonomy.–oneyearaftertheParisAgreement–toconsidertheroleofandimplicationsforthefinancesector.■FulltransparencyisrequiredonhowthebondproceedsareallocatedthroughdetailedTheEU’sfinancialregulationsreformreportingrequirements.packagekickedinon7March2018,withtheEuropeanCommission’sactionplanfor■AllEuropeangreenbondsmustbecheckedfinancingsustainablegrowth–basedonthebyanexternalreviewertoensurecompliancerecommendationoftheExpertGroup,whichwiththeRegulationandtaxonomyalignmentincludedtheideaofaEuropeanTaxonomyofofthefundedprojects.sustainableactivities.■ExternalreviewersprovidingservicestoAmongstthesustainablefinancepolicypackageissuersofEuropeangreenbondsmustbethreedistinctpoliciesstandout.TheEUregisteredwith,andsupervisedby,theTaxonomyregulationestablishesaframeworktoEuropeanSecuritiesMarketsAuthoritydefinesustainableeconomicactivities,whilstthe(ESMA).ThisensuresthatthequalityoftheirSustainableFinanceDisclosureRegulationandservicesandreliabilityoftheirreviewsprotectstheCorporateSustainabilityReportingDirectiveinvestorsandmarketintegrity.mandateasetoffinancialactors(orproducts)andcorporateactorstodisclosetheireligibilityandalignmenttotheEUTaxonomy,therebyenhancingtransparencyofclimateexposurerisksandtacklegreenwashing(seeTable2).Sustainablebuiltenvironmentsforeveryone,everywhere12Table2:SummaryofthreekeysustainablefinancelegislationsintheEU.EUTaxonomyregulation18SustainableFinanceCorporateSustainabilityDisclosureRegulationReportingDirectiveEstablishesaframeworkSeekstoimprovetransparencyAmendstheexistingreportingtofacilitatesustainableinthemarketforsustainablerequirementsoftheNon-investment,essentiallyinvestmentproducts,tofinancialreportingdirectiveprovidingacommonsetofpreventgreenwashingandto(NFRD)rulestodefinesustainableincreasetransparencyaroundeconomicactivitiessustainabilityclaimsmadebyMandatesthedisclosureofEUfinancialmarketparticipantsTaxonomyalignmentaswellasCategorisessustainabletheimpactsofenvironmentaleconomicactivitiesusingtheMandatesESGdisclosurerisksoneconomicactivitiesNACEframework19obligationsforassetmanagers(doublemateriality20),andandotherfinancialmarketsincompliancewiththeEUDefinesthesignificantparticipantsatentityandsustainabilityreportingcontributiontosixproductlevelstandards(ESRS)environmentalobjectives–actorscanchoseoneofthesixDoublemateriality:ActorsmustAppliesasofJanuary2024discloseenvironmentalimpactstoaround12000companiesDefinesDoNoSignificantonfinancialinstitutionsandalreadysubjecttotheNFRD–Harmcriteriafortheotherfiveproductsaswellastheimpactasof2025approximatelyobjectivesofinvestmentdecisionson50,000companiesneedtotheenvironment,referredtocomplyMinimumSafeguardse.g.UNastheprincipaladverseGuidingPrinciplesonBusinessimpacts(PAIs)Thirdparty“limitedassurance”21andHumanRightsismandatoryinthereporting,followedby“reasonableassurance”22inafewyears18ComplementarytotheEUTaxonomyRegulationtheEuropeanCommissionreleasedtheClimateDelegatedAct–Regulation(EU)2021/2139definingsubstantialcontributioncriteriafor1.climatechangemitigation,2.climatechangeadaptation,andsettingdonosignificantharmcriteriafor3.transitiontoacirculareconomy,4.pollutionpreventionandcontrol,5.sustainableuseandprotectionofwaterandmarineresources,and6.protectionandrestorationofbiodiversity&ecosystems.19NACEistheacronymusedtodesignatethevariousstatisticalclassificationsofeconomicactivitiesintheEU.20EuropeanSustainabilityReportingStandardsincludedoublematerialityrequiringcompaniestodisclosematerial(ofrelevance)climate-relatedimpactsonthecompanyaswellasimpactsofacompanyontheclimate.21“Theconclusionofalimitedassuranceengagementisusuallyprovidedinanegativeformofexpressionbystatingthatnomatterhasbeenidentifiedbythepractitionertoconcludethatthesubjectmatterismateriallymisstated.”22“Theamountofworkinareasonableassuranceengagemententailsextensiveproceduresincludingconsiderationofinternalcontrolsofthereportingundertakingandsubstantivetesting,andisthereforesignificantlygreaterthaninalimitedassuranceengagement.”Sustainablebuiltenvironmentsforeveryone,everywhere1320242025CSRDappliestolargecompaniesnotcurrentlysubjecttoNFRDCSRDalsoappliestolistedSMEs2023-2024SFDRfullyapplies,incl.EUTaxonomyalignmentforallenvironmentalobjectives2023DelegatedActonthe4remainingenv.objectivesMid2023EUCommissiontoadoptfirstsetofcorporatereportingstandardsbasedonEFRAG‘sdraftESRSupcomingJan2023CSRDpublishedinDec2022comesintoforce–Jan2023Non-financialreportingrequirementstoSFDRlevel2–fulldisclosure:financialactorsdiscloseEUTaxonomyalignmentdisclose(PAIs)impactsstatement,sustainablefundsdiscloseEUTaxonomyalignmentNov2022Nov2022PlatformonSustainableFinance’sEuropeanFinancialReportingAdvisoryGroupsupplementaryadviceontheMarchreportreleasesdraftEuropeanSustainabilityReportingontheremaining4environmentalobjectivesStandards(ESRS)July2022Oct2022ComplementaryClimateDelegatedActPlatformonSustainableFinance’sreportson‘Data&usabilityoftheEUTaxonomy’(gas&nuclearenergy)againstexpert&‘Minimumsafeguards’advice–applicableasofJan2023Jan2022Jan2022Financialandnon-financialreportingSFDRlevel1“trialyear”starts–financialrequirementstodiscloseEUTaxonomyeligibilityactorscategorisefundsassustainableornot–sustainabilityclaimsrequiredatatoMarch/April2022supportclaimPlatformonSustainableFinanceconvenedinOct2020releasesreportsonNov2022‘socialtaxonomy’&‘environmentalCSRDproposaltoamendreportingrequirementsoftheNon-FinancialReportingDirectivetransitiontaxonomy’Dec2021July2020ClimateDelegatedActreleasedapplicableTaxonomyRegulationcomesintoforceasofJan2022Dec2019March2021EUGreenDealreleasedSFDRtakeseffect:financialinstitutionsmustdiscloseprincipaladverseimpacts(PAIs),Nov2019sustainabilityrisks&remunerationSFDRRegulationpublishedMarch2020FinalTechnicalExpertGroup(TEG)convenedinJuly2018releasesfinalreportonEUTaxonomyMarch2018ActionPlanonFinancingSustainableGrowthincludesEUTaxonomyDec2015Jan2018ParisAgreementHigh-levelExpertGrouponSustainableFinanceconvenedinDec2016releasestheirfinalreportincludingtheideaofataxonomyEUTaxonomySustainableFinanceCorporateSocialResponsibilityDisclosureRegulation(SFDR)Directive(CSRD)Figure2:Thelegislativewave:milestonesofkeysustainablefinancepoliciesintheEU.Sustainablebuiltenvironmentsforeveryone,everywhere14Non-financialpolicydevelopmentsalsohavea■EnergyPerformanceCertificates(EPC):considerableimpactontheEuropeanrealestateAccordingtotheCommissionproposalsectorinfluencingfinancialactivitiesintheEPCsshouldbeharmonisedacrosstheEUEuropeanbuildingsector.by2025andrescaledwith“aviewtothecommonvisionforazero-emissionbuildingTheEnergyPerformanceofBuildingsDirectivestockby2050”.AnewsetofmandatoryEPC(EPBD)isthesinglemostimportantofnon-indicatorshasalsobeenproposedforEPCs,financiallegislations.TheEPBDiscurrentlyunderwhichincludecalculatedfinalenergyuse/reviewtobetteralignwiththegoalsoftheEUconsumptionalongsideprimaryenergyuse/GreenDealandFitfor55package.Aspartofthis,consumption.WLCdisclosureisan‘optionaltheEuropeanCommissionproposedarevisionindicator’atpresent.textinDecember2021,whichincludedthefollowingmeasures:■BuildingRenovationPassports:BuildingRenovationPassportssetoutstep-by-step■MinimumEnergyPerformanceStandardsdeeprenovationroadmapsforindividual(MEPS):TheEuropeanCommissionproposedbuildings.TheCommissionproposedthattointroduceminimumenergyperformancebytheendof2024–latest2025,Memberstandardsforexistingbuildings–currentlyStatesshallintroduceaschemeofonlynewbuildingsaresubjecttoMEPS.renovationpassports.TheMEPSwouldrequirethatexistingbuildingsimprovetheirEnergyPerformanceItisalsonoteworthythatbeyondthetranslationCertificateratings,withdifferenttrajectoriesofEUdirectivesatthenationallevelsomesetforpublic,non-residentialandresidentialMemberStatesaretakingtheleadonmorebuildingtypes.ambitioninthebuildingsector.Forexample,Denmark,Finland,France,theNetherlands■ZeroEmissionBuildings(ZEB):TheandSwedenhavereportingrequirementsonCommissionproposalintroducesanewembodiedcarboninplaceorhaveproposeddefinitionforZEBs,whichareclassedrequirementsfornewbuildings,whichincludeasbuildings‘withaveryhighenergymaximumthresholdsofGHGemissions.performance’.AllnewbuildingswouldneedThesecountriespavethewayforwholelifetobeZEBsbythestartof2030(2027forallcarbonregulations–beyondonlyoperationalnewpublicbuildings).energyandcarbonemissionsbutissuesremainregardingthedegreeofflexibilityinthe■WholeLifeCarbon(WLC)reporting:UnderbuildingassessmentsandthetypeofdatatheCommissionproposal,allnewbuildingsthatcanbeused23.wouldhavetocalculateanddisclosetheirGlobalWarmingPotential(GWP)from2030,withtherecommendeduseoftheLevel(s)framework,arequirementthatwouldapplytonewbuildingslargerthan2,000squaremetresfrom2027.TheLevel(s)frameworkprovidesaharmonisedandEU-approvedmethodologyforassessingtheenvironmentalimpactofbuildings,includingWholeLifeCarbon(WLC).TheEuropeanCommissiondevelopedtheLevel(s)frameworkbasedontheEuropeanstandardEN15978andGBCshaveextensivelysupporteditsdevelopmentandpiloting.MostgreenbuildingratingschemesinEurope(includingthoserunbyGBCs)alignorarealigningwithLevel(s).Level(s)iscitedinthe2021EPBDrevisiontextandtheEUTaxonomyRegulationasamethodologytoreportbuilding’sGlobalWarmingPotential(GWP).23Ramboll,2022.WholelifecarbonmodelsfortheEU27tobringdownembodiedcarbonemissionsfromnewbuildingsReviewofexistingnationallegislativemeasures.Sustainablebuiltenvironmentsforeveryone,everywhere15AvailableframeworksandresourcesforclimatechangemitigationfinancingAsthedemandandsupplyforsustainablehowever,facedseveralissuestobalanceinclusionfinanceinthebuiltenvironmentisgrowing,offinancialactorswithambitionofthepledges27continuousworkisunderwaytoenhancedata2829.granularity.Moreover,standardiseddefinitionsandmoretransparentframeworksarebeingInthebuildingandconstructionsector,developedtoequipthefinancecommunityWorldGBC’sglobalclimateactionprogrammewithappropriatetoolstoidentifythelevelAdvancingNetZeroworkstowardstotalsectorofsustainabilityamongstprojectsandthusdecarbonisationby2050.Workingwith34avoidgreenwashing.GreenBuildingCouncilsacrossthenetworktheinitiativedevelopstools,programmesPledgingtorealignfinancetowardsandresourcestopromotetheurgencyandasustainablebuiltenvironmentachievabilityofzerocarbonbuildingsandbuildindustrycapacitytodeliverthem.TheinitiativeInrecentyearsaglobalwaveofnetzerotargetscomprises170signatories,includingfinancialexpandedtofinallycoveraround90%oftheactorssuchasDeutscheBank,GoldmanSachs,globaleconomy24.ThefinancialsectorhasNatwest,LloydsBankGroupandCommonwealthfollowedsuitbyjoiningthenetzerowaveand/orBankAustralia,coveringalmost20,000assetspledgingtoalignfinancialactivitieswith1.5°C.andaccountingfor7.3milliontonnesofcarbondioxideemissions.MostprominentlytheGlasgowFinancialAllianceforNetZero(GFANZ),aglobalcoalitionofleadingTheNetZeroCarbonBuildingsCommitmentfinancialinstitutions,committedtoacceleratingrequiresthatby2030:thedecarbonisationoftheeconomytolimitglobalwarmingto1.5°C25.Accordingtothe■Newdevelopmentsandmajorrenovationscoalition,“everycompany,bank,insurer,andarebuilttobehighlyefficient,poweredbyinvestorwillneedtoadjusttheirbusinessmodels,renewables,withamaximumreductionindevelopcredibleplansforthetransitiontoaembodiedcarbonandcompensationofalllow-carbon,climate-resilientfuture,andthenresidualupfrontemissions.implementthoseplans”26.TheCoalitionhas,■Existingbuildingsreducetheirenergyconsumptionandeliminateemissionsfromenergyandrefrigerantsremovingfossilfueluseasfastaspracticable24NetZeroTracker,2022.Recommendationsandcurrentrealities.25TheGFANZcoalitionincludesthefollowingsub-coalitions:Net-ZeroAssetOwnerAlliance(NZAOA),Net-ZeroAssetManagersinitiative(NZAM),ParisAlignedAssetOwners(PAAO),Net-ZeroBankingAlliance(NZBA),Net-ZeroInsuranceAlliance(NZIA),NetZeroFinancialServiceProvidersAlliance(NZFSPA),NetZeroInvestmentConsultantsInitiative(NZICI).26GFANZ,2022.GlasgowFinancialAllianceforNetZero.27FinancialTimes,2022.GfanzdropsitsRacetoZerorequirements.28FinancialTimes,2022.COP27:MarkCarneyclingstohisdreamofagreenerfinanceindustry.29Bloomberg,2023.WallStreet’sCO2AgendaDrivesGreenBanktoQuitAllianceSustainablebuiltenvironmentsforeveryone,everywhere16PlanningthepathwaytozeroAtthenationallevel,leadingtoolsforemissionsdecarbonisationthathavebeendevelopedandadoptedbyindustryincludeDutchGBC’sThereareseveralapproachesforactorsinParisProof,GermanSustainableBuildingCouncilthefinanceandrealestatesectorstoequip(DGNB)Klimapositiv,IrelandGBC’sHomethemselvesforthetransitiontowardsawholelifePerformanceIndex,LEEDZeroortheUKNetZerozerocarbonbuiltenvironment.OneapproachCarbonBuildingStandard(forthcoming).toinformfinancialdecisionsisthesettingofemissionsandemissionsintensitypathwaysImplementingaction–keybasedonacarbonbudgetapproach.principlestoguidefinancingdecisionsPlanningfortheconstructionofdecarbonisedbuiltassetscanbestraight-forwardwithaResourcessuchasthenationalandEuropeanmultitudeofcriteriaandcertificationschemesroadmapsunderthe#BuildingLifeproject,touse.Decarbonisingtheentiresustainableclearlysetoutshort,mediumandlongtermbuiltenvironment,however,requirestheactions.Suchresourcesarevaluableforfinancialdecarbonisationofexistingbuildingsasactorsseekingclear,actionableguidancetowell.Becausethecurrentstockcannotbestartmakingimmediateandno-regretemissionsimultaneouslyrenovated,toolsandframeworksreductions.canhelptoplanthedecarbonisationpathways.Emissionsfromtheconstruction,Inresponsetotheneedforplanningtherenovationanddisassemblytransitionofthewiderbuildingstockandofbuildingsespeciallyfromrealestateactors,severaltoolsarenowavailable.EssentiallythegoalofthesetoolsEmbodiedcarboninthebuiltenvironmentisthatfinancialactorscansettargetsinformedcontributesapproximately9%ofallcarbonbyadecarbonisationpathwayandalignfinancialemissionsgloballyfortheconstruction,decisionstotheemissions(intensity)trajectory.renovation,deconstructionordemolitionandthewidersupplychainofabuilding;andanotherDespitetheusefulnessofsettinganenergyand6%for“otherbuildingandconstructionindustry”emissionsintensitypathway,thereareseveralreferringtoconcrete,steelandaluminiumdifficultiesofthatexercisetobeawareof.Top-emissionsforinfrastructureconstruction3132.downemissionpathwaysrelyonamultitudeEmbodiedcarbonisestimatedtocontributeofassumptionsaroundcarbonbudgetsandbetween10–20%oftheEU’sbuildingcarbonassumehomogeneousactionofallstakeholdersdioxidefootprint,dependingonfactorssuchinthebuildingsector.Therefore,divergencesasbuildingtypeandconstructiontechniquepersistwithcurrentpathwaymethodologies.andmaterials.Incountrieswithlow-carbonenergy,theembodiedsharecanalreadybeForexample,theCarbonRiskRealEstateMonitorashighas50%33.(CRREM)aimstosupporttheindustrytotackletransitionrisks,e.g.arisingfromchangingmarketexpectationsandlegalregulations,andthusfosterinvestmentsinenergyefficiencytoavoid‘stranded’properties“thatwillnotmeetfutureenergyefficiencystandardsandwhoseenergyupgradewillnotbefinanciallyviable”30.30CRREM,2023.CarbonRiskRealEstateMonitor.31UNEP,2022.2022GlobalStatusReportforBuildingsandConstruction:TowardsaZero-emission,EfficientandResilientBuildingsandConstructionSector.32Worldwide,buildingsarenotonlyresponsibleforaround40%ofcarbonemissionsbutalsoof50%ofallextractedmaterials,33%ofwaterconsumptionand35%ofwastegenerated–otherenvironmentalimpactsincluderesourcedepletion,air,waterandlandpollutionandbiodiversityloss(Ecorys,2014;Pomponi&Moncaster,2016;Mercader-Moyano,Esquivias&Muntean,2020).33MaterialEconomics,2019.TheCircularEconomy–aPowerfulForceforClimateMitigation.Sustainablebuiltenvironmentsforeveryone,everywhere17PreventPlanforthefutureAbuildingisheavilyanchoredinitscontext,Takestepstoavoidfutureembodiedcarbonwhichaffectssustainabilityconsiderations.duringandattheendofabuildings’life,forItisimportantforinvestorsandfinancialexamplebymaximisingthepotentialforfutureinstitutionstounderstandthatcontext.Inrenovations,futureadaptationofabuilding’sEurope,withalargebuildingstock,urbanuse,andenhancingthecircularityofabuilding’splanningconsiderations,includingtheneedformaterials.Intheconstructionorrenovationphasegreen,well-connectedcities,arecrucialtolimitlongevity,resilience,durability,easymaintenanceunsustainablerealestateexpansion.andreparabilityofthebuildingareessential.Attheendoflife,considerationsofdisassembly,Themoststraight-forwardapproachtoavoidingreuseorrecyclingofembeddedmaterials,embodiedcarbonfromtheoutsetistoconsidercomponentsandsystemsarekey35.alternativestrategies,mostprominentlytherenovationofexistingbuildingsratherthanEmissionsfromtheuseofbuildingsnewdevelopments.Moreover,considerationsofspaceefficiencyovertimethroughsharedInEurope,theoperation(oruse)ofbuildingsoccupancy,flexibilityandadaptabilitycanpreventaloneaccountsfor42%ofallfinalenergyunsustainablerealestateexpansion.consumption36.Improvingenergyefficiencyofbuildings,electrifyingenergyuseandReduceandoptimisematerialsusedecarbonisingelectricityandheatarekeytoreducingemissionsinEurope.Fromstructuralelementstofinishes,buildingproductsoftenrepresentthebiggestReduceandoptimiseenergydemandcontribution.ThisisnotjustbecausetheseofnewbuildingsmaterialsareusedinsuchgreatvolumesbutbecauseproducingthemisoftenhighlycarbonAllnewbuildingsshouldbebuiltasdecarbonisedintensive.Therefore,itiscrucialtoevaluatebuildings–itavoidstheneedforretrofittingatadesignchoicesusingawholelifecycleapproachlaterstage.Newbuildingsshouldbedesignedtoandseektominimiseupfrontcarbonimpactsminimiseoperationalemissionsfromthestart,suchasthroughleanconstruction(whichcanensuringtheymeetproposedZEBstandardsandbeimplementedstraightaway)aswellaslowthattheywillrequirenofuturerenovationworkcarbonmaterialsandconstructionprocesses.toimprovetheirperformance.Roughly75%oftheEUbuildingstockisenergyinefficient37.ThisMorespecifically,materialsfortheconstructionmeansthatalargepartoftheenergyusedgoesorretrofittingofbuildingsshouldsourcedurabletowaste.Suchenergylosscanbeminimisedproductsandservices(e.g.secondary,sustainablybyimprovingexistingbuildingsandstrivingforsourced,renewable,reusableand/orrecyclablesmartsolutionsandenergyefficientmaterialsmaterials).Life-cycleassessment(LCA),life-whenconstructingnewbuildings.cyclecosting(LCC)andreadilyavailabledigitalinformation(suchasbuildingmaterialpassports)helptoreduceandoptimisematerialuse34.34WorldGBC,2022.CircularityAccelerator.35WorldGBC,2022.CircularityAccelerator.36EuropeanEnvironmentAgency(EEA),2020.Finalenergyconsumptionbyfueltypeandsector.37EuropeanParliament,2021.DraftReportontheimplementationoftheEnergyPerformanceofBuildingsDirective(2021/2077(INI)).Sustainablebuiltenvironmentsforeveryone,everywhere18PlanfordeepdecarbonisationAbout35%oftheEU’sexistingbuildingsareatleast50yearsold,andatleast75%arenotefficientenoughtocomplywithfuturecarbonreductiontargets38.Thisreflectstheneedtosetupactionplanstoremoveanyremainingsourcesoffossilfuelsinbuildingsassoonaspossible.Keyprinciplesfortheretrofittingofbuildingsare:■Whenabuildingrenovationoccursitshouldentailadeepenergyretrofit–itavoidstheneedforanotherretrofitlateron■Deepenergyretrofittingshouldbecomethedefaultapproach,representingthemajorityofworksundertaken39■Thedeepretrofittingrateshouldreach3%peryearassoonaspossiblebefore2030andbemaintainedupto2050■Thosenumbersstandinstarkcontrastwiththecurrentsituation,wheretheaverageannualdeepenergyretrofittingrateintheEUisat0.2%40SourcerenewableenergyToachievefulldecarbonisation,anyremainingenergyusedneedstobecarbonfree.Thisisparticularlychallengingforspaceandwaterheatinggiventhatmostheatingiscurrentlypoweredbygas,oil,orcoalburnedon-site.On-siterenewablescanreducestressonthepowergridfromadditionaldemand.Whereverpossible,newbuildsshouldincorporateon-siterenewables.Energyfromthegridshouldbesuppliedfromzerocarbonenergysources,acknowledgingtheoverlapwiththeenergysector.Smartmetrescanalsoplayaroleinhelpingtointegrateadditionaldemandintoarenewableenergy-dominatedgrid41.38WorldGreenBuildingCouncil(WorldGBC),2019.BringingEmbodiedCarbonUpfront.39Buildingpassportscouldgivedetailedguidanceonwhatenergyefficiencyimprovementmeasuresareneededwhenretrofittingandbeusedforassetrating(WorldGBC,2017).40BPIE,2021.DeepRenovation:ShiftingfromexceptiontostandardpracticeinEUPolicy.41ClimateActionTracker,2022.Decarbonisingbuildings:achievingzerocarbonheatingandcooling.Sustainablebuiltenvironmentsforeveryone,everywhere19JoinusTheurgencyandcomplexityoffinancingtheWorldGBC’snewSustainableFinanceTaskforcetransitiontowardsafullydecarbonisedbuiltconveneskeystakeholderstoenhancecollectiveenvironmentcallsfordrasticactions.Thelearningandprogress,advisestobuildcapacitiesbuiltenvironmentisofafragmentedandamongsttheindustryandinfluencessustainableheterogenousnaturerenderinglarge-scaleandfinancepracticesandpolicyimplementationtimelyfinancingofclimateactionsdifficult.atalargerscale.WeinviteyoutojoinusonTherearemanysignsofchange,likerecentandthisjourney.upcominglegislationsbringingtransparencyandacommonframework,andweneedtoavoiddivergentimplementationandreportingpractices.Inthatcontext,WorldGBCinvitesallstakeholderswithinthebuiltenvironment,whetherafinancialinstitution,third-partyreviewer,investor,developer,owner,manufacturer,architect,designerorconsultant,andrepresentativesofnationalgovernment,statesandcities,tobeaheadofthetransformationwave.Weurgeyoutocollaboratewithourglobalnetwork,poweredbyourGreenBuildingCouncilsandourpartnerstoensurethatEurope’sbuiltenvironmentisdecarbonised.Sustainablebuiltenvironmentsforeveryone,everywhere20AppendixINon-exhaustiveoverviewofresourcesonWholeLifeCarbonandsustainablefinanceinthebuiltenvironmentKeydocumentsFindings/InsightsWorldGBC■Astheurgencyofclimatechangeisbecomingclearer,sustainabilityisbeingintegratedintoeverycorneroftheeconomy.BeyondtheBusinessCase■Realestateisamajorassetclassaccountingfor10%ofglobalGDP.Therefore,thecreation,renovationandmaintenanceofasustainablebuiltenvironmentofferslargescalefinancialopportunities,frombothamarketcompetitivenessandriskmitigationperspective.■Financialmarketsareincreasinglydirectingtheirinvestmentstowardsprojectsandcompaniesthatguarantee(inadditiontoeconomicprofitability)theachievementofsocialandenvironmentaldevelopmentgoals.WBCSD&OneClickLCA■Reducinginefficientmaterialuseandwastagehasaverydirectfinancialbenefitforconstructionmanagementbusinesses.WhatinvestorsandassetHowever,otherplayersinthevaluechaindonotdirectlyshareownerscandoaboutthesebenefits,soe.g.investorsanddesignershavelessincentivetoembodieddesignformaterialefficiency.■Ideally,theincentivesshouldbeproportionaltotheeffort.Calibratingtheincentivesisdemandingandwillinpracticerequiresimplifiedrulestoallowprojectdeveloperstotargetaspecificperformanceleveltounlocktheincentive.■Manyoftheincentivesidentifiedinthisdocumentworkaspartofavoluntarycertificationsystembyprovidingpoints.Fromdecarbonizationpointofview,theoptimaldesignforavoluntarycertificationdesignwouldbetomakecarbonreportingmandatory,andawardpointsforbetterperformance.Incentiveswithdirectfinancialvaluelinkedtocarbonreductionarerare.GreenFinanceInstitute■EnergyefficiencymeasuresandgreenhomeretrofittechnologiesLender’shandbookarecrucialtothetransitiontonet-zeroreadyhomes,asarethefinancialproductsandserviceswhichwillfacilitatetheirroll-out.■Measurementsassuresandareunlikelytobejustifiedpurelyonthebasisoffinancialpaybackthroughenergybillsavings.WBCSD■Life-cyclecostingiscurrentlythemostwidelyusedtoolusedbytheindustrytoinformfinancialdecision-making.However,Thebusinesscasewhenworkingwithcirculareconomypractices,almostathirdofforcircularbuildings:stakeholderswhenaskeddidnotknowhowtocreateamonetaryExploringtheeconomic,businesscaseforcircularperformance.Thereisclearlyaneedenvironmentalandsocialtoadaptconventionaleconomictoolstobeabletomeasurethevalueretainedvalueofabuildinginadopting.Sustainablebuiltenvironmentsforeveryone,everywhere21KeydocumentsFindings/InsightsWorldGBC■ThereportprovidesanoverviewofkeyEUregulationsandtheirtimeline.EUPolicyWholeLifeCarbonRoadmap■Theroadmapputsforwardamultitudeofpolicyrecommendationsfromtodayto2050.DGNB,DK-GBC,GBCe,■WhencomparingthedifferentbusinessactivitiesrelatedtoÖGNIbuildings,newlyconstructedbuildingsscoredhighestintermsofTaxonomyeligibilityandalsohadtheleastdifficultyEUTaxonomyStudy–indemonstratingeligibilityfortheDoNoSignificantHarmEvaluatingthemarket-(DNSH)criteria.readinessoftheEUtaxonomycriteriafor■Thestudyfoundastrongcorrelationbetweeneligibilityandbuildingscertification.Certifiedprojectshadahigherrateofeligibilityincomparisonwithnon-certifiedprojects,bothfortheclimatechangemitigationandtheDoNoSignificantHarm(DNSH)criteria.DGNB,GBCe,DK-GBC,■ThisintermediateprojectreportaimstoguidethetransitionÖGNI,D-GBC,SGNI,ofthecriteriaoftheTaxonomyfromatechnicalproposalintoCGBC,BGBC,CPEAafunctioningsystemattheverycoreofafuture-proof,circularEvaluationofthemarket-Europeaneconomy.readinessoftheproposed■Thestudytested31projects,30coveringthe“NewConstruction”CircularEconomyEU-activityandoneprojectcoveringthe“Renovation”activityofTaxonomyScreeningtheTaxonomy.Around90%oftheprojectsare(being)certifiedCriteriaforconstructionaccordingtovaryingsustainableorgreenbuildingstandards,soaandrealestateactivitiesselectionbiasmayaccrue.■ThediversegroupofmarketparticipantswereunanimousintheirmotivationtogainadeeperunderstandingoftheCircularEconomyTaxonomy,asthetopicisperceivedaschallengingdespitetherecognitionthatitisintegraltosustainablesectoraleconomicactivities.■ThecurrentambitionoftheCircularEconomyscreeningcriteriawouldleadtocherrypicking,asachievingalignmenttothefirsttwoenvironmentalobjectivesareperceivedaslesschallenging.ToachievewideapplicationandrealisationoftheEuropeancircularityobjectives,marketparticipantsclaimtheneedforclearerdescriptionofscopeanddefinitions.Sustainablebuiltenvironmentsforeveryone,everywhere22KeydocumentsFindings/InsightsPCAFGuidanceonfinancing■Thereporthighlightschallengesinfinancinganet-zerotheEuropeanbuildingbuildingstocktransitiontonetzero■Itprovides3keyrecommendationstothefinancecommunity:ClimateActionTracker1.Aggregation&Upscaling,2.Data&Methodology,Decarbonisingbuildings:3.Alignment&Visionachievingzerocarbonheatingandcooling,■Itproposesaunifiednet-zerobuildingdefinitionElementThree–Financing■Itsuggestsastepwiseapproachforfinancialinstitutionstowardsanet-zerobuildingstockby2050◦Pathwaytowardsnet-zerobuildings:anet-zerobuildingstockby2050providesoverallguidanceforfinancialinstitutionstosteertheirstrategiesandactions◦Measuringandtrackingprogressalongtwokeyindicators:kgCO2eortCO2epersquaremeter&kWhorMWhpersquaremeter◦Decarbonizationofbuildingportfolios:FinancedbuildingsoftheportfolioneedtobetransformedonalargescaletoEPCratingAtoCtobealignedwiththeoveralldecarbonizationpathway&2030and2050arekeymilestones(halveemissions2030andnetzeroby2050)◦A“Menuofemissionreductionmeasures”existstodecarbonisebuildings:‐Energyefficiency‐RES‐Embodiedcarbon‐Efficiencyinoperation‐(offsetting)◦FinancingthetransitionthroughnewfinancialproductsandservicessuchasBuildingRenovationPlans,GreenHomeFinancePrinciples,aLender’sHandbookonGreenHomeRetrofitandTechnologies,Sustainability-linkedBonds/Loans,Greenbonds/loans,LocalClimateBonds,GreenMortgages■Insomecases,neworretrofittedzerocarbonbuildingsarecheaperthanmorecarbon-intensivealternatives,atleastwhenconsideredoverthelifetimeofthebuilding.■Inthesecases,easyaccesstofinancecanreducetheperceivedriskofhighup-frontcostsandovercomefinancialbarriers.However,wheregasandheatingoilremaincheaprelativetothecostofelectricity(whenonsiterenewablesarenotanoption),andformoreexpensiveupgrades,paybackperiodsmaybebeyondaninvestor’stimehorizon.■Alternativefinancialsupportarrangementsarerequiredtochangethemarketthroughimprovingthecost-competitivenessoflowcarboninvestments,addressinghighupfrontcosts,andreducingfinancialrisks.Multiplepolicyinstrumentsareavailableandthemostappropriatedependsontheregulatoryframeworkandfinancialsituationofthecountryorregion.■Carbonpricinghasproveneffectiveinencouragingelectrificationbutensuringthatanymoneycollectedthroughapricinginstrumentisredistributed,suchthatitdoesnotexacerbatesocialinequalities,iscrucialforapolicy’slong-termviability.Sustainablebuiltenvironmentsforeveryone,everywhere23KeydocumentsFindings/InsightsEuropeanCommissionLevel(s)■Level(s)providesacommonlanguageforassessingandreportingEuropeanframeworkforonthesustainabilityperformanceofbuildings.Itisasimplesustainablebuildingsentrypointforapplyingcirculareconomyprinciplesinthebuiltenvironment.EPRAEUTaxonomyAlignment■Level(s)offersanextensivelytestedsystemformeasuringandinListedRealEstatesupportingimprovements,fromdesigntoendoflife.Itcanbeappliedtoresidentialbuildingsoroffices.■Level(s)usescoresustainabilityindicatorstomeasurecarbon,materials,water,health,comfortandclimatechangeimpactsthroughoutabuilding’sfulllifecycle.Itisaflexiblesolutionforidentifyingsustainabilityhotspotsandforfuture-proofingyourprojectorportfolio.■TheRealEstatesector,givenitshighenvironmentalimpact,isinthespotlightofEURegulationsaimedatredirectingfinancialflowstowardsmoreenvironmentallysustainableinvestments,inordertoachievecarbonneutralityby2050orotherinterimtargets.■AddingtothecomplexrequirementsoftheEUTaxonomy,thedifferencesobservedintheinterpretationofcriteriatocomplywiththeEUTaxonomyacrossEuropeancountriesaddsanotherlevelofcomplexityfororganisationsthatoperateinseveralmarkets,astheywillhavetocalculatetheEUTaxonomyeligibilityandalignmentoftheirinvestmentsusingtheapproachorsetofcriteriadefinedineachspecificcountry.■Inthiscontext,andwithotherupcomingregulatoryobligations(i.e.CSRD,SocialTaxonomy)inthepipeline,organisationsmustremainin-tunewithmarketpracticesandguidelinesbeingpublishedinordertocontinuouslyaddresstheregulatoryexpectationsatitshighestlevel.#BUILDINGLIFEworldgbc.org
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