What do carbon-neutral targets mean for property owners?

Today’s megatrends–climate change, urbanisation, population growth, digitalisation and scarcity of resources–also affect the real estate sector. How should real estate owners respond to carbon neutrality requirements?

The Finnish government's goal is for Finland to be carbon-neutral by 2035. The real estate sector plays an important role in improving energy efficiency in Finland. It generates a good 30 per cent of carbon emissions. On the real estate level, energy and water account for about 30 to 40 per cent of maintenance costs.

Most of the energy consumed during the real estate lifecycle is consumed when the property is in use. Maintenance, use and repair of buildings affect the energy consumption level when the property is in use. Construction and construction materials account for only 10 to 20 per cent of the lifecycle emissions of properties.

The existing building stock and making its energy use more efficient play an important role in achieving the goals of carbon neutrality. In concrete terms, the carbon neutrality goals mean that in the future we should be able to reduce the energy usage of buildings, use renewable energy and compensate for the remaining emissions.

If the environmental aspect has not been of interest to many so far, this is a good time to think about how to deal with one’s own property assets in a cost-effective way, while at the same time reducing emissions. For most properties, savings in energy and water efficiency are within easy reach. Property owners play an important role in discussing the construction and maintenance of existing buildings–should energy-efficient alternatives be taken more into account or should they be content with meeting the minimum requirements?

On the commercial premises side, property users have the opportunity to influence the energy efficiency of the property, for example through more efficient use of space. From the owners’ point of view, underutilisation remains a significant problem in many office buildings. Empty premises consume energy, which is a big problem from the point of view of energy efficiency. Therefore, the adaptability of spaces plays an important role in enabling them to be used more efficiently.

Climate change also creates new requirements for buildings

Extreme weather phenomena are expected to become more common as the climate gets warmer. As far as Finland is concerned, a warmer climate, increased rainfall and a rising sea level have been predicted. For example, the location of properties will increasingly affect how they are exposed to future flooding.

It is also clear that the heating needs of properties in Finland will decrease due to warmer winters. On the other hand, the demand for cooling is projected to increase as hotter weather becomes more common. This means that changing conditions should be factored in during the construction phase in increasing detail.

In the context of increasing energy efficiency needs, there is also a need to introduce technology that is still under development. This will make renovations more costly and more demanding. On the other hand, addressing energy efficiency at this early stage will also bring savings when properties can be used more efficiently in the future.

The energy sector is shifting from fossil-based energy to renewable energy production. The variable production capacity of renewable energy, for its part, contributes to increased price fluctuations. In future, real estate will operate as an energy producer as well as storing energy, but it will also contribute to flexible consumption in changing market situations.

Bold experimentation for a competitive edge

A competitive advantage usually comes about through taking the right decisions and also having the courage to be at the forefront of experimenting with new things. Several companies have already discovered that environmental sustainability can be a success factor.

Following the publication of the report by the Intergovernmental Panel on Climate Change, the debate on climate change has been very active. This is particularly the case among younger age groups. In the future, will the rental markets change in the direction of tenants wanting to live in houses or rent premises where energy and water efficiency have been taken into account and invested in?

Why should we set an example?

At Realia’s energy day event in November, Arman Alizad spoke about how things tend to be seen in black and white. For me, that was thought-provoking. We often hear debate about the fact that actions taken in Finland are irrelevant when it comes to improving energy efficiency at a global level. The fact is that Finland’s energy savings and emissions reductions are only a drop in the ocean if the issue is considered on a wider perspective. But what if everyone else thought the same way?

The fact is that people in Western countries consume many of the commodities that are produced elsewhere and that account for emissions in countries where the population is growing and where fossil fuels are used to produce commodities. We can set an example in Finland and develop innovations that can then be exploited elsewhere. In other words, we need to transform talk into action.