CHICAGO, January 11, 2022 /PRNewswire/ — Expectations for new buildings – from amenities to environmental footprint – have increased dramatically in recent years. Sustainability continues to rise up the corporate priority list and investors are rethinking value, making the threat of a “brown haircut” more real than ever.
A new report from JLL (NYSE: JLL), “Return on Sustainability: How the ‘value of green’ conversation is growing up,” highlights the urgency for investors to move beyond the ‘value’ conversation. green” to focus instead on the long-term performance of sustainability. The document explores a gradual shift in play around what qualifies as a top notch building.
“The bar is raised on what it means to be green,” explained JLL’s global head of sustainability and ESG services, Guy Grainger. “Now that the business case for sustainability is undeniable, the time has come to shift the conversation around valuation.”
There is a strong financial incentive to go green
While investors initially doubted the value of certifications like LEED and BREEAM, evidence now shows that green certifications result in a 6% rental premium and a 7.6% sales premium. These so-called “green bonuses” turn out to be materially significant, but there is another facet to consider. JLL research shows that buildings that do not evolve to meet sustainability standards will suffer financially, resulting in “brown shed”.
The definition of green is changing
New dimensions are rapidly emerging to influence the value conversation. Climate risk and resilience, carbon emissions and occupant health are increasingly contributing to conversations about what it means to be “best in class” in the built environment.
JLL’s April 2021 A survey of nearly 1,000 business leaders, investors and occupiers found that:
- 83% of occupants and 78% of investors believe that climate risk is a financial risk.
- 79% of occupants expect reducing carbon emissions to be part of their sustainability strategy by 2025.
- 42% of occupants believe that their employees will increasingly demand green and healthy spaces.
Certification systems focused on sustainability and well-being will have to adapt to respond to this new moment. Until now, a highly rated and certified green building was not necessarily a building with the lowest carbon footprint. Certification standards will soon change as LEED, BREEAM and others launch new carbon-centric benchmarks, defining the carbon footprint and incorporating additional elements into the calculation. As investors and businesses make environmental and social commitments, they will increasingly need to consider their real estate portfolio to achieve climate goals.
Hurry up. According to the Paris Agreement, to avoid the worst impacts of climate change on the global economy, emissions must be reduced by 50% by 2030, and the world must reach net zero carbon by 2050. JLL urges those who shape the built environment to take action to avoid asset tie-up and promote sustainable, resilient and healthy places, even in the absence of a perfect case study or data.
To learn more, download the JLL report “Return on Sustainability: How the ‘value of green’ conversation is growing up” at https://www.us.jll.com/en/trends-and-insights/research/return – on sustainability.
JLL (NYSE: JLL) is a leading professional services firm specializing in real estate and investment management. JLL is shaping the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, incredible spaces, and sustainable real estate solutions for our clients, associates, and communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in more than 80 countries and a global workforce of more than 95,000 September 30, 2021. JLL is the brand name and a registered trademark of Jones Lang LaSalle Incorporated. For more information, visit jll.com.
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