IMN recap: From decarbonization talk to action

At IMN’s recent ESG & Decarbonizing Real Estate Forum, our founder Christopher moderated an expert panel on Taking Decarbonization from Talk to Action, covering the challenges of building a decarbonization business case and strategies to gain organizational alignment.

Christopher was joined by:

• Zach Brown, Director of ESG for the Americas for PGIM Real Estate. 
• Chris Laughman, Senior Director of Energy and Sustainability at Greystar
• Jaime Birman, Director of Development and Construction for Orbach Affordable Housing Solutions
• Keely Felton, Chief Sustainability Officer at Nova Group, GBC
• Charlie Christensen, VP of Engineering at STOK

The three best practices for seeing tangible outcomes at their organization?

1. Just Do It 
2. Build an Actionable Business Case
3. Speak the Right Language

Let’s dive into these below.

(Missed the conference? Go behind-the-scenes at IMN with us.)

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1. Just do it

Don’t let perfect be the enemy of good, and don’t let comprehensive data collection block you from taking action. Yes, collecting some amount of basic property-level data is critical to get started on your decarbonization journey, but too many people get caught up in the data collection itself, instead of remembering the end goal of collecting that data — driving carbon reduction.

This was a major theme at the conference, including on the Less Reporting, More Reduction panel, which took place before Taking Decarbonization from Talk to Action. 

“Data is a huge challenge,” Daren Moss, Principal, ESG of Real Estate at Ares Management, said during the reporting panel. “Instead of collecting everything, we focus on what we’re doing to drive decarbonization.”

In software, we talk about ‘minimum viable product’. In decarbonization, we should think about minimum viable data—you don’t need all the data, and you don’t need perfect data. You need enough of the right data and estimations to be directionally accurate as you move forward.  

“We've purposely, particularly this year, put a lot of emphasis into different types of quality control to make sure the data's right in the first place so that we make informed decisions,” Chris said. “If we make decisions on bad data, it's downhill from there.”

When considering decarbonization, your primary goal is to make sure that whatever fuel you’re consuming (no matter how much you’re consuming) is of the lowest carbon intensity possible. Thus, the important data to get right is what types of fuel you’re using (fuel mix), what systems are using it, and what the right replacement is for each of those systems. 

“Don’t let perfection inhibit progress,” Keely said. “You don’t have to do 100% electrification right away. You don’t have to do it all at once.”

What does getting started look like?

There’s nothing wrong with starting with the low-hanging fruit projects (LED lighting being the most common we see) — they can help start the flywheel of progress and demonstrate the value of decarbonization to your internal stakeholders without requiring a significant investment.

“We’ve all changed to LED light bulbs,” Charlie said. “How many more fluorescent or incandescent lights are still left out there? The challenge seems to be the medium-hanging fruit and the high-hanging fruit, the things that are going to be very impactful.” 

Some times, particularly in California, owners may already be sitting on all electric assets that will decarbonize naturally with the grid. But in most cases there’s a growing recognition that low-hanging fruit will only get you so far. It’s not going to get your portfolio to zero carbon, or even the majority of the way there. We’ve seen (and developed) hundreds of transition plans, and the hard truth of the matter is: decarbonization is expensive. There’s no getting around it. To drive material carbon reductions, you will need to fund and implement more capital-intensive retrofits.  

You can ‘just get started’ by prioritizing a few of these bigger-ticket projects, implementing them, measuring their impact, and proving their value to your organization. 

2. Build an actionable business case

To get your projects approved and funded, you will need to build a strong, data-driven business case for decarbonization.

We have covered this extensively in our webinar series and many of the same themes were underscored at our IMN panel. Building a successful business case for decarbonization is critical to achieving your reduction targets —but it has its challenges. The traditional simple payback model, which focuses only on savings, fails to capture the more holistic value created by decarbonization.

So what’s a sustainability leader to do? Focus on value creation and value protection.

“What's really been working for us is to lean into this assumption that a decarbonized building is going to be more valuable, whether it's tomorrow, whether it's next year, whether it's five years,” Zach shared of his work at PGIM, one of the world’s largest asset managers. 

We can see the opportunities driving that value from market forces and impending regulations. The demand for low-carbon office spaces is expected to far outstrip supply by 2030, leaving 70% of demand unmet, and low carbon real estate is already securing a green premium of 7.1%. The numbers speak for themselves.

So do the regulations. The building performance standards expected to roll out in nearly 50 jurisdictions across the US were the hot topic of another IMN panel, Building Performance Standards: Is This Really Going to Happen. While we are still early in seeing evidence of brown discounts play out in the US (vs. Europe), the destruction of asset value due to failure to responsibly decarbonize is no longer a question of if. It’s a question of when.

For many of the speakers at IMN, who manage some of the world’s largest funds and portfolios, incorporating fine avoidance (i.e., value protection) has been a critical part of building out the business case for decarbonization.

“There is a real possibility of a brown discount applying to properties whenever we don’t take into account the fines that may result from not meeting local rules,” Chris said, citing that existing regulations impact thousands of properties within Greystar’s portfolio. “it's a real, real possibility that I'm going to have to discount the sale of a building at some point in one of these jurisdictions if I don't take into account the fines it's gonna face.” 

Stranding risk, as tracked by CRREM, is another framework to help real estate owners quantify asset value at risk due to carbon and aid them in building strong business cases. Though it’s well-established and utilized in Europe, CRREM is still relatively new in the US and Canada, with the CRREM North American Working Group working to adapt the methodology for these markets.

Zach and PGIM were early adopters of CRREM. “It’s one of the best tools that we have for a truly consistent global way to understand decarbonization,” Zach said. “It’s a globally understood way to communicate progress toward decarbonization.” 

(Want to learn more about CRREM? Check out our recent webinar.)

3. Speak the right language

The value of decarbonization is in the eye of the beholder. There is no (yet) universal language or set of metrics used to communicate the value of reducing carbon, so securing buy-in and ongoing alignment requires deeply understanding the goals of your internal and external stakeholders, and tailoring your language and positioning for them. 

“We have to be able to speak to our internal audience and our external audience in the language that they understand,” Zach said. “So when I talk to the CFO, it's a financial conversation. When I talk to HR, it's a people conversation. You have to speak in a manner that they understand [decarbonization] adds value to them and helps them solve a problem.”

In some cases, securing buy-in can simply be a matter of repackaging the language and phrasing, rather than the financials. 

“When I do see people's eyes light up over a transition plan rather than CRREM or decarbonization, that's where I shift how I talk about it and find that vein of collaboration and understanding,” Zach said.

The decarbonization journey doesn’t end with securing funding. It starts there. Driving true action requires ongoing conversations, education, and engaging internal advocates to embed change into the organization. 

“Even after the project is finished, follow up and make sure that the education is there, not just for the residents but for the staff onsite, too, so they can optimize those tools,” Jaime from Orbach Affordable Housing shared. 

Ready to take decarbonization from talk to action? Let’s get started, together.