Greening The Concrete Jungle: Biodiversity’s Growing Role In Real Estate

Greening The Concrete Jungle: Biodiversity’s Growing Role In Real Estate

Many experts believe that we are now entering a sixth great extinction event – a short period in which a high proportion of the world’s biodiversity dies out. Twenty-eight per cent of all assessed species are under threat of extinction according to the IUCN, and that number is likely to be considerably higher if all species were assessed. The difference from all previous events is that this decimation of the world’s biodiversity is man-made. And, within this alarming trend, the built environment is responsible for nearly 30% of global biodiversity loss. Yet, biodiversity rarely features as a priority metric when ESG strategies are developed.

Part of the reason for this is the difficulty of quantifying the risks and benefits of biodiversity in decision-making. Unlike carbon credits, biodiversity is not easily captured into a quantifiable metric around which organizations can structure financial decision-making: the impacts of biodiversity on human activity, and vice versa, are unpredictable. But biodiversity and nature can afford the real estate industry some key benefits. In building operations, there is emerging evidence of the benefits of living walls on occupant comfort and wellbeing, while biodiversity incorporation for buildings in cities has been shown to reduce urban heat island effects. Still, these and similar opportunities remain indirect and ambiguous, meaning they rarely influence construction or building management decisions to support biodiversity in a meaningful way.

As with other ESG and sustainability issues, intensifying regulations and reporting requirements are working to shift behaviours. Strengthening reporting requirements portend to shoot biodiversity up the ESG agenda of large corporates and real estate investors. For example, mandatory disclosure requirements in the CSRD will compel European firms to make detailed biodiversity-aligned disclosures from 2024. Dovetailing with mandatory reporting requirements is the development of voluntary disclosure standards such as the Taskforce on Nature-related Financial Disclosures (TNFD) which, similarly to the TCFD, will encourage real estate firms to improve their transparency around the nature-related risks and opportunities of their operations. 

Bigger changes are afoot, though. Typically, biodiversity is viewed as a compliance factor, with developers and landlords working to adhere to protective laws around specific species and habitats. Following COP15 on biodiversity, there are calls for ‘nature-positive’ regulations that go beyond protective laws, aiming to restore damaged ecosystems. The Biodiversity Net Gain policy in the UK is a harbinger of things to come for the real estate sector in the shifting regulatory tide on biodiversity. The policy, which comes into effect in November 2023, will require a 10% net increase in biodiversity in all new developments and large refurbishments, and looks set to present developers with the huge challenge of creating specialized habitats on site. Similar efforts around biodiversity protection in Australia and France signal the acceleration of a regulatory shift around biodiversity.

Going forward, industry-specific guidance will be needed to enable the full range of stakeholders in the real estate sector to monitor and report on their biodiversity impacts for the purposes of benchmarking and demonstrating compliance with nature-positive regulations. Building owners and construction firms will need to back up corporate commitments to biodiversity by updating project financing models and frameworks to ensure nature-related opportunities are appropriately factored into developments. Consulting services and technology solutions will also be required to plug resource and skills gaps within the sector.

To learn more about strategies and approaches to ESG data management for real estate, read Verdantix Best Practices: ESG Data Management For Real Estate.