Hidden in plain sight: understanding embodied carbon for real estate | The Pulse by GRESB

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Erik: Welcome to The Pulse by GRESB, our interview series where we discuss important issues in ESG for real assets from GRESB and benchmarking to sustainability and the wider financial industry. Today, I’m your host, Erik Landry, Director of Climate Change at GRESB, and we’re going to be talking about the growing importance of understanding and measuring embodied carbon for the real estate industry. I’m excited to be joined by Victor Fonseca, Senior Associate on our real estate team leading our work on embodied carbon. Welcome, Victor.

Victor: Hi Erik, it’s a pleasure to be here and discuss such an important topic.

Erik: So I’m going to warm up with a softball question and ask the very basics. What is embodied carbon and why does it matter in real estate?

Victor: Yeah, that’s a great start. Embodied carbon are the emissions associated with materials and construction processes applied to a building throughout its whole life cycle. This means that every element present in a building, such as the structure, the facade, the furniture, has at some point emitted greenhouse gases throughout its extraction, manufacturing, transportation, installation processes.
This is embodied carbon. Now, today, buildings are responsible for 39 percent of annual global greenhouse gas emissions, with 28 percent coming from building operations, so operational carbon, and 11 percent coming from building materials and construction processes, or embodied carbon. However, this ratio is expected to change in the future. As operational and energy efficiency increases and local grid decarbonizations drive reductions in operational emissions, embodied carbon are expected to become more representative of the annual global GHG emissions from the real estate sector.

Erik: It certainly sounds like a really important evolution that the balance between the operational enbodied carbon will shift towards the latter. Although it still seems pretty significant that there’s still a significant portion of embodied carbon in the present. So, you know, given the fact that the role of embodied carbon in global emissions is only going to get bigger, how is the industry currently measuring embodied carbon in buildings?

Victor: Well, the measurement of embodied carbon of a building is basically, in very simple terms, the sum of the embodied carbon of all materials that goes into the building, together with the emissions associated with construction and installation processes. This is usually done through life cycle assessments. It is important to mention, though, that these measurements should be more based on actual data rather than just estimations. It is fundamental that developers and contractors engage with the material suppliers to collect environmental product declarations of the materials they are procuring for the construction works. The reality is that, well, we aren’t yet at a time when this practice is widespread within the industry. There’s currently an insufficient knowledge on how to measure embodied carbon, as well as lack of available data on materials used in these construction works.

Erik: So it sounds like there’s a bit of a chicken and egg problem going on right now, in which the standardization of embodied carbon methodologies is relying on the current availability of embodied carbon data and vice versa. Can you tell us a little bit about how GRESB is addressing this issue in the current GRESB real estate standard?

Victor: Oh yeah, sure. It’s been a journey. So embodied carbon has gained prominence in the real estate standards since it was identified in 2022 by GRESB members as a priority issue to be further developed and addressed in the standards. We currently have a few indicators that collect information on embodied carbon. Starting with the existence of a policy around material selection process, followed by the actual measurements of embodied carbon for new construction and major renovation projects, and also if these emissions are disclosed internally or externally. But now, earlier this year, the Real Estate Standards Committee which is the committee within the GRESB Foundation that oversees the development of the real estate standard, identified embodied carbon as a high priority for the standard.
So what they did was form a dedicated task force to inform the development of a roadmap for embodied carbon in the real estate standard. This work has now been completed and is pending endorsement later in the year, with potential changes coming as early as next year already.

Erik: That’s really exciting. when can we expect to communicate the changes to the wider industry?

Victor: Well, this is going to be communicated externally towards the end of the year, so around Q4.

Erik: Great. Well, then we’ll be on the lookout for that later this year then. In the meantime, what are some of the strategies being used to reduce embodied carbon currently?

Victor: Well, this is a very interesting question, because embodied carbon is very linked to building materials and buildings are also designed based on the climate where they are located. So this means that strategies may vary, but they are usually informed by four guiding principles. So “building less”, “build wise”, “procure low carbon materials”, and “build for the future”. So let’s start with “building less”. Now this means retrofitting existing structures instead of building new, where possible of course. “Building wise” would be trying to identify which materials are responsible for most of the emissions and find alternatives for it. “Procuring low carbon materials” is more like prioritizing low carbon, bio based, recycled, and reused materials to go into your construction works. And “build for the future” is more or less design with the end of life considerations in mind, thinking about circularity. These are some reduction measures, more or less in a hierarchy order of impact, that can be applied to our construction projects to mitigate embodied carbon emissions.

Erik: Great. All very relevant and very important levers that stakeholders in this field can go ahead and use as principles for, essentially, putting together their embodied carbon roadmaps. For this last question, I’ll ask you to put on your kind of futurist hat and ask you, what do you see on the road ahead in terms of embodied carbon? And, you know, really, what do you see happening in the years to come?

Victor: Well, that’s a great question. I’m also very looking forward to see what’s going to happen. But embodied carbon is an emerging issue that is rapidly gaining prominence in the industry. The direction of travel is for these emissions to be more and more on the radar of real estate managers in the future.
These are usually driven by two top down forces: regulations and investor pressure. Let’s start with regulations. Well, they are actually starting to catch up with embodied carbon. I have two examples for you today. First one being the Energy Performance Building Directive that will mandate that from 2030, all new buildings have to calculate its life cycle global warming potential, which is basically the operational and the embodied carbon emissions over the whole life cycle of a building. Similar applies to the EU taxonomy that requires buildings that are larger than 5,000 square meters to also calculate the same life cycle global warming potential, and disclose it to investors and clients on a demand basis. Other industry developments are also raising the awareness of investors to reduce these emissions, which is another pillar of making top down changes.

Organizations such as the World Green Building Council, the IIGCC have included embodied carbon in the frameworks and are actively progressing towards making sure that embodied carbon is addressed as part of one’s ESG agenda. Now, this is an important push for the industry, when it comes to embodied carbon in the coming years. But also, it is important to note the industry still doesn’t have consensus on how to address embodied carbon in all fronts. But all in all, recognizing the challenge is the first step, but, action must follow. The GRESB standards are designed to evolve in line with emerging needs. The ultimate goal to guide the industry forward in this journey. This includes further addressing embodied carbon in the future, as I mentioned before, and making sure our members have all the tools in their hands to make a change.

Erik: Great, that’s really helpful. Thank you, Victor. And with that, that’s about all the time we have on today’s episode of The Pulse. Thanks again for taking the time to join me and sharing your insights. And for all of those who have listened to this point, we’re constantly developing new content, and we’d love to hear from you regarding topics that you’d like to hear about in future episodes. Leave a comment or get in touch with us at [email protected]. I’ve been your host, Erik Landry, see you next time on The Pulse by GRESB.