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How green leases are fast-tracking net zero

Occupiers and landlords are using green leases to work together to achieve net zero targets earlier.

May 06, 2022

With an increasing number of organizations prioritizing sustainability, green leases are helping occupiers and landlords turn their net zero ambitions into deliverable plans.

Green leases are a very important initial step to engage tenants early in a collaborative approach with landlords to ensure the right steps are in place to support the net zero goals of both parties, says Michael Greene, head of tenant representation – Australia, JLL.

“Without a collaborative approach between occupiers and landlords net zero will be difficult to achieve, so green leases are a good starting point – even before fit-out – to outline and agree on the sustainability approach,” Greene says.

A way to enhance energy efficiency and put targets in place around reducing environmental impact, green leases are also part of the reason many organizations are fast-tracking their net zero timelines, says Connor McCauley, sustainability operations director – APAC, JLL.

“To achieve zero carbon by 2050 or earlier, we need to reduce carbon emissions across the whole of the built environment by almost 50% by 2030. We can’t expect to achieve that unless we look at the whole life-cycle of carbon emissions for buildings and put plans in place to reduce these to zero," McCauley says.

“Once companies set out their action plans they often see achieving net zero isn’t as difficult as they thought. The more companies understand where they are currently by assessing their baseline and the technology they need to reach zero carbon, the more we’re seeing them bring forward their targets.”

Here are other ways green leases are adding benefits for occupiers and landlords.

Reduced financial risk

McCauley says the increased focus on sustainability is being led by businesses who recognize the growing risks – including financial – of not meeting expectations around climate action and building performance.

“Our occupiers aren’t only focused on what they need to do now and over the next five years to reduce their energy consumption, they are looking ahead to 2040 and 2050,” McCauley says. “If they are considering moving to a new office space, occupier clients want to know if it will still meet their sustainability ambitions into the future and whether it’s the right space for their people in the long term.”

Globally, 34% of occupiers have green leases, with an additional 40% planning to have them in place by 2025, according to JLL’s Decarbonizing the Built Environment report.

“For investors, they are looking at climate risk to help them determine whether an asset will be obsolete by 2040 or 2050 and they are modelling different climate scenarios to assess the physical and transition risks to inform their decision making,” McCauley says.

“Financial institutions in the EU and U.S. are now focusing more on the impacts of climate change and mandating climate-related financial disclosure (TCFD). So, what that means is if we’re not able to demonstrate those assets will have the same value in 20- or 30-years’ time that climate risk is turning in to financial risk.”

Improved health and wellbeing

COVID-19 was a catalyst for many people to rethink their wellbeing and as people return to workplaces they have new expectations about how the built environment should support this.

“Expectations on the built environment have been evolving, but the return to work from the COVID pandemic has accelerated this for office spaces,” Greene says.

“Landlords want tenants and tenants want to retain their employees, so it’s more important than ever that the design of workplaces is more human-centric and are healthier for the people that are working within them. One way green leases helps tenants and landlords with that is through an improved indoor environment and better air quality. This has health benefits for employees, can lead to improved productivity and employee retention which ultimately means tenants are more likely to renew their leases.”