There are six weeks left in 2021! For these last six Nexus Newsletters, let’s explore my top trends, lessons learned, and lightbulb moments of the year.
Here’s where we headed between now and 2022:
- “Green” → ESG (and the carbon flywheel)
- Reporting → Retrofits
- “You can’t build the app store before you build the iPhone”
- Moving interoperability up the stack and the true value of the Independent Data Layer
- Advanced Supervisory Control for small buildings and the emergence of the grid integration platform primer
- Look around: workforce issues are everywhere
Let’s jump into Trend #1…
2021 Trend #1: “Green” → ESG and the carbon flywheel
Last week, I was on Zoom with a sustainability professional talking about energy management software. Nerding out, as usual. But that probably doesn’t surprise you…
What might surprise you happened about 30 minutes into the call…
I got put on mute because the CEO called. He called because the largest investor in the REIT is demanding a report from the Board of Directors on how the REIT is going to get all its buildings to Net Zero Carbon.
As someone who’s been working to decarbonize buildings my whole career, I almost cried.
The best part? Our sustainability professional wasn’t worried at all. He’s been waiting for this moment his whole career too. 💪
The CRE industry is at an inflection point, and not just because of this one conversation. And not just because hundreds of you loved this story .
The CRE industry is at an inflection point because decarbonization is becoming a core business issue.
Under the old paradigm, building owners performed voluntary reporting of their sustainability credentials as marketing fluff. Today, building owners must disclose their sustainability credentials so that investors can quantify their investment risks. I’m no real estate expert, but that seems like a huge shift. Risks like:
- The risk of fines due to being out of compliance with disclosure and/or performance laws (E.g. the UK’s TCFD, EU Action Plan, EU SFDR, NYC LL97, Australia’s NABERs, etc)
- The leasing risk of an asset that doesn’t enable tenants to meet their own sustainability targets
- The risk to the future sale of an asset and the value of that sale
- The future cost to decarbonize
- The physical risk due to extreme weather, which frequently leads to property damage
- Insurance risk due to the rising costs of that property damage
In other words, the carbon flywheel is just starting to spin…
Here’s what it means for smart building technology in the near term:
- Plaques to performance—The old paradigm was about getting certifications and putting plaques on the wall. The new paradigm is about measurement of performance. And unlike carbon neutrality targets with the ability to offset everything, it’s a lot tougher to bullshit net zero carbon targets. *What’s the building actually doing? What are the actual emissions?
- Better tools to manage data—Quantifying true performance will be difficult. Drawing boundaries between Scope 1, 2, and 3 emissions will be taxing. Owners are currently dealing with manually-reported, incomplete, and siloed data sets. They need much better tools to manage the complexity here. And so do the third party data assurance firms.
- Portfolio strategies are vital—This is too important to the enterprise to allow it to be solved at the site level. A holistic tech stack is needed and that will be lead by portfolio-level stakeholders who will connect the dots between sustainability and other core business outcomes.
In summary, investors seeking to improve risk and cost management and strengthen resilience must identify their portfolio exposure to climate-related risks. Technology can help!
Here’s the big elephant in the room though, folks: Once all the target setting, measurement, and reporting is done, building owners must then take action to address vulnerabilities in each asset.
We’ll talk about taking action next week! Technology can help there too.
For now, what do you think? Hit reply and let us know.
P.S. Nexus Pro members are actively discussing this shift in the Nexus Connect chatroom. Join them by joining Nexus Pro.