Sustainability

What we predicted

1. 2022 will see tightening regulation drive lower greenhouse emissions and enforce sustainability disclosure requirements. Combined with pressure from investors and customers, this will lead to wider and deeper coverage of sustainability issues in firms’ corporate responsibility strategies
2. Coverage of strategies will increasingly encompass social as well as environmental issues. Stand-out issues will be clarifying the relationship between sustainability and value, and the incorporation of embodied carbon into emissions budgeting
3. Acquiring more data and increasing collaboration between landlords and occupiers will be key to address these issues

What's happened so far

• Corporations and financial institutions have seen their sustainability credentials increasingly scrutinised. There is evidence that regulators are vigilant against greenwashing and that the industry is becoming more discerning
• Further funds were made available to help transition the building stock to low carbon heating systems. VAT on heat pumps and solar panels was scrapped for homeowners in the Government’s spring statement, indicating that the spending announced in the 2021 Heat and Building Strategy was insufficient to meet targets
• The government has not regulated embodied carbon. The industry’s proposed part Z amendment to UK Building Regulations, which would require whole life carbon emissions to be assessed and embodied carbon limits to be set for construction, has not been adopted in policy. However, there is continued pressure from Parliament and the industry to regulate in this field

What happens next

The trend of tightening regulation is set to continue as we await confirmation of the latest government requirements. For example:

• Higher minimum energy efficiency standards (MEES) which are set to make commercial buildings with an EPC rating below B illegal to let by 2030
• Introduction of UK Sustainability Disclosure Requirements (SDRs) following Brexit. These will oblige UK financial institutions and corporations to report against designated frameworks to disclose their environmental and social impacts to investors
• A possible rating system for large commercial buildings based on the disclosure of operational energy data
• Businesses will refine their climate transition plans, the disclosure of which will become mandatory under the SDRs from 2023, aligning with the UK’s 2050 net-zero objective
• Driven by the increasing pressure from disclosure regulation and consumer demand, data on sustainability performance will become more readily available. This may allow more robust investigations into the relationship between sustainability and value