The data and technology challenges on the road to net zero
Decarbonisation is one of the seminal challenges of our times. Over recent years it has climbed to near the top of corporate agendas and it’s estimated that 90% of global GDP is covered by some sort of net zero target.
Buildings are responsible for around 25% of all greenhouse gas emissions in the UK and property investors are working hard to decarbonise their portfolios. Given the scale of the challenge, it’s unsurprising that many are turning to innovative technology to help with the undertaking.
There are fascinating developments happening in everything from mass timber frame construction to low carbon reinforced concrete, solar-generating paint to data centre-powered heating. But as discussed at a recent roundtable with BPF members (including a number from our Tech & Innovation Working Group), translating these promising developments into useful implementation is fraught with challenges and one that is exercising people at the moment is access to data.
Data is king
If you don’t know how much energy your buildings are using or what level of emissions they are generating it’s really hard to know how much you need to do to get to net zero or where to even start. And yet figuring this out is harder than you might think, particularly where energy contracts are held by building occupiers rather than property owners.
Commercial occupiers can be reluctant to disclose their energy consumption, perhaps wary that property owners will extract value from such data without reciprocating. We’re hearing that the phrase “green lease” is increasingly a red rag for some occupiers and even where the terms of a lease require energy consumption data sharing, we are not at the stage where (m)any property owners would forfeit the lease just because that requirement is not met.
With residential occupiers there are additional privacy considerations: while the status of energy consumption data under GDPR is unclear, general practice seems to treat it as if it were and seeking consent to access consumption data from a shifting pool of – in the case of large residential investors – thousands of individual occupiers is a daunting logistical task with a fairly low success rate.
This is an area where the government may need to step in with some appropriate regulation. In France, the décret tertiaire requires owners and occupiers of large commercial property to provide energy consumption data to a central agency. We are talking to civil servants about the need for something similar in the UK, mindful of the need to balance a desire for very granular data against the concerns mentioned above.
But is that enough?
Let’s assume we are able to overcome the data access challenge: is the technology currently available even enough to get the property sector to net zero? Or do we need new innovation to get us there?
If the latter, then we need to ask some serious questions about where that innovation is going to come from. The property sector is not well known for its commitment to R&D – whereas the UK’s pharma and automotive industries invest around £5bn and £3.5bn per year respectively, the construction sector (not a great proxy for property as a whole, but stats are hard to come by…) invests a relatively paltry £400m.
Many property businesses have been supporting emerging technologies through investments in proptech VC funds. This is great, but the need for VC funds to hit return on investment targets means they are likely to invest predominantly in technology that already exists and needs to find a route to market, rather than fund speculative but genuinely groundbreaking research of the kind that might make a real difference in five to ten years’ time.
"The BPF’s proposed merger with the UK Proptech Association is similarly being driven in part by a recognition that we need to better bridge the gap between “traditional” property and proptech..."
Addressing this challenge is potentially even more difficult than cracking the data nut. The property industry is highly fragmented with relatively few players of genuine scale – at least compared to many other industries – that can deploy large amounts of capital into R&D. Fragmentation also makes it harder to come up with common standards around everything from data sharing to net zero targets and this in turn makes it harder for new tech firms to get to grips with the sector and develop new products accordingly or for existing products to be utilised to their full potential.
The cyclical nature of property markets makes sustained R&D spending difficult as firms always have an eye on the next downturn and want to keep costs down. R&D is therefore seen as a nice to have rather than part of a future-proofing strategy and tends to attract money only when times are good. Finally, opportunities to implement new technology in buildings can be relatively few and far between (e.g. as and when leases come to an end) and this slows down the industry’s ability to test the efficacy of such technology.
There are no simple solutions here, but there are some reasons to be optimistic. The UK has a flourishing proptech sector and government-backed accelerator programmes such as Geovation help people with ideas find people who can make them happen. The BPF’s proposed merger with the UK Proptech Association is similarly being driven in part by a recognition that we need to better bridge the gap between “traditional” property and proptech and provide more opportunities for connections to be made.
Ultimately though, we need to find a way to make it easier and more attractive for property businesses to support sustained investment into R&D. Not only will it make the sector’s decarbonisation journey quicker and more successful, it will result in a more productive and efficient property sector.
