The built environment is, by some measures, outgrowing the natural one. Every 10 seconds, the building industry pours 19,000 bathtubs of concrete, which is the second most used substance on the planet after water. Nowhere is the built environment growing faster than in Asia, which is expected to add another 1.2 billion people to its sprawling cities in the next 20 years.
Asia is critical to the World Green Building Council’s ambition to decarbonise the built environment by 2050. Asia comprises about half of the global real estate market, and is expected to add more than 70 billion square metres of real estate in the next two decades.
Decarbonising Asia’s built environment could be a US$47 trillion opportunity, assuming 75 per cent of the new construction and existing retrofits are green, according to Boston Consulting Group. Joining the Eco-Business podcast to talk about the task ahead are Vinamra Srivastava, chief sustainability officer of CapitaLand Investment, and Giovanni Cossu, head of sustainability for CapitaLand Development.
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Boring is beautiful. A lot of solutions in urban development are not sexy – but they do their job.
Vinamra Srivastava, chief sustainability officer, CapitaLand Investment
CapitaLand Investment chief sustainability officer Vinamra Srivastava (left) and CapitaLand Development head of sustainability Giovanni Cossu
Tune in as we discuss:
- Where is Asia Pacific on the road to a net zero built environment?
- CapitaLand’s net zero progress
- The embodied carbon conundrum
- Decarbonising an Asian multinational
- Built environment low-carbon solutions – what works?
- Isn’t the only real decarbonisation solution to build less?
The edited podcast transcript:
How do you see the progress the industry is making so far to decarbonise the built environment in Asia?
Vinamra Srivastava: First, I’m very surprised by the statistics [mentioned in the introduction]. I think the 1 per cent [of all buildings are net zero aligned] figure is too high. Not just because of technology or the availability of the right tools to decarbonise. There are a whole lot of factors – policy, geography, and balancing financial considerations.
For Asia Pacific in particular, there is a huge variety and discrepancy between cities that have a very high percentage of green buildings. For example, Singapore has 80 to 90 per cent that are green certified. Other geographies within East Asia where the number could be 20 to 30 per cent, which means that there is a huge potential for those countries to ramp up on their green building journey.
I think the opportunities for APAC are immense. It is urbanising extremely fast, which for me is an opportunity because greenfield development requires you to factor in a lot of green features right at the design stage in contrast to the problem of retrofitting existing buildings.
Then there’s the potential of renewables. A large part of APAC is blessed with significant natural resources, which countries need to come together to boost the implementation of; battery prices are getting extremely cheap now, they’re going through the same sort of trajectory as solar panels. Geothermal research is very promising. So I think there’s a lot of positive energy on what renewables can do to accelerate APAC’s energy transition.
The policy landscape is evolving very rapidly too. India is a fantastic example. India opened up its renewable market, and over the last five to eight years the market has skyrocketed. India should be well on track to achieve its fantastic renewable targets.
Singapore is a great policy example in how they’re using a carbon tax. They’re taking a firm stand and making sure there are costs attached to polluting the atmosphere.
Carbon markets is the other area where I think APAC is playing a leading role, given the abundant natural resources that we have. So I see promise there.
I also see a lot of promise in innovation and venture capital as a lever to drive decarbonisation. You see the proliferation of climate tech in the region. I’m very hopeful that as the macroeconomy stabilises, that’s going to skyrocket.
So, I’m very excited by the opportunities. Challenges remain, yes. But how we balance financial feasibility with sustainability leadership is tough. In many countries, policy frameworks are evolving slowly, so that remains a challenge.
For large private organisations, the complexity of managing multiple businesses in the race to get to net zero fast, means having to manage various stakeholders who have different requirements.
So it’s easier said than done, but I think we have all the tools at our disposal, so I’m actually quite hopeful that the penetration of green buildings in the built environment will increase quite rapidly.
CapitaLand Investment chief sustainability officer Vinamra Srivastava (middle) and CapitaLand Development head of sustainability Giovanni Cossu (left) speak with Eco-Business associate editor Robin Hicks (right). Image: CapitaLand
Eco-Business: Giovanni, where are the opportunities to decarbonise the built environment in Asia Pacific? Are we talking about building upwards not outwards, switching to green materials, stop rebuilding, start reusing?
Giovanni Cossu: APAC is a combination of tensions. You have countries like Singapore, which are very regulated and countries like Vietnam and Indonesia, where the regulatory market is evolving. There needs to be a different approach to sustainability leadership in each market, which is both a challenge and an opportunity.
It’s a challenge because you are entering a country that is not regulated, where you have to take a leadership position and take on risk, but you also have the opportunity to drive the industry in a certain direction.
This is, for example, what low carbon materials now mean for the industry. If you look at Vietnam, China and even Singapore, decarbonisation is being approached beyond operational carbon to look at embodied carbon – for instance the content of cement, low-carbon concrete and low-carbon steel. Five to eight years ago nobody was even talking about these materials.
Another important factor is sustainable finance. In the past, sustainable finance mechanisms were related to a number that was attached to a decarbonisation target, for instance reducing emissions to a certain level by 2030 and then achieving net zero by 2050. Now decarbonisation is becoming more nuanced. Targets could be related to social outcomes or even a breakdown of decarbonisation into components that look at a percentage of low carbon materials that you purchase or the amount of energy that you are producing.
The other thing in Asia which is unique is the cultural component. The path and the pace of urbanisation is growing fast. This is also an opportunity because you have the chance to influence the next generation. People are getting much more educated, and the language of sustainability that they speak is very different compared to what their parents spoke. So that awareness of what sustainability means across different sectors is also growing. In China, the ability to control sustainability outcomes is very different compared to how it was before, which is due to the growing awareness among the younger generations.
Navigating an extremely diverse region like APAC is a big challenge for a multinational like CapitaLand as it tries to decarbonise. What sort of progress are you making on that front?
Vinamra Srivastava: CapitaLand Investment came out with the 2030 Sustainability Master Plan [launched in 2020, and updated in June 2023], where we outlined quantitative targets, all working backwards from getting to net zero in Scopes 1 and 2 by 2050.
I would say we’ve seen mixed progress. There are aspects where we have done very well. Let’s take energy intensity for example. We wanted to reduce our energy intensity by 15 per cent. We are already at 9 per cent and I think we are well on our way to getting there.
The same with water intensity – we want to see a 15 per cent reduction and we’ve already crossed that. Year on year it goes up and down, so I won’t read too much into us meeting our target earlier.
On our recycling rate: We want it to be 25 per cent [by 2030] – and we’re already at 14 per cent. We want every building to be a green building by 2030. We’re already at 60 per cent today, and I think we’ll get there [by 2030].
A couple of targets where we need to continue to do more homework on are in renewable energy. We have said we want to achieve 45 per cent [renewable energy use] by 2030. Last year, we were at 6.5 per cent to 7 per cent, so we still have a long way to get there.
And that then directly impacts our carbon intensity reduction target as well, where we still have a long way to go. I think the reason why those targets are harder is because a huge part of our portfolio – close to more than one third of our portfolio – is in Singapore.
We know that Singapore has natural challenges in accessing renewable energy, despite us trying to maximise whatever rooftops we have. And that brings me to the complexity that you mentioned earlier of a conglomerate like ours. We are in different geographies. We are in different asset classes of real estate. And we also have different capital sources: some for listed funds, some for private funds, and some on our own balance sheet.
So when you put all these three different considerations together, managing the decarbonisation of this large portfolio becomes a very complex exercise. And it actually becomes an exercise of allocating your capital based on what moves the needle, what is more implementable, what your stakeholders want, where you get financial benefits back, and so on.
In many ways, it’s a portfolio management game. I’ve got 100 green capital expenditures I can put in in a year. Where do I best put it so that it meets all these requirements?
Then you also have to keep in mind the long-term value in terms of risk – both physical and transition risks.
We did some analysis last year. We quantified value at risk across our entire portfolio globally. You’ve got to understand where the most impact of a dollar that you put in today to green your asset is – not only from a short-term perspective, but also keeping the long-term value at risk in mind.
It is a very scientific and complex exercise. But we’ve got the right tools and analytics, and this is the kind of lens that we use when we look to decarbonise our portfolio.
Our strategy is very focused. We follow a carbon mitigation hierarchy right from the design stage to the operation stage and try to minimise energy consumption through energy efficiency measures, as well as using a lot of AI and smart building tech.
Then we look at renewable energy to continue to green the assets. Then at the last mile, we look at instruments like renewable energy certificates (RECs) or carbon offsets to offset what we cannot achieve through real-world decarbonisation.
Then we focus a lot on innovation and technology – we run a global innovation challenge [CapitaLand Sustainability X Challenge], where we source climate technologies from all over the world and deploy them to fast track what’s new out there, which could help us accelerate [decarbonisation] in the future.
We also look at data analytics and risk assessment frameworks to assign the right value to risk.
I’m quite confident that we have put in all the right measures in place. This is a long term journey. The business is growing. We are acquiring companies. Last year we acquired two fund managers [CapitaLand acquired a 40 per cent stake in SC Capital Partners Group and Australian firm Wingate Group Holdings]. As you grow fast and acquire more companies, naturally your absolute emissions are going to go up on a year-on-year basis. So the focus is making sure carbon intensity always keeps going down to keep growing in a more energy-efficient manner and how you accelerate the procurement of renewables and green energy to start getting absolute emissions down as well. That’s how you focus on decarbonising a business that is growing very rapidly.
Can you elaborate on the sort of portfolio risk you’re talking about?
Vinamra Srivastava: There are two kinds of risks: physical risks and transition risks. Transition risks concern changes in policy, regulation, changes in customer mindset, and stakeholder expectations. Usually the way we quantify those risks is through industry standard curves and guidelines on how the sector should decarbonise. If you’re not on that curve, you assume that there will be an implicit carbon cost that you will have to pay, either as tax to the government or through free market mechanisms.
There’s a way in which you quantify that – the more energy inefficient you are, the less renewables you have, the more carbon you are burning… you multiply that with the dollar value, and that’s your carbon cost.
The other kind of risk is physical risk. Physical risk will include, of course, wildfires, coastal flooding, fluvial flooding, extreme heat, extreme cold and hurricanes – and the physical damage that they will do to your assets.
That is very location-specific. If you are in an area prone to natural catastrophes, then you will have a high value at risk there.
How we try to address that is right at the investment stage; we do a very detailed environmental and social impact analysis. So if we know there’s a new investment we’re going to make, but it’s in a zone that could be sensitive to physical risks, we do a detailed assessment of the kinds of risks involved, and we try to quantify them and put in mitigation measures that we need to do.
Both kinds of risks require different interventions. And both unfortunately are getting very, very real. We need to be very sensitive to them and include them in our commercial decision-making.
Giovanni, let’s talk about CapitaLand Development and the decarbonisation challenge in the context of development. Are we talking mainly about embodied carbon?
Giovanni Cossu: CapitaLand as a group has the unique condition of having two sister companies that work in sustainability with the same objective and goals but with two different approaches.
So we have the investment side, which is also an operator of the properties that CapitaLand owns. And then we have the development side, which is the developer component of the business.
Development – by nature – has different risks, which are mostly related. For example, supply chain disruption, which includes sources of material specific to the development process, from design all the way to construction until completion.
For us, decarbonisation focuses mostly on design and materials. On the design side, there is a strong assessment of what embodied carbon means. At the beginning of the design process, this is calculated using a life cycle assessment (LCA) for every new property.
An LCA is a methodology that guides the design in achieving a specific embodied carbon target. In our case, we have a target of at least 22 per cent embodied carbon reduction. There is subsequently an optimisation of the design so that you can, for example, look at the embodied carbon of finishes, materials, structure, and foundations.
The process of optimising the design is done at the beginning of the design stage. Once the design is completed you go into the specification of materials. You look at the market conditions, supply chain availability, the kind of materials available in those markets, and the validity of suppliers to achieve the reduction targets.
Finally, we look at the construction process itself. For example, how to use construction methods that are more innovative or energy efficient. Recently, we looked at 3D printing for some of our residential projects.
So I would say that from the design to the specification of materials all the way to construction methodologies, you are able to control the process in a way that reduces embodied carbon. It’s a very complex process because there are different markets with different conditions and also differing expertise available in those markets.
You cannot, for example, use a low-carbon concrete benchmark taken from the United Kingdom and apply it in Singapore because the two markets are at very different stages.
Another factor is risk: climate change is disrupting supply chains, which raises questions about the kind of plans that need to be in place in case of disruptions. For example, where do you source materials from? And in case that specific flow is disrupted, how do you control this during your construction stage so that you don’t create huge delays in your project? All these things are layers towards achieving the sustainability outcome.
Gionvanni Cossu: reducing embodied carbon is complex for a multinational like CapitaLand, because of the diversity of markets, market conditions and available expertise. Image: CapitaLand
We’re also seeing the rise of regulations such as carbon border taxes. How do you see that in terms of a risk that CapitaLand has to manage as it decarbonises?
Giovanni Cossu: I think the main problem we are seeing in the regulatory landscape is the validation of [carbon] claims. This could take many years, from identifying and testing available products to their adoption. In markets where you do not have third-party verification, or even where you don’t have construction authorities which are comfortable in adopting those materials, you have a situation that is bringing in high risk. So you have to take an incremental and controlled risk approach.
Let’s talk about solutions. CapitaLand runs the CapitaLand Sustainability X Challenge (CSXC). What are the most interesting solutions you’ve noticed that could make a difference to the built environment decarbonisation challenge?
Giovanni Cossu: CSXC is led and managed by CapitaLand Investment and the CapitaLand Group and is a global search for innovations. The number of applications is increasing at every round. The last time it was around 800.
The challenge has evolved such that it is becoming an expansion of the business objectives of CapitaLand. Initially, for example, the challenge looked for operational solutions, for example, to reduce operational energy. Now it is expanding to the development side, for example, materials, construction, and methodologies.
It’s a unique opportunity because first of all it’s driven by the private sector, which is not something that you see very often.
The challenge allows you to have a global lens that can filter solutions that, for example, are available in other markets, and can be brought or adapted or at least tested in the markets where CapitaLand operates.
It gives startups or established businesses the opportunity to tap on a global portfolio, from hospitality to commercial offices to residential.
The other thing about the innovation challenge, which is also unique, is the fact that it is driven by CapitaLand teams. So there is a strong collaboration internally between the teams that are sourcing for such information and the committee that evaluates and subsequently implements those solutions.
Are there any solutions that particularly excite you that have emerged from the innovation challenge?
Vinamra Srivastava: Just a few stats to showcase the challenge’s scale. We’ve had 1,300 entries over the last three years from over 70 countries. We have disbursed more than $2 million of funding for these projects. Thirty pilots are at different stages of execution across 46 sites globally. So this is one of the largest private sector real estate and climate tech sourcing platforms of its kind in Asia, if not the world.
There are multiple solutions that are exciting. We’ve seen thin solar panels that can go on corrugated solar roofs, so they don’t need the typical roof loading traditional panels require. They’re lightweight, bendable and flexible – you can just put them anywhere. And we are testing those now. They are helpful because a lot of old industrial structures can’t take regular panels because of their loading requirements.
We’ve seen heat-reflecting films that can be painted on the facades of buildings to reduce energy consumption and non-chemical ways of treating cooling tower waters, which can reduce the energy consumption of cooling towers that are key in heating, ventilation, and air conditioning (HVAC) systems.
We’ve had smart louvers [a louver is a window covering that controls airflow and light with angled slats] that provide shade to reduce heat absorption, and are loaded with solar panels to generate renewable energy.
Also, plastic waste taken from our malls is used to create asphalt and bitumen for road construction within our properties.
Two more things to add. CSXC is our channel for sourcing innovations externally. We also have another channel in house through our CapitaLand Innovation Fund where we encourage our own staff all over the world to submit ideas and innovations. We’ve got a lot of internal expertise, whether it’s on development or on operations. So there’s a way to encourage our people to innovate and we will provide them with the cheque, provided they meet certain criteria.
The second thing is more applicable to real estate decarbonisation overall. Many other hard-to-abate sectors like aviation are very public in nature. For example, what happens with SAF as a tool is very public, whereas real estate decarbonisation happens behind the scenes, because a lot of it is about using the right low carbon material, which is all in the supply chain. A lot of operational decarbonisation happens in the HVAC systems of a building, which you don’t typically even see. A lot of high-tech smart solutions building AI are inside computers, which you will never see.
So it is not the most glamorous. I’ve often said that boring is beautiful. Because I think that a lot of the solutions in urban development and real estate are not the most sexy. They will not grab headlines. But they do their job. Some will give you that 5-10 per cent [emissions reduction]. Some will give you 15-20 per cent. But when you add all of them up, it is very material.
You need a lot of patience. You need a lot of rolling up your sleeves and getting your hands dirty behind the scenes to get going.
Final question: isn’t the best decarbonisation solution for the built environment retrofitting and reusing buildings rather than demolishing and rebuilding? I used to live in Pearl Bank Apartments, which has been demolished and rebuilt. That’s a CapitaLand project. It did occur to me that there was no need to knock it down and rebuild it…
Vinamra Srivastava: When we take these decisions on whether to build greenfield or to redevelop or to retrofit, we take a total lifecycle assessment. We assess whether the building will continue to produce more operational carbon over its lifetime, versus if you were to demolish and rebuild.
In the extreme case, if you were to demolish and rebuild, yes, you add new embodied carbon, but because the new designs are almost always more energy efficient than the old buildings, you have reduced the operational carbon footprint.
For every such decision, an LCA is done and then you see which way the pendulum swings. That is one angle. The other angle is also stopping real estate development, which for emerging markets is not a very practical solution when it comes to economic growth. The region needs to develop, and for that, you do need urban structures.
So I think the question that should be asked is not so much should we continue to build more or not. Yes, of course, we shouldn’t be building just for the sake of building. Wherever you can retrofit, wherever you can do adaptive reuse, that must be your first port of call.
But beyond that, there’ll be many cases where you cannot. Technically maybe you can. But from an economic and social angle, it may not be the best solution.
There are many projects that we have not undertaken because of these reasons, which people will never know because they never saw the light of the day. Rejecting many of those projects for us is as important as the projects that do go through.
Giovanni, do you want to add anything to the debate on reuse? You have spent some of your career in China, which has undergone dramatic urban transformation.
Giovanni Cossu: I have had the opportunity to see adaptive reuse in different contexts. If you look at the European market, the majority of the built environment is already built. And it has been built with certain qualities and components that create value for conservation. Europe is a market where that appreciation of conservation – and the regulations that are supporting that approach – are very strong.
When you move to a market that is developing and evolving such as China, or a land-scarce country like Singapore, the conversation shifts – because it raises the question of sustainability in a very different context. Market conditions such as the cost of materials and the expectations of the product that you are creating add to the complexity of the calculation of whether to demolish or reuse a building.
Also, this is not a decision that a developer takes alone, because you do not have control of the land, nor control of the value of conservation for the architecture. So it is a combination of voices, from the regulations in the specific market to the architectural community, that inform the discussion.
In Singapore, adaptive reuse projects have achieved a very high level of performance. Most of them are in the public sector, and this is mostly because you have the control of the land. The buildings are of a specific height and serve a specific purpose. So there are conditions that facilitate the way in which a building can be adapted, and then you can create great projects that show not only the value of conservation, but performance potential.
But in the private sector, there is a business component that has to be managed for how the building is going to be used, whether for conservation or reuse.
Vinamra Srivastava: For every redevelopment example, there are multiple green asset enhancements that we continue to do. For example, Clarke Quay [an entertainment district in Singapore] – almost 30 per cent of the total CapEx for the enhancement was dedicated to sustainability features. Also, 21 Collier Quay in the central business district went through a massive green upgrade before it was relaunched.
So we continue to invest significantly in green asset enhancements. So, it’s not just a question of redevelopment; you have all these interim measures as well.
But I just want to add one last thing to the question of where Asia is headed. What’s happening now is a fantastic scene playing out of how to balance rapid economic growth with rapid sustainability growth.
Asia is leapfrogging the world today in showing the world how can you do both. The West is facing very different problems. But Asia is showing that you don’t need to compromise one to achieve the other. You can do both together, but you need to be smart about how you do this. And that’s how, in the private sector, we are also looking at this problem.
