Hines, one of the world’s leading developers, is creating a role to assess the global carbon emissions of the firm. Micheal Izzo, formerly Vice President of Construction in the firm’s U.S. East region, was appointed as the firms’ first Vice President of Carbon Strategy. Hines’ commitment to the decarbonization of the built environment is the latest in a growing tide of real estate companies ramping up environmental, social, and governance (ESG) goals.
Constructed with carbon-intensive materials and machines, housing energy-guzzling commercial operations, the built environment is responsible for around 40 percent of global carbon emissions. Tackling changing climate will require willing partners in the property sector committed to emission reduction. As the first and only global developer to establish an executive position dedicated to carbon, Hines’ hopes to use its vaunted position in the industry to usher in an era of change.
“Based on his deep technical expertise and successful implementation of decarbonization strategies with some of our new projects, we are thrilled that Mike has agreed to lead the carbon strategy for our firm as we embark on creating carbon standards for the built environment,” Peter Epping, Hines’ Global Head of ESG, said.
Hines’ carbon reduction efforts are part of its larger ESG strategy being helmed by Epping. Sensitive to the growing chorus of investors, occupiers, and communities demanding better from the commercial real estate industry, Hines’ seeks to use its integrated model to shape the next generation of the built environment. A report from CBRE looked specifically at how corporate ESG goals growing in popularity through practically every industry are changing the conversation in commercial real estate. The report found 83 percent of industry executives expect growing demand for sustainable buildings from tenants while 54 percent said they will be changing their portfolio strategy towards ESG.
The real estate industry’s biggest players are following suit by lining up ESG commitments. The World Green Building Council now has 122 signees with offices in 28 cities, each promising to only occupy net-zero carbon operation offices by 2030. JLL signed the pledge, promising to achieve net-zero emissions by 2040, working with each of the firms’ clients to start a path towards decarbonization. The commercial brokerage and property manager Cushman & Wakefield is aiming to reduce emissions across its corporate offices and operations by 50 percent by 2030 and is actively engaging the world’s largest real estate owners and occupiers to reduce their emissions at properties managed by the firm. Brokerages, developers, builders, occupiers, and investors are all releasing ESG policies with slight variations in commitments and targets.
“Ten years ago, sustainability was all about corporate social responsibility. For the last five years, it’s been about how to integrate sustainability into core business strategies. The next five years are all about how we integrate it into capitalism,” Peter Bakker, President and CEO of the World Business Council for Sustainable Development, told Ronald Berger, an international management consultancy headquartered in Munich.
We have the technology and expertise to turn the world’s building stock into allies in the fight for a sustainable climate. The commitment is building. Net-zero buildings are still rare, but some day they may become the norm. Hines’ own 555 Greenwich Square is an example of what the next generation of net-zero buildings will look like. The 270,000 square-foot, 16-story office designed by COOKFOX Architects will exceed New York Cities’ stringent 2030 climate targets for office buildings by nearly 50 percent and is already aligned with the City’s 2050 carbon neutral targets. The building is the first new office to use its concrete superstructure for thermal energy storage. Together with sustainable mechanical, engineering, and plumbing systems, including geothermal piles that use concrete for heat exchanges, the building is expected to reduce carbon emissions by 46 percent with a 29 percent reduction in electrical consumption. AECOM Tishman is expected to deliver the building in Q4 2022. CBRE is serving as the exclusive listing agent.
“The intense planning and preparation to launch this project progressed even through the historic disruption caused by the Covid-19 pandemic. 555 Greenwich will raise the bar for sustainable development in the city and on a global stage as the world watches our city break the mold for environmentally responsible development. It will be a gift that keeps on giving well into the future,” Manhattan Borough President Gale Brewer said.
Hines’ new Vice President of Carbon Strategy Michael Izzo worked closely on the 55 Greenwich project, now he’s been tasked with implementing those lessons across Hines’ globe-spanning portfolio. To date Hines has now developed, redeveloped, or acquired 1,393 properties, totaling over 459 million square feet. Behind some of the most iconic skylines on five different continents, the firm has defined many aspects of quality and now it hopes to add a new one: sustainability.
“We believe over time this approach will become the industry standard, driving material suppliers to do better and rewarding those that do. By bringing focus to significantly reducing embodied carbon, while continuing to decrease operational carbon, we intend to address the holistic impact buildings have on increasing global temperatures and partake in the transition to net-zero,” Izzo said. “We encourage all in the real estate sector to join this commitment to create a decarbonized built environment, as it is imperative for us all to collaborate to achieve this momentous goal.”
Commitments are only as good as follow-through. It’s promising to see the wave of ESG commitments grow into a tsunami, but all those press releases will be wasted words if each firm isn’t dedicated to following through on those commitments. ESG goals are not just about reforming companies but capitalism itself. Investors with over $100 trillion in assets are signed on to the UN’s Principles of Responsible Investment. The problem is, according to research, that $100 trillion hasn’t done much to improve anything. Researchers said the investors ‘use the status to attract capital without making notable ESG changes.’ This isn’t to say Hines’ and other efforts won’t have an impact, but to highlight how often commitments fall through.
One way to hold companies to their commitments would be to release regular public reports on ESG initiative progress. As a privately-owned firm, Hines decides most of what is disclosed, publicly reporting ESG progress is not a given. Public financial and ESG reporting should be transparent, standardized, and audited. The world’s largest accounting firms have put together a common set of ESG metrics for any company to use in financial reporting, which nearly 70 companies including Unilever and Sony have committed to. ESG goals are not for charity, they are a core part of evolving business models in the 21st century.
“This isn’t about philanthropy,” Claudia Allen, senior advisor at the KPMG Board Leadership Center, wrote in The Atlantic. “It’s not some theoretical issue. ESG is about risk, opportunity, and building long-term value.”
Time will tell if Hines’ and other major players in the commercial real estate industry will follow through on their ESG ambitions. The scope of the challenge and scale of change required is not to be taken lightly. The fear is empty words and broken promises will create a backlash against ESG reforms, turning a movement meant for public good into the latest marketing buzzwords. Hines wouldn’t be the company it is today without trust. Now investors and occupiers must trust Hines and other firms to make good on their word.
