Getty
This year is shaping up to look a lot like 2008. Twelve years ago, the financial crisis led to a global recession that drove many companies and investors to the brink of insolvency, with nearly 200 financial institutions failing in 2008 and 2009 alone. Fast forward to 2020, where the cause of today’s COVID-19 global crisis is quite different, but the impact looks eerily similar.
The problem began as someone else’s problem in many people’s minds. As time passed, we saw a clear economic collapse spread across the globe. Businesses are moving quickly to minimize the impact on their bottom lines, starting with reducing their existing expenses. Millions of people are being furloughed or laid off, and an astonishing 16 million people filed for unemployment in the U.S. by April 11 — that is 11% of our overall workforce.
But what does this abrupt shift mean for the built environment? Will companies and governments be able to find the capital and resources needed to reduce energy costs given how tumultuous current times are?
Not only am I confident that this is possible, but I believe it’s necessary we accelerate this effort to maintain our climate ambitions. Energy costs must be minimized and brought into line with operations. As hotel occupancy disappears and schools remain shuttered, we need to adjust our energy costs accordingly. This means changing operating procedures and sequences of operations, as well as incorporating sensors into buildings’ control strategies.
With many buildings and facilities seeing lower levels of occupancy and activity, it’s a good time to take on maintenance that often gets deferred, make certain that preventive maintenance is up to date, and review all key systems while tenant demands are lower.
One unintended aspect of the shutdown is the positive effect it’s been having on air and water quality. Hopefully, as we work to rebuild the economy soon, we will maintain the resulting decline in costs associated with poor air and water quality as the new status quo. Accomplishing this would mean increasing investment in renewables and reducing energy demand in the built environments. New York, Washington, D.C. and San Francisco have seen their air quality improve by at least 33% since February 1, according to my analysis of data from the EPA. Will we go back to a period of poor air and water quality? Will people accept this, or are governments going to push forward and accelerate sustainability and environmental regulation while supporting the economy?
Early evidence shows that officials around the world are staying firm on new environmental and governmental regulations. On March 11, investment group BlackRock reiterated its plan to support management and board directors whose companies are making sufficient progress on sustainability-related disclosures. While the fight against COVID-19 is in its early days, we see no evidence of investors backing down from ESG goals. Investment firms realize that ESG drives the value of their assets, increases fees and increases access to capital markets; this pandemic isn’t going to change that.
So, where do we go from here? How do we protect the economy from certain recession while still maintaining our environmental ambition? How can we realize the twin benefits of stimulating the economy and accelerating the clean energy transition when the seduction of short-term success is more exciting than long-term survival?
Like a pandemic, sustainability seems at first to be someone else’s problem, but with time, it becomes evident that it is everyone’s problem. The timeline for ESG and climate is much longer and its approach stealthier, but the potential outcome is no less dire.
There are three key areas to focus on once the current crisis slows.
First, the green economy represents jobs. It’s been one of the fastest-growing parts of the U.S. economy in recent years and will allow us to shift jobs away from the carbon-intensive parts of the economy. ESG is proactive management. ESG needs to be a factor in all capital investment decisions going forward, bringing the twin benefits of igniting economies and speeding up clean energy transitions.
Second, investment in ESG will drive the economics of business and positively impact the environment. It will put a price on carbon emissions and change how we consume, work and live for decades. ESG will value clean air and water and make health a priority, allowing resiliency and redundancy to grow from a nice-to-have to a must-have. The Urban Land Institute’s 2019 study made clear that ESG is not simply doing good, but good business for the real estate industry.
Finally, as we rebuild the economy, we must decide the kind that we want. Should we rebuild a carbon-intensive economy, or should we invest in sectors that have a sustainable and valuable future? People have long said it’s hard to find the political will to take this on, but one thing we’ve learned in the past few months is that when we must, we find a way. A stimulus that creates jobs is critical at this moment, but let’s invest in sectors that are critical for our future — not our past.