Investing in Sustainable Buildings
Reducing building emissions will help the world get to net zero
The buildings sector is responsible for a significant share of global emissions—and holds enormous potential to help the world get to net zero.
If the world hopes to achieve the Paris Agreement’s goals and limit global warming, the buildings sector must almost completely decarbonize by 2050. The International Energy Agency say much of the work needs to take place this decade.
The good news is that the expertise and technology required to substantially decarbonize buildings already exists. What’s needed is the right mix of investment, incentives, and new behaviours to effect change at scale.
At Ontario Teachers’, we're investing in four areas that help make the buildings sector more sustainable. They include deep retrofits, sustainable timber, technology that supports building efficiency, and district energy. This underscores how we are aiming to use our capital to deliver measurable, real-world environmental and social impact as we create value for our members.
This is a critical decade for investing in building sustainability
If the world is to transition to net zero by 2050, emissions from building operations must fall by more than half by 2030, the International Energy Agency says. Increases in population and urbanization will complicate matters. Floor area equivalent to the surface of Paris will be added to the global building stock every week through 2050, the agency estimates.
Ensuring that an ever-expanding built environment is more sustainable is a huge challenge. The following three factors support the case for investing in building sustainability:
There are policy and regulatory tailwindsMany countries are moving to green their building stock through a mix of investment, incentives and regulations. Commitments like these are creating investment opportunities across the buildings sector.
Making buildings more sustainable is good businessBecause they are more energy-efficient, sustainable buildings typically deliver lower operating and maintenance costs. These benefits translate into higher rental revenue and occupancy rates. The market calls this the “green premium.”
There are risks with not investing in greener buildingsBuildings not classed as sustainable can be subject to lower rents and prices than their greener counterparts. This “brown discount” is the flip side of the “green premium” that more sustainable buildings command.
Targeted strategies can help make the buildings sector more sustainable
Targeted investments can reduce the carbon associated with buildings. Here are four areas that help make office and multifamily residential buildings more sustainable.
1. Investing in deep retrofits
Most of the buildings that will be standing in 2050 are already built. For a world aiming for net zero by 2050, that’s a challenge. Older buildings are, on average, inefficient compared with newer ones.
Retrofitting the world’s existing building stock will be critical to reducing the sector’s emissions. The International Energy Agency says annual retrofit rates need to ramp up significantly this decade—to 2.5% of the building stock in advanced economies, from 1% today.
Revitalizing the Toronto-Dominion Centre
To stay competitive in Toronto’s robust commercial office space market, our wholly owned real estate subsidiary, Cadillac Fairview, embarked on a multiyear project to revitalize the iconic Toronto-Dominion Centre complex.
2. Using more sustainable building materials
The buildings sector relies heavily on materials which are produced using carbon-intensive processes. The emissions associated with making and transporting these materials make up a building's embodied carbon. Multiple efforts are underway to reduce that embodied carbon by making key building materials more sustainable, such as switching to electric arc furnaces to make steel.
Mass timber also holds promise. This engineered wood product is built to high strength ratings and can in some instances replace concrete and steel.
Harvesting the benefits of large-scale managed forests
Through Tamarack Timberlands, Ontario Teachers’ owns 870,000 acres of Loblolly pine forests in the southeastern U.S. Tamarack’s portfolio is managed according to Sustainable Forestry Initiative standards, which ensures its forests are harvested with long-term sustainability in mind.
3. Investing in technology that supports building efficiency
Advanced technologies can play a key role towards lowering emissions from routine building operations, such as heating or cooling spaces and keeping the lights on, by better aligning energy demand and supply. These technologies include the sensors, smart meters and connected devices that capture granular data on energy and water usage, and the software and analytics that translate that data into actionable insights. Technology also makes consumption-based pricing easier—a key driver of lower usage.
Getting smart about lowering buildings’ carbon footprint
Techem’s devices make residents of multifamily buildings more conscious of how and when they use heat and water. Its products are deployed in more than 12 million apartments, helping building owners across Europe reduce their emissions.
4. Tapping into the collective benefits of district energy
District energy systems offer economic and environmental advantages. These neighbourhood-scale systems eliminate the need for buildings to maintain separate heating and cooling equipment, cutting costs. District energy systems can be integrated with municipal systems for water, waste, power and more, maximizing local resources. And increasingly, they are leveraging electricity-driven solutions. District energy systems take many
forms. Examples include biomass district heating, which uses wood, agricultural waste or municipal solid waste to produce heat, and district cooling systems, which deliver a cleaner form of air conditioning by piping chilled water to buildings through a closed loop system.
Energized by Toronto’s waterfront location
Lake Ontario is helping Toronto as it pursues one of the most ambitious climate strategies in North America: net zero by 2040. Supporting this effort is a district cooling project operated by Enwave Energy, which delivers low-carbon renewable cooling to almost 100 Toronto buildings.
A more sustainable built environment is within reach
Investors will play a critical role in the decarbonization of the buildings sector. They can help meet growing demand for the technologies and approaches that reduce emissions in buildings. They can make investments that preserve value in the building sector for the long term. And they can be partners for the businesses and governments working to drive positive change in the sector.
At Ontario Teachers’, we invest to deliver outstanding service and retirement security for our members. We believe that the best way to ensure better risk-adjusted returns over the long term is to create a lasting, positive impact on the world.
That’s why we are making investments in building-sector decarbonization and supporting the energy transition in other ways.
More sustainable headquarters for Ontario Teachers’
Owned and managed by our Cadillac Fairview subsidiary, our new building at 160 Front Street West in Toronto’s downtown core is targeting LEED® Platinum certification, the highest ranking in the widely used Leadership in Energy and Environmental Design green building rating system.
The project is being built to rigorous standards addressing materials, energy and water usage, indoor environmental quality and much more.