Lend Lease is a commercial property developer, builders and owner with assets in Australia, Europe, Asia and the Americas. They build office buildings, mixed use buildings, malls and even US Military bases. The company’s major projects and strategic growth areas span major urban commercial centers across 30 countries, and weighted towards coastal regions.
Positioning themselves as a leader in sustainability, Lend Lease is on target to build Australia’s first carbon neutral project , but are they truly prepared for the changes to come?
Rising with the Tide: Regulatory and Physical Risks
As the building sector contributes up to 30% of global annual greenhouse emissions and consumes up to 40% of all energy, the inevitable carbon regulations of any sort will be costly. In Europe, Asia and Australia we already see requirements around emissions reporting, renewable energy targets, and established trading schemes that will place additional financial burdens on management. Potential carbon taxes could significantly increase both the cost of construction using carbon-intensive materials (concrete, aluminum and steel) as well as the ongoing energy costs of operating their properties and add administrative costs to monitor all energy usage.
Rising sea levels presents a real threat to their key assets in coastal cities. An MSCI report found that properties in the US’ eastern seaboard, eastern Asian cities and Australian cities – Lend Lease’s core territories – are all at major risk. Rising sea level and worsening coastal storms already threaten existing and between $66-106B of coastal property will be below sea level by 2050 in the US alone. Scaling up to account for Lend Lease’s global footprint, these physical risks are very real and will be very expensive.
Near Term Solutions
As a reactive measure, Land Lease’s development diligence process accounts for the risks of regions prone to flooding and storms.
Construction accounts for 10-20% of the emissions of a building project, so Lend Lease is also factoring in the potential price increases of its core construction materials, considering less carbon-intensive materials, such as timber, and also attempting to shift to more local sourcing to reduce supply chain risks.
The source of over 80% of emissions from a building comes from the actual energy use. Toward that end, Lend Lease can do some mix of using a cleaner energy sources or using less energy. Aside from signing power purchase agreements, unavailable in many urban areas, selecting for a cleaner energy mix is generally not within their control so consumption reduction is key. As shown by their sustainability certifications, such as LEED, Lend Lease’s buildings use a mix of energy efficiency measures, such as monitoring and controls. Additionally, Lend Lease have hired “environmental managers”, invested in energy audit and data collection mechanisms which result in KPMG-audited reports. All wood is from credibly certified forests and LL has pledged to restore degraded environments.
For commercial developers such as Land Lease, both more stringent carbon regulations as well as more destructive storms and rising sea levels are certain. Lend Lease has already undertaken significant internal measures to reduce energy use and incorporated rigorous forecasting of the increased costs and risks and greater diligence in site selection.
Yet Land Lease has yet to address the existential threat that rising sea levels pose to their predominantly coastal portfolio. Potential immediate steps to mitigate the impact of submersion include adding wetlands as intermediary buffers, and sea walls. Both of these approaches require partnership with and investment from cities.
In addition to the incremental improvements to efficiency in each property, Lend Lease may also need to reconsider their building materials to be more regionally appropriate. For example, glass buildings in hot and humid regions such as Southeast Asia or Oceania, are inherently less efficient.
 Lend Lease, Annual Report, 2016
 UNEP Sustainable Buildings and Climate Initiative, Buildings and Climate Change: Summary for Decision makers, 2009
 MSCI, ESG Issue Report: Climate Risk Executive Summary, December 2014
 Bloomberg Philanthropies, Risky Business: The Economic Risks of Climate Change in the US, 2016
 Lend Lease, Carbon Disclosure Project, 2010