How can the construction industry reduce carbon emissions?
We look at the shift to a “circular” building sector; encouraging the reuse of materials and reduction of waste.
27 April 2018
The “whole life” carbon of a building includes the carbon associated with operating the building – the heating/cooling, powering, water etc. – but also the embodied carbon. Embodied carbon is the CO2 associated with the manufacturing, assembly, deconstruction and ultimate disposal of the materials which make up a building1. Ever greater efforts are being made to reduce the operational carbon of buildings (by using insulation and LED lighting, for example), partly driven by regulation and not least because it often makes great commercial sense to save money by saving energy.
The "carbon profile" of different buildings
The Buildings as Material Banks project (BAMB2) - co-funded by the EU - is exploring ways to enable the shift to a “circular” building sector; encouraging the reuse of materials and reduction of waste. “Data passports” for the materials used in the buildings will be a key driver for the shift, based on the logic that accurately documenting the value of the materials is essential if we are to recover and reuse them better. BAMB believes these passports will create incentives for suppliers to develop “circular materials”. These are products designed with their future reuse in mind. The passports will also make it easier for architects, developers and renovators to choose sustainable and circular materials and stimulate the logistics required to underpin the circular economy in construction. 70 manufacturers and a number of construction industry associations have joined the project so far.
These circular business models are still at an early stage. However, as investors we are interested, because we believe these shifts create opportunities for companies to differentiate their products and win market share. Materials passports will shine a light on the companies which are doing the most to ensure the sustainability and recyclability of their products and may well give them a competitive advantage and better pricing power over the laggards.
Further down the line, we see rising carbon prices and declining availability of free emission allowances under the EU ETS as another important catalyst for sharpening the focus on the carbon embodied in construction. If the sustainability credentials of construction can be better measured, they can be better managed, and sustainability leaders can reap the rewards.
The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.
1. https://www.ukgbc.org/sites/default/files/Tackling[(20embodied) was not found]20carbon[(20in) was not found]20buildings.pdf ↩
2. http://www.bamb2020.eu/ ↩
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.