What You Should Know About BREEAM Certification
This globally recognized program is now gaining a foothold in the U.S. Breana Wheeler of BRE U.S. gives the details.
Europe has a fair advantage ahead of the U.S. in terms of sustainability principles. Governments in Europe have been more progressive in establishing requirements for building emissions, energy consumption and water usage. In addition, asset owners in Europe have been more proactive and outspoken in requiring that their investments comply with these green building and sustainability standards.
In recent years, the U.S. has also placed greater focus on sustainability, supported by both investors and political will. This remarkable focus on matters of sustainability and on combating climate change—even more so under the new administration—doesn’t go unnoticed. Building Research Establishment’s Environmental Assessment Methodology is a sustainability assessment method for buildings that is gaining real estate across the country.
BREEAM first made it onto U.S. territory in 2016, and after a few years of analysis the standards were modified for the local environment. To learn more about BREEAM in U.S. buildings, we reached out to Breana Wheeler, U.S.-based operations director at Building Research Establishment.
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Why did BREEAM make landfall in the U.S. just five years ago?
Wheeler: BRE has been exporting ideas and content around the globe and has evolved into an international business. As part of this evolution, we established operational centers in two markets which showed the most promise: China and the U.S.
For the U.S., we saw that there was a vast gap in the real estate market that was not served by existing certification standards such as LEED. By its nature, LEED was set up as a “leadership” program—essentially making green building a niche market differentiator rather than something that was to be a core part of business operation and real estate value.
With BRE’s core mission about delivering science-led solutions, focused on building performance to address large-scale problems like climate change, we felt we had the right solution to offer sustainability to the masses, while not sacrificing credibility, rigor or prestige.
How have these years been at BREEAM USA? What are some of the key takeaways during this time?
Wheeler: The initial U.S. market impression of green building was that sustainability is for elite, urban core, deep-pocketed Class A prestige buildings. We’ve worked very hard to change that message and shift the perception to make the business case that sustainability, when done right, delivers value for assets.
We encouraged BREEAM’s early adopter clients to tell their stories frankly and honestly, not being afraid that their buildings aren’t the prettiest or most sustainable. We emphasized what they had learned, how they had driven value through the whole process beyond the certificate itself.
BREEAM was simply ahead of its time and the American market is now catching up to Europe on all things relative to ESG. There also continues to be shifting perceptions around sustainability. The days of leveraging sustainability as simply a marketing tool are gone—credibility, rigor and science-based approaches are now accepted as critical to ensuring delivery of corporate goals.
What sets BREEAM apart from other benchmarks?
Wheeler: BREEAM was developed to provide a science-led solution for understanding what sustainability means for buildings. It was the first green building certification program in the world when it launched in 1990.
BREEAM is designed to encourage a holistic approach to sustainability by going beyond environmental performance to address a broad range of human health and well-being aspects, along with resilience and management practices that protect and grow asset value in the longer term.
Our certification process requires on-site verification using an independently appointed assessor to validate evidence provided for performance and outcomes. The process of benchmarking and certification, using a rigorous standard, provides risk management value and the ability to disclose performance with confidence.The BREEAM USA In-Use Version 6 is a locally adapted version of the international program and the first update since BREEAM’s entry in the U.S. What prompted this redesign for the U.S. and how is it different from the international version?
Wheeler: The local adaptation is essentially a translation of the international version: language, units of measure, etc. However, it maintains the same performance requirements, ensuring that the outcomes are comparable on a global scale.
For BREEAM, “sustainable buildings” means growing and protecting asset value, and in our changing world, we needed to make that balance between mitigation and adaptation more explicit and measured alongside historic environmental performance. Version 6 introduced a Resilience category which brought the resilience aspects already within the standard to the forefront.
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BREEAM already had a strong emphasis on identifying the physical risks to an asset, but this was enhanced by providing exemplary credits for using climate change scenarios in the evaluation and connecting the emergency planning for these events to community resilience. We then added encouragement to evaluate transitional risk and opportunities, as well as social risks, which aligned the asset with the Task Force on Climate-Related Financial Disclosures reporting requirements.
BREEAM has always set net-zero carbon performance as the ultimate outcome in our program. Only those assets that achieved net-zero would earn maximum credits in our Energy category, not because we thought it was achievable by most—because clearly not!—but because that was the goal that all buildings needed to be aspiring to.
Our residential program can accommodate anything from multifamily all the way to single-family rentals and aligns with the commercial program. For owners investing in all the different segments, they now have a program they can leverage to measure, monitor and compare sustainability performance in a meaningful way.
How many projects have been BREEAM certified so far in the U.S.?
Wheeler: In the U.S., 47 assets have been certified, and this is set to double by the end of this year. Certifications were awarded in 15 states, with California leading the way with 14, followed by Illinois (7) and New Jersey (5).
In the 30 years since BREEAM launched as the first green building certification program, we have issued over 594,000 certificates in 88 countries.An increasing number of investors only consider CRE investments that demonstrate pathways to net-zero carbon emissions. How does the BREEAM certification increase the value of assets?
Wheeler: There are two key ways. Firstly, understanding the gap and how to close it—BREEAM provides a pathway to net-zero, first by helping to identify how close an asset is to achieving net-zero, and second by providing insights to improve the asset in a way that enhances and protects value. So, first BREEAM focuses on the efficiency of the asset and then encourages on-site renewables to meet or exceed the energy demands of the asset.
Secondly, through third-party verification of performance—with investment decisions being made based on promises and the risks associated with climate change, the importance of independent verification has never been greater. Investors are not willing to put money into a company that self-verifies their financial accounts and for good reason—this is a similar scenario. The race to net-zero carbon is a marathon, not a sprint, and ownership will need to show how assets are progressing towards this goal.
How effective are the current sustainability targets? Are there companies hiding mediocre energy-efficiency performance behind ineffectual targets?
Wheeler: The scale of change required to prevent more than 1.5 Celsius degrees of warming globally is huge. Single-digit reductions of carbon emissions annually are just not going to move the needle and shouldn’t be considered acceptable by companies or their investors. Carbon emission reduction is fundamentally about risk management and opportunity capture.
For real estate, relentlessly driving efficiency and seriously considering the capital requirements to get current portfolios to net-zero without any offsets is imperative. The focus needs to be on “zero” and not “net”—there is plenty of efficiency still to be found, with additional operational benefits to be gained. There are not enough offsets to go around and the quality of what is offered today for offsets raises its own questions. The reality of what it’s going to take to achieve these targets needs to be grasped, and quickly.
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We’re still hearing the discussion of the “green premium” with whispers of the “brown discount”. Everyone seems content to continue to play the game of hot potato, hoping that they simply don’t end up with the stranded asset. However, hold periods are now starting to touch on time when assets will need to be substantially decarbonized. We see this issue accelerating, though time—in relation to the investment cycle—is getting very short and there is too much at risk for weak action.
Fundamentally, this is about recognizing decarbonization as an opportunity to protect and grow asset value. First movers will gain the biggest advantages and those who are willing to have their performance transparently and publicly reported using third-party standards will ultimately attract more investment money.
There seems to be skepticism around green bond initiatives and proclaimed ESG commitments, a concept known as greenwashing. How prevalent is greenwashing in the built sector?
Wheeler: ESG funds captured $51.1 billion of net new money from investors in 2020, a record, and more than double the prior year, according to Morningstar. The extent of this is hard to know, but the growing involvement of regulators is a clear sign of discontent and concern among investors and activists with regard to the scale of the problem.
In Europe, you have the publication of the EU Taxonomy, a classification system whose aim is to provide clear legal definitions about which economic activities can be considered sustainable. The Taxonomy is the world’s clearest attempt to standardize these measures and being first provides significant momentum for the rest of the financial markets to adopt them in some part—even without official regulator sanction—to attract European investment and to demonstrate adherence to an international leading methodology.
We know that the U.S. is watching this closely—just look at the actions already taken by the Securities and Exchange Commission under the Biden administration. With the EU having established the starting rules, it will bring significant pressure on the U.S. to align with that framework and to work with the EU to strengthen its standards and ensure harmonization across markets.