Reducing Carbon Emissions from Buildings – One (Green) Lease at a Time


Author: Luca Castiglione

Buildings and construction are responsible for a staggering 40% of global carbon emissions annually. As a result, decarbonising the built environment is a priority for the industry. Out of the total carbon emissions, operational emissions (i.e. energy used to heat, cool and light buildings) account for 30%, whilst building materials and construction (referred to as ‘embodied carbon’) are responsible for the remaining 10%.

To reduce carbon emissions, building owners should invest in energy efficiency measures, such as LED lighting, more efficient HVAC equipment, and, more drastically, insulating or replacing building envelopes. But that alone is not enough – after all, it’s the occupants in the building that are the ultimate consumers of energy. One mechanism that can improve environmental performance from an operational perspective is a green lease; a standard form lease with additional clauses that promote the management and improvement of the environmental performance of a building by both owner and occupier(s). Several categories of green lease clauses exist, including those that address environmental data-sharing, (sustainability related) cost-sharing, rights to carry out works enhancing environmental performance and limitations on works which adversely affect environmental performance.

At Avignon, our asset management team is committed to incorporating tailored green lease clauses into all future leasing activities. These clauses address a wide array of sustainability issues, such as energy efficiency, water and waste management and the use of sustainable materials during CAPEX works. These clauses help create awareness in sustainability matters with tenants, making it easier to gather and benchmark the energy/carbon ‘performance’ of individual tenants, and makes the process of improving an asset easier. Additionally, we pre-screen all prospective tenants to ensure that our sustainability objectives align and that we are collaborating with like-minded, environmentally-conscious parties. This flexibility also enables us to actively engage with a wide variety of tenants that may pose differing environmental and social challenges.

The BBP has produced a comprehensive Toolkit for green leases to enable owners and occupiers of commercial buildings to work together to reduce the environmental impact of their buildings. Currently, there are no legal obligations to include green clauses in a lease, just voluntary industry initiatives. However, Avignon believes that their importance will continuously grow over time. As governments continue to set out plans to reduce emissions in the built environment, investors will find that sustainable buildings and management practices which address these policies reduce both business risk and associated costs. Furthermore, green leases provide a collaborative environment for occupiers to tackle the environmental and social impacts of their business operations. Tenants can expect reduced operational costs, improved staff productivity & retention and achievement of their CSR objectives.

Reducing the carbon impact of buildings is a big task that requires the involvement of many different stakeholders in the real estate sector. Green leases are an effective tool to engage tenants.

To speak to our team about how we can assist with your portfolio, please contact us here