This article is the responsibility of PLMJ

Text: Rita Alarcão Júdice, partner and co-coordinator of the Real Estate and Tourism area.

“Green swans” are more predictable than “black swans”. In fact, it is already possible to see them if we take into account the implications and challenges of the energy transition and the objectives of carbon neutrality.

If the climate crisis presses the market towards the need to promote the decarbonisation of the economy to meet the objectives of the Paris Agreement, the current context, marked by the energy price crisis, the increase in inflation and the war in Ukraine, the allies increase. interest rates and the risks of a social crisis create a climate of enormous uncertainty.

However, the objective is clear, the path is marked out and Environmental, Social and Governance (ESG) criteria have already come to play a central role in the investment strategy.

the objectives

Portugal is committed to achieving carbon neutrality, having approved the Roadmap for Carbon Neutrality 2050, with the goal of reducing greenhouse gas emissions by around 90% by 2050, compared to 2005 values .

To meet this objective, the National Energy and Climate Plan 2030 (PNEC 2030) was also approved, defining goals and objectives and implementing policies and measures for the 2030 horizon.

With regard, specifically, to buildings, the PNEC 2030 establishes specific lines of action for the reduction of carbon intensity and the promotion of energy renewal, with a view to implementing the concept of Buildings with Almost Zero Energy Consumption in the construction of new buildings and in the transformation of existing

The approval of the Long-Term Strategy for the Rehabilitation of Buildings (ELPRE) aims to promote the renewal, in 2050, of the national real estate park, with the aim of turning it into a decarbonized park with high energy efficiency.

The way

If we take into account that the longevity of buildings is between 30 and 150 years, we quickly conclude that, in 2050, around 70% of the current building stock will remain.

With this framework, it will not be possible to achieve the decarbonisation goal without taking care to minimize the impact of embodied carbon in existing buildings.

For this purpose:

• efforts should be made to standardize the assessment of what is sustainable and what is not;
• there must be a clear focus on the renovation of existing buildings, it being essential to ensure that incentives are in place for rehabilitation;
• there must be a reflection on how to rebuild and a change in the way of building, promoting the use of more sustainable materials and solutions, that is, the reuse of materials;
• innovation should be encouraged, promoted and rewarded;
• the conversion of buildings for other purposes and the change of permitted uses must be facilitated by simplifying the granting of licences, which continues to be very complex, slow and with significant limitations from the urban point of view, especially in historic cities.

The engine of change

Asset valuations already quantify the risks stemming from climate change, namely the risks of energy inefficiency and obsolescence. In a short time, financing and the insurance market will be strongly impacted by this reality. Perfect habitat for the appearance of “green swans”.

In view of the proposed objectives, the difficult balance between costs and rationality of the investment will be marked, to a large extent, by the evolution of the current economic and political context.

However, awareness of the goals set, the proper orientation of the path and the creation of the necessary means to face the challenges that inevitably arise will be decisive in making change possible.

Increased awareness of environmental issues and the imposition or adoption of ESG goals will become increasingly important factors under the scrutiny of consumers and stakeholders in general, and will ultimately dictate the pace at which change will operate.

Listen to an episode of the PLMJ Podcast on the subject here.