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Commentary

Nature-based Solutions: A Game-Changer in Real Estate

NbS integration is no longer a possibility but a necessity, says Joey Aoun, Net Zero Implementation Lead at Savills Investment Management. 

With more than half of the world’s population living in urban areas – projected to 70% by 2050 – urbanisation continues to reshape landscapes, and the real estate industry finds itself at a tipping point. Growing concerns about climate change, habitat destruction, and declining biodiversity – as well as new regulations and stakeholder interest – are prompting real estate investors to shift towards nature-centric approaches.

As the momentum for nature-based solutions (NbS) grows across various industries, real estate investors can lead the way in creating a harmonious coexistence between economic development and environmental preservation – creating more valuable and future-proofed assets. This approach not only enhances the sustainability of real estate portfolios but also contributes to the overall wellbeing of individuals and communities.

 What are nature-based solutions?

The European Commission defines NbS as “solutions that are inspired and supported by nature, which are cost-effective, simultaneously provide environmental, social and economic benefits and help build resilience. Such solutions bring more, and more diverse, nature and natural features and processes into cities, landscapes and seascapes, through locally adapted, resource-efficient and systemic interventions.”

Why are they so important?

We are no longer talking about the future impacts of climate change – it is already impacting the lives of billions. September 2023 beat the previous record for the hottest month, set in 2020, by 0.5°C, according to data maintained by the Japan Meteorological Agency and the EU’s Copernicus Climate Change Service. On the other hand, the extinction of species is now happening between 100 and 1,000 times more quickly than scientists would expect. Indeed, the climate crisis and biodiversity loss are deeply interlinked. As the world approaches net zero deadlines, NbS are poised to provide up to 37% of the necessary emissions reductions. To achieve this, nature recovery strategies must consider the impacts of changes in average climate conditions and climate extremes expected over the coming decades.

Businesses are more dependent on nature than previously thought. According to the World Economic Forum (WEF), half of global gross domestic product, or US$44 trillion of economic value, is highly or moderately dependent on nature for the services it provides. The WEF study suggests that investing in NbS can generate significant financial returns arising from several factors, such as increased property value, energy savings, reduced maintenance costs, and improved tenant satisfaction, ultimately resulting in higher rental income or sale price.

It is becoming a legal requirement

As the urgency to address climate change intensifies, healthy, diverse, and well-connected ecosystems are being placed on the global agenda. The UK government has committed to halting the decline in species abundance and protecting 30% of land and sea by 2030. In the EU’s Taxonomy for Sustainable Activities, significant contributions and avoiding significant harm are based on undertaking robust assessments of physical climate risk and setting out actions in response, including consideration of NbS and Blue-Green Infrastructure. The global agenda is supported by numerous jurisdictions which passed new policies that incorporate biodiversity into planning and financial reporting, including the UK’s Biodiversity Net Gain (BNG), France’s Article 29 and Singapore’s Landscaping for Urban Spaces and High-rises (LUSH).

Companies are facing increasing pressure to assess and report on nature and biodiversity-related issues, with new disclosure systems emerging such as the Taskforce on Nature-related Financial Disclosures (TNFD), and the Science Based Targets Network (SBTN) which announced the first-ever set of corporate science-based targets for nature conservation.

Opportunities in real estate integration

Leading real estate organisations must incorporate biodiversity into their overall sustainability strategies, recognising that protecting and restoring natural functions is integral to protecting asset value, enhancing stakeholders trust and creating sustainable and resilient urban environments. By embracing this approach, real estate investors can gain a competitive edge and secure long-term value in an era of growing sustainability expectations and as demonstrated in the World Economic Forum study.

Retrofitting existing buildings presents an opportunity to introduce NbS. A particularly successful case study within our own portfolios is Bourn Quarter, Cambridge, UK, where we transformed a former air-brownfield which successfully revived a neglected area into a vibrant, biodiverse habitat. This achieved a 30% increase in habitat units equivalent to 10% BNG, planted over 1km of native hedgerows and introduced water feature swales doubling as walkways through the development. These interventions help mitigate the urban heat island effect, reduce the load on stormwater infrastructure, and enhance air quality. In addition, they promote occupants’ wellbeing and provide habitats for various species such as bees and birds, while creating appealing outdoor amenities for residents and workers.

The successful implementation of NbS in real estate hinges on collaborative partnerships which can bring diverse perspectives and expertise to the decision-making process. By forging those partnerships, we have unlocked new opportunities in a retail park asset in Fidenza, Italy to replant trees. A total of approximately 170 trees were successfully preserved, showcasing a commitment to environmental conservation and sustainable land use practices. Furthermore, an additional 244 native trees and hedges were strategically planted within the car park area. The establishment of this green area brings environmental benefits. According to expert analysis, over a span of 20 years, this newly developed landscape is projected to absorb approximately 595 tons of CO2 equivalent (CO2e).

What it all means

As the understanding of climate change and biodiversity loss deepens, the integration of NbS in real estate is no longer a mere possibility but a necessity. By prioritising sustainability and the coexistence of nature and built environments, real estate investors can build future-proof portfolios that deliver economic, social, and environmental value. As cities continue to develop, embracing NbS in urban real estate provides a roadmap to create resilient and sustainable communities, benefiting investors, tenants, and the environment alike – however this comes with its challenges.

There is an ongoing discussion in the industry regarding the insurance of NbS, particularly for example the insuring of green walls, as these can potentially increase the risk of fire and water ingress. Given that the use of NbS is relatively new, particularly in the private sector, it will be interesting to see how insurers decide to approach reviewing and underwriting risk in this context.

In addition, it is currently difficult to assess progress towards achieving climate resilience for nature due to the complexity of the natural world as well as wide ranging data gaps. Quantitative measures of progress towards climate resilience outcomes for nature have several methodological challenges that need addressing. This is an area that should be further explored!

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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