Biodiversity: The real estate industry’s next ‘net zero’

Biodiversity has recently gained prominence. At COP15 in December 2022, Australia became a global pioneer. It committed to account for the economic value of nature. A commitment to work towards protecting 30% of land and oceans for conversation by 2030. The NSW Government is seeking to simplify biodiversity protection via the Biodiversity Conservation Fund Charge System (BCF).

The industry has not universally welcomed the biodiversity focus. The BCF has been controversial as accounting for biodiversity creates extra costs. From higher upfront investment through to greater asset design, implementation and management complexity. It is a new and unfamiliar topic to understand. This article looks to help by breaking biodiversity down – what it is, why it matters and what it means for you.

An unappreciated resource: What is biodiversity?

Biodiversity refers to all life – plants, animals, micro-organisms existing in a physical area. This culmination of life creates an ecosystem. Australia has over one million plant and animal species, in which many are quite unique. Like the global picture Australia’s biodiversity is declining precipitously. To date, we have lost over three-quarters of our rainforests. We also have the most mammal extinctions globally. With Koala populations in some states having halved in the last 20 years¹.

Biodiversity loss has many casualties including pollution, climate change and invasive species. Real estate is a major driver in this loss. Primarily due to land use changes, building material sourcing, construction and operational emissions. Biodiversity’s increasing decline and its immense consequences for human life demands urgent prioritisation.

The next ‘net zero’: Why does it matter?

Setting aside the moral ethics of presiding over the loss of so much life for a moment. Nature’s ecosystems provide fundamental services which our economies and societies need. Including air filtration, pollination, flood protection, climate regulation, food production and carbon sequestration. Without that vital support, we as a species are doomed. The UN states that biodiversity is our strongest natural defence against climate change. It could contribute up to 30% of the emissions reduction needed to reach net zero. As it aids in removing atmospheric carbon dioxide2. It is critical in mitigating physical climate impacts too. Green spaces in urban areas reduces heat-absorbing surface areas like asphalt and concrete.  

A ‘heat island effect ‘occurs in urban areas when hot temperatures rise well above the average. These ever-rising hot temperatures can threaten human life. An example of this is playing out in Parramatta’s urban development. Biodiversity provides a balance to these developments. Restoration of marshes and forests provides protection against coastal erosion and inland flash-flooding.

Biodiversity fits across all aspects of the ESG framework. It has a stake in environmental areas and issues. But also has a significant role in the social impacts. And of course, areas of governance. Green spaces in cities supports mental and physical health and wellbeing. Biodiversity does not respect site boundaries. So, a collaborative governance approach needs to protect and enhance its value. Collaboration between landowners, local governments, occupiers and communities is essential.

There has been an under appreciation for biodiversity for far too long. That is changing fast. Net zero has become accepted wisdom over the last decade. And now permeates every aspect of our lives. So too will biodiversity given its vital role. We believe that biodiversity will be the next net zero.

Practical implications: What does it mean for you?

‍Biodiversity accounting imposes extra considerations for built environment stakeholders. Planners must ensure its preservation and improvement in rezoning and development deliberations. Placing it equal alongside economic and social factors. This means identifying and protecting sites for biodiversity. And incentivising developers, landowners and occupiers to improve their assets. Biodiversity impact assessments are essential. Local governments can provide the forum. Bringing together the various stakeholders who must collaborate to support biodiversity. They have a key role to play in educating those stakeholders of its importance.

Developers, landowners and occupiers must look to improve site and asset biodiversity. This may include greening roofs or hard standing, creating wildflower meadows or ponds. Maintaining biophilia without pesticides, using sustainable urban drainage systems (SUDS). As well as establishing maintenance schemes which supports long-term biodiversity. Whilst this raises upfront and ongoing costs, such enhancements can increase value too.

Occupiers and renters find assets with greenery more appealing. Biodiverse assets may benefit more from quicker building permits and greater community support. Operating costs can fall, for example by lowering heating and ventilation requirements. Funding may become cheaper if securing sustainability-linked finance. Insurance may be lower through better climate resilience. It makes ethical and financial sense.

Biodiversity: Cannot be ignored

Whilst biodiversity regulations have evolved in recent years, more change is likely. Awareness of the importance of this topic is rising. Australia’s commitments to biodiversity protection needs more radical action. The legislative landscape in Europe is more stringent than what we have. For example, the UK Government recently imposed a 10% net biodiversity gain for all large developments. Biodiversity rules will harden here also, forcing industry laggards to adapt.

ESG is already leading occupier, investor and consumer preferences regardless of legislation. Stakeholders have much to gain by prioritising a biodiversity approach now.