Poland The cost of going green

One thing which has come into my mind quite recently is that climate denial is becoming very, very strong, especially in the United States and in the UK, and we're already hearing Trump say, for example, burn more oil. Also, I heard the opinion on the market that there's not quite so much enthusiasm for ESG as there was. Is this a real problem?

Well, that's the political narration, but I like to base my opinions on facts. And the facts are that it is impossible to continue the way we are going. There must be a change in our respect for the environment, in our respect for natural resources, because they are limited. And there is climate change, we can't deny that. Let’s take real estate, where adaptation to climate change brings on quite significant capex.

We know there will be more and more extreme weather events that are caused by climate change. And that's what we must deal with. So, I do understand that there is climate denial, because it's hard to accept a new reality, and it's hard to accept something that requires different behaviour from us. I also believe that one reason for climate denial is a lack of understanding, a lack of education about these problems. Physical climate risk is now a board-level issue. The wrong data can mean mispriced assets, stranded investments, and failed audits.

Is going green going to be expensive?

I prefer we say going sustainable than going green, as there is a risk of greenwashing that we must consider. Of course, there is some investment that needs to be made in the transition. The change that's required is not a short-term view, not like a one-year Excel budget, but a longer-term view. So that's important, and that's a clash with the political narration, because most of the politicians have a pretty short-term view; unfortunately, the same often applies to businesses.

Investment is required to reduce the use of resources, cut emissions, adapt to climate change, reduce other negative environmental impacts, but there are also business opportunities in addressing these issues. Let’s put it this way – the stake is making our business and asset future-proof or stranded. Focusing on sustainable development is not about not doing business, but about doing business with respect for the natural environment and for people. In that basic definition of sustainable business, there is a limit to financial growth, because financial growth cannot come at any cost. It has to come within the boundaries of environmental and social protection. I believe that the solution is education. At school, we are just starting with climate education. So there is hope that future generations will be more aware.

This might seem a silly question, but would you say the real estate industry is advocating for these necessary changes, or is it just following the trend?

Well, I would say that, especially in the Polish market, our real estate is an example of an increasing number of sustainable buildings and forward thinking. In Poland, we have the highest number in Europe of square meters of commercial real estate with green building certification, which means that our real estate is modern and more energy efficient than in other European countries so we are privileged in that respect, but of course, as a whole, real estate is very challenging because the emissions are high. It's one of the sectors that has very high emissions.

Final question, because it did come to my mind. That figure 40 pct which I mentioned earlier, represents the total contribution of real estate to global carbon dioxide emissions. Well, it's 40 pct now as I understand it, and it was 40 pct ten years ago. So not much has changed?

No, no. old buildings are still with us. Even if the new ones are energy efficient, the old ones have not been changed. In the EU, current data says that 75 pct of buildings are not energy efficient. That’s 75 pct with all the European Union countries together. And most of these buildings, around 95 pct of these buildings, are going to be with us in 2050. That's when the European Union aims to be climate neutral. So, there is a big pool of buildings to be renovated. You know, energy prices are going up, and they will go up. So for society, it is better to live in a building that does not have energy leaks, that is more energy efficient and with lower energy bills. These are the topics that should be on the political agenda in terms of actions and not denial because, in my view, the consequences of this denial and inaction will hit us all very hard, being both economic and health-related issues.

Let me please conclude with this: one may denial climate change and may not have an enthusiasm for ESG but for sure is interested to breathe clean air and reduce respiratory cardiac and mental health risks (all associated to air pollution), have access to affordable energy, water and live in a city that is adapted to climate change (reduced heat islands, infrastructure to mention a few) and is safe. And if still not, one for sure is interested in capital risk. There is a need for a strong change in the narrative. Sustainability and climate risk data is no longer just about ESG reporting — it’s capital risk data.