The Rancho Mission Viejo community in Orange County, California, has dedicated approximately 75 percent of its 23,000 acres as a nature preserve. The builder's move into what's being billed as California's largest new community, which is expected to house about 35,000 residents in 14,000 homes surrounded by retail and other commercial space, has only brought in big sales. and also met local wildfire resilience requirements.
This is an example of stars aligning for conservation goals and financial investment. The U.S. real estate industry has yet to promote biodiversity at the same level as it promotes decarbonization, but future government mandates could change that.
Real estate-related conservation efforts like the one in Orange County are a global ray of sunshine for millions of species at risk of extinction, largely due to habitat loss. The biggest recent success may have been in the UK last month. New regulations have come into force that promote net biodiversity benefits as well as reduced impacts at development sites.
According to the regulation, large-scale real estate development projects are now required to achieve a net benefit to biodiversity of 10 percent, calculated through a measurement framework that takes into account the size, quality and characteristics of the natural habitat at the construction site. It is being It also goes a step further by allowing biodiversity offsets elsewhere, but only if on-site habitat restoration is not possible. This change could stimulate innovative approaches to development and an emerging market for biodiversity credits, like carbon credits before them.
There is a reason why UK regulation focuses on new development. “It doesn't take much to degrade a habitat,” says Eyal Frank, an environmental economist and assistant professor at the University of Chicago. “It can take a very long time to get back to baseline levels.”
Stopping destruction before it occurs is the most effective way to limit habitat degradation and thus species loss.
Biodiversity assessment in real estate
The emphasis on biodiversity reflects another sustainability cause that is already seeing a lot of movement: the decarbonization of buildings. In this case, a combination of regulations, incentives, and demand from investors and occupiers has driven homeowners to adopt new technologies and sustainable material choices.
However, there are some differences from promoting decarbonization. While the impacts of carbon emissions are global, biodiversity is primarily a local challenge. Real estate developments that destroy natural habitats can endanger the safety of many species by taking up space and disrupting food chains. Biodiversity decreases when various types of plants and animals become extinct. According to the Urban Land Institute (ULI), real estate businesses impact biodiversity through three main pathways: land use change, unsustainable sourcing and climate change. While the third problem has been addressed by a wave of improvements in building energy performance, the other two still require unique solutions. So where does that impetus come from?
Proponents of biodiversity conservation or restoration point to several benefits of their efforts. ULI recently released a detailed report on nature-friendly and biodiversity-friendly real estate. This report lays out a number of business cases for investing in nature.
Positive solution: compliance with UK-like regulations. Improving asset value. Opportunities to make low-cost improvements on-site, such as landscaping and native plants that reduce water use. Successful community participation. Interest from stakeholders such as investors. Benefits for climate resilience. Compliance with disclosure standards. Acquisition of various building certifications such as LEED and WELL.
The thing that can encourage effort the quickest is the adjustment angle.
Tenants may not be able to provide the push necessary to get biodiversity-centered properties off the ground, said Andrew Busch, president of sustainability-focused development firm Morgan Creek Ventures. “It will probably be quite some time before tenants consider biodiversity as part of their leasing decisions,” Mr Busch said. “I think it's more likely due to the regulatory framework. … And I think biodiversity is young, the science is young, and politically young in terms of debate.”
Regarding the housing sector, Jameson Hartman, vice president of proptech venture capital investor RET Ventures, shared a similar view. “If a resident knew there were 100 different plant species on the property, compared to 'I know there are two to three types of trees and four to five types of plants.' Will the results change? That’s the only hard part.”
Regulatory frameworks like the UK's rely on standardized scoring systems and specific carrots and sticks, providing a kind of top-down mandate to keep new construction on track towards biodiversity. may be provided. Several U.S. cities are already moving down this path. ULI's report points to Seattle's Green Factor and Washington, D.C.'s green coverage, but these focus on landscaping and not ecology or biodiversity. Prioritizing such an approach comes with significant challenges.
Measurement challenges
Unlike measuring a building's carbon footprint or the carbon in its walls and floors, which are relatively simple numbers, it is difficult to develop a standardized system of biodiversity values, impacts, and relationships. is. Species occupy a complex network of interdependence, and what is good for one species may be bad for another.
In the UK, where the Biodiversity Net Gains Regulations have recently come into force, a complex set of regulations takes into account what type of habitat is being affected and whether it is particularly irreplaceable, such as part of an ecosystem. Destruction is evaluated according to a rubric. of the ancient forest.
Busch said it may take a concerted push from major industry groups to take the lead.
“I think LEED has been very helpful in educating a lot of people about what's possible on many different levels,” he said of building sustainability.
When it comes to biodiversity in development, a clear cheerleader has yet to emerge.
“Who will develop the ecological framework for real estate and real estate development in terms of biodiversity?” Bush said. “Who is going to come out and get something that can be quantified and measured so that you can calculate impact fees and things like that?”
This complexity makes it difficult to set up any type of consistent measurement scheme.
The Suppression of Inflation Act, a 2021 federal law that made funding available for projects ranging from clean energy investments to energy-efficient home improvements, serves as a rubric for the mandate to promote investment in biodiversity. there is a possibility.
“I think we'll probably define at the local level specifically what we need, and then maybe the funding could come from the federal level,” Hartman said. “I wouldn't be surprised if that were the case.”
Beyond the challenge of setting an assessment framework, promoting biodiversity goals can create friction with other green goals.
“Cities like Chicago that have green roof ordinances often compete for solar space,” Busch said. “You have to decide what is most important to do about that particular property, in this case the roof.”
A focus on biodiversity may be the next logical step on the path to sustainable real estate after the current focus on energy efficiency. “It took us 10 years to bring operational carbon and all-electric buildings to the forefront,” President Bush said. “I think it will take another 10 years to really bring about embodied energy.” [the total energy needed to create a given product or service] To the front line. I think biodiversity either works in step with embodied energy or follows the path of embodied energy. ”
technology angle
Where private property owners may hesitate before investing in biodiversity solutions, government-owned property may represent an attractive market for providers. Government acreage and land holdings may represent an area where biodiversity technology providers may see their first real market.
“There's an influx of consumer demand for national parks,” Hartman said. As visitor numbers increase, agencies may need to rely on technology solutions to proactively avoid or offset human disruption. “I think that’s probably the easiest sales cycle for someone to get into.”
He added that there are huge opportunities for biodiversity solution providers in this niche, whether it's solving existing ecosystem degradation or mitigating ongoing impacts.
Additionally, Mr. Hartman encouraged biodiversity technology providers in the real estate sector to focus on real estate outcomes and returns.
It affects the line first and foremost. “There is not much benefit to being a first mover as a property owner. [Owners want to] Be the latter and say, “Okay, this technology has been adopted, this technology is valid.” It improves our bottom line and also benefits the environment. ” ”
While there is a sense that on-site is the best option when it comes to energy generation, Mr Bush said the threat to biodiversity is larger than the site itself.
“I'm intrigued by where the idea of biodiversity is going, breaking it down into urban, suburban and rural areas and thinking about the larger ecosystems that cities and our projects are part of. And that's really fun. I think.”
