Real estate industry a top culprit in destroying biodiversity

The real estate industry may be pushing ahead with attempts to reduce CO2 emissions and meet climate targets but one crucial issue isn’t being addressed enough – the loss of biodiversity.

According to a recent study by PwC, ‘Nature is our capital’, the real estate industry is one of the main causes of species extinction and the destruction of natural ecosystems due to land sealing and resource consumption.

‘Investors aren’t asking for it much yet but there is an EU initiative ‘Biodiversity 2030’ that will be a big topic,’ Susanne Eickermann-Riepe, chair of the European World Regional Board RICS, among other roles, told REFIRE. ‘They want to protect more land and ‘green up’ cities. New legislation will limit the land we can build on EU-wide. With all of the sustainability measures, there’s a long way to go but cities with more than 20,000 inhabitants will be required to have a ‘greening’ plan. If you build new buildings, you will need to include a green component like in Singapore. In France, there is already legislation in place to green roofs.’

The Nature Conservation Act recently passed by the EU Parliament will also serve as a regulatory framework in future to encourage companies to make areas more nature-friendly. The Renaturation Act lays down requirements that oblige companies to increase biodiversity on their land, particularly in urban areas. As a key component of the ‘Green Deal’, it aims to promote the sustainable use of natural resources and integrate environmental concerns more strongly into business decisions and activities.

According to the Federal Statistical Office (Destatis), an average of 55 hectares per day were sealed with settlement and traffic areas between 2018 and 2021. This is a far cry from the German government's goal of limiting the increase in these areas to less than 30 hectares by 2030 and achieving a circular economy by 2050. The extraction of raw materials such as sand also contributes to the loss of biodiversity.

Climate change and biodiversity are often not correctly connected

Yet many people just don’t connect climate change and biodiversity, according to Elena Winter, senior manager Sustainable Real Estate at Union Investment Real Estate, who spoke to the study: ‘I realize that many people are not aware of the connection between biodiversity and climate change,’ she warned.

Subsequently, companies have so far woefully underestimated the associated risks and have hardly integrated them into their processes, according to the PwC study. More than 80% of those surveyed stated that biodiversity in urban areas is an important issue for the industry yet for more than half (54%), it plays a subordinate or even no role at all in their daily work. Worryingly, it is only high on the agenda for 18%.

At the same time, it is difficult for many companies to implement appropriate measures. For 86% of respondents, the biggest obstacle to implementing more projects to protect biodiversity in the building sector is the interests of tenants. For example, they may complain about the creation of a wildflower meadow or leaving dead wood lying around, according to the study.

In addition, more than half of those surveyed believe that there is a lack of pressure from politicians to implement appropriate measures such as green façades and roofs. Technical obstacles, costs, unrecognizable increases in value and a lack of specifications are also barriers to implementing measures to preserve habitats, species and genetic diversity in real estate.

Torsten Butz, head of Sustainable Investing, Generali Real Estate, agrees: ‘We need guidelines and regulations (to promote biodiversity). And these must be clearly formulated. The more concrete it is, the higher the chances of successful implementation.’

One company taking this on board is Frankfurt airport operator Fraport. On its roofs, it has planted robust plants that can withstand the heat and barren ground without attracting flocks of birds. The company wants to support nature as much as possible on around 600 hectares of green space between buildings, taxiways, runways and runways without restricting the safety and operability of the airport.

Biologist Jürgen Ebert and his team from Wildlife and Animal Services have the task of finding a balance between flight safety, airport operations and nature conservation. In order to make the site unattractive for large birds and thus minimize the danger to aircraft engines, Ebert and his team control the ecological food chains. To do this, they create artificial fox dens. Foxes prey on rodents and thus deprive the birds of prey of their main food source.

Over the past 23 years, the company's environmental fund has supported more than 1,000 projects to promote biodiversity in the area surrounding the airport. With funding of around €39 million, Fraport creates space and incentives for nature to flourish. In addition, hundreds of hectares in the Rhine-Main region have been ecologically upgraded as compensation.

Importance of recognising nature within city limits

‘Especially in cities, biodiversity is a crucial issue; in particular, the well-being and health of people is very strongly influenced by nature…you have to recognize the value of nature within the city limits and not ignore the issue and only see it outside the city,’ said Helena Ivanovic, head of Sustainability & Analysis, KanAm Grund Kapitalverwaltungsgesellschaft mbH, speaking to the study.

Even chemical firms are getting on board: BASF implements a wide range of measures to protect biodiversity at its production sites around the world. In North America, it cooperates with the non-profit organization Wildlife Habitat Council (WHC) at 13 sites, which carries out inspections and certifications. One example is the former Rensselaer production site in New York State, where BASF has been investing in sustainable land use for more than a decade. On an area of 90 hectares along the Hudson River, the company has created a LEED Platinum-certified environmental education centre and a cogeneration plant and ten acres of natural habitat for numerous species have also been built. This habitat is the result of a long-term BASF project to clean up contaminated sites and restore ecological balance.

Extreme weather events such as heavy rainfall, forest fires and droughts have increased significantly in recent years. As the consequences of climate change are being felt worldwide, it is perceived as one of the greatest threats of our time. At the same time, the loss of biodiversity is in danger of being quickly forgotten, even though species extinction and ecosystem loss are increasing exponentially worldwide, according to the study. One million animal and plant species are already threatened with extinction and the population of vertebrate species has declined by 69% since 1970, according to the WWF's ‘Living Planet Report 2022’.

‘Ongoing loss of biodiversity could cost the global economy up to $2.7 trillion a year by 2030’

The climate and biodiversity crises are closely linked. Not only are changes in land use, the overuse of resources and environmental pollution putting increasing pressure on the habitats of plants and animals, but entire ecosystems are also at risk due to rising temperatures. Yet more than half of the world's economic output depends to a high or at least moderate degree on nature and healthy ecosystems. According to a joint study by PwC and the WWF from 2022 titled ‘From Net Zero to Nature Positive - why the German financial sector should focus on biodiversity’, the ongoing loss of biodiversity could cost the global economy up to $2.7 trillion a year by 2030.

The impact of biodiversity loss can be extensive and often unrealized, causing disruption to supply chains, increasing regulatory compliance costs and potentially eroding social license. However, many companies have only just begun to explore their impact on biodiversity loss. Ultimately, it needs to be a team effort, as the study notes.

‘It needs the cooperation of several owners and portfolio holders, like a neighborhood development,’ said Sandra Stassinet, head of Corporate, ESG, Data & Contract Advisory, Commerz Real, taking part in the study.

And although biodiversity considerations can seem arduous, they can lead to better outcomes and help make the value chain more resilient. For example, with careful planning and management of a greenfield residential property development, the work done to avoid the risks of fragmented landscapes and keep biodiversity systems intact can also help improve property valuations. ‘I’m on the board of CTP, a logistics firm in Eastern Europe,’ Eickermann-Riepe said. ‘They’re buying forest land, the same size space as they build on for compensation, and I think this could become a bigger thing, although ‘compensation’ is difficult to calculate.’

Biodiversity impact exists beyond rural areas in towns and cities. There are important roles for local governments, town planners and developers to incorporate nature-related opportunities into their strategic planning, risk management and asset allocation decisions.

As Prof. Dr. Florian Altermatt, president of the Swiss Biodiversity Forum puts it: ‘The climate and biodiversity are literally in the same boat. It is up to us humans to prevent them from capsizing.’