Building operations and materials in the commercial real estate sector account for about 30 per cent of carbon emissions.Grigory Fedyukovich/iStockPhoto / Getty Images
Since it was built in the late 1980s, one downtown Toronto bank tower has stood out for its distinctive slim profile, red granite cladding and energy-conserving reflective windows.
Beyond its physical appearance, the 68-storey tower at 40 King St. W. now stands apart as Canada’s largest zero carbon certified building. In awarding the designation last year, Canada Green Building Council president Thomas Mueller said it “validates that zero carbon buildings – whether new builds or retrofits – are both technically and financially feasible for owners willing to innovate and invest in a low carbon future for Canada.”
That future looms large for the commercial real estate sector, whose building operations and materials account for about 30 per cent of carbon emissions, according to the federal government. Last month, Ottawa announced plans to raise its carbon tax to $170 a tonne by 2030, up from $30 currently, as part of the federal response to climate change. Meanwhile, from various quarters, calls intensify for action on sustainability measures.
“The investor community has become very engaged and is driving the direction the world economy is taking [on carbon emissions] even more than government,” says Deloitte partner Henry Stoch, Vancouver-based leader of the consultant firm’s sustainability and climate change practice. He also cites a “massive shift in expectations” by a younger generation for buildings and employers that demonstrate environmental values.
The Scotia Plaza tower at 40 King St. in Toronto.WZMH Architects
Some major building owners, such as those of 40 King St. W., have chosen to get ahead of the curve on emissions reduction by establishing long-term road maps to reduce the carbon footprint of their properties.
“I would say a good ESG [environmental, social and governance] strategy is playing offence, not defence, and we are playing offence,” says Jon Love, chief executive officer and founder of KingSett Capital Inc., a co-owner of Scotia Plaza (which includes 40 King) since 2016. “We think over a long period of time it will be increasingly valued by our investors, employees, suppliers, tenants and our various constituents; that is the long-term payback.” Last November, Mr. Love’s private equity real estate investment firm with $18.4-billion of assets ranked first in North America in an annual ranking of global real estate owners who integrate sustainability measures into company and fund practices.
The strategy of KingSett and like-minded building owners “could turn out to be the smart money play,” says University of Waterloo sustainable building researcher John Straube, an associate professor with the department of civil and environmental engineering and the School of Architecture, citing rising costs of carbon and the growing appeal of environmentally friendly office space.
Over the 30-year-plus life of 40 King, successive owners have invested in energy efficiency and other updates. Since purchasing the property, KingSett has spent about $8-million in upgrades that include energy-saving lighting and technology improvements to building automation systems. In 2018, the building received platinum certification under the green building council’s Leadership in Energy and Environmental Design scorecard for efficiently run operations and maintenance. Over the past five years, the carbon emission intensity of 40 King has dropped 55 per cent while earning other third-party certifications for air quality, according to KingSett.
In early 2020, after a review of KingSett’s ESG strategy to accelerate carbon neutrality across the portfolio, officials selected 40 King for a zero-carbon pilot project. The bank tower already was well on its way to carbon neutrality because it mostly ran on electricity, not natural gas, and used thermal tanks that generate cool air in off-peak hours for use on hot days.
“We chose an asset that would yield the least burden so we could learn the most out of the process and apply it to other properties,” KingSett director of sustainability Kit Milnes says. Last year, the company planned to replace the few remaining non-electricity systems in the building, including a natural gas-heated underground garage, to cut carbon emissions. But the coronavirus pandemic disrupted the timetable, Mr. Milnes says, with conversions now to be completed by this fall.
One of KingSett’s allies in attaining zero carbon certification for 40 King is the lead tenant, the Bank of Nova Scotia. A former owner of the building, the bank has its own decarbonization agenda that includes spending $100-billion by 2025 to fight climate change.
“As a tenant, it is very difficult to get to the finish line without strong partnerships from our landlords,” says Darren Da Silva, vice-president, asset management and special projects for Scotiabank’s real estate division.
“Large tenants and landlords need to be partners and go hand in hand,” he adds. “Understand there may be some incremental upfront costs, but it pays back both economically and in the productivity of the employees.”
Decarbonizing 40 King, though hard to see with the naked eye, affects everyone in the building, Mr. Da Silva says. “Air quality has always been top-notch,” he says. “This was about delivering that air quality with less electricity.” When the bank had to confirm new global standards for coronavirus protection, he says Scotia Plaza (which includes the original bank building) already exceeded them.
Even with various carbon-squeezing efforts, including in the building’s food court, KingSett still needed some offsets (permitted under the certification) for 40 King to qualify for recognition. Mr. Milnes said his company only chose environmental projects, such as a reforestation project in East Timor, where the offsets generated meaningful local impact.
Zero carbon advocates hope others follow KingSett’s lead in developing a carbon-reduction road map for their properties. Typically, building owners schedule capital improvements, including energy audits and heating and cooling system upgrades, says Fin MacDonald, manager of the green building council’s zero carbon program. “One thing they were never doing was looking at how to transition from fossil fuels; that is the new piece.”
Since introduction of the council’s certification program three years ago, about 60 property owners have signed on to develop carbon emission reduction plans. “Carbon has to be the question that we ask if we are going to solve this climate change problem,” Mr. MacDonald says.
While 40 King grabbed the headlines – and other big carbon reduction projects are pending for KingSett – Mr. Love also praises small-scale achievements. For example, his company recently upgraded a dozen lights in a downtown Toronto office lobby. “There was no glamour, but it cut the electricity cost by 90 per cent,” he says.
Mr. Love, who describes the move to zero carbon buildings as “evolution, not revolution,” emphasizes the value of a long-term plan, and staying ambitious about outcomes. “I’d be disappointed if we followed just that [plan] and we were not able to accelerate.”