Climate Risk Exposure in the Built World

The built world is facing a once in a generation existential threat. Challenges including rising interest rates, rampant inflation, tightening environmental regulations, and capital markets pressure on non-ESG-compliant assets.

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The Built World Ecosystem

The built world constitutes any man-made enclosures, spaces, structures, and infrastructure created to adapt the natural environment into a habitable and useable area for the purpose of living, working, and playing. Within the built world ecosystem, buildings intersect with other major industries and sectors of our global economy, including food, water, energy, mobility, waste, and infrastructure.

37% of global GHG emissions

Representing 37% of global GHG emissions, it will simply not be possible to meet wider climate targets without decarbonising our built world. Emissions occur throughout the building lifecycle, from the carbon embodied in building materials, through to the fossil fuels used to power building operations and construction processes.

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$21tn value at risk across residential + commercial real estate alone

As much as $21tn of global residential and commercial real estate at risk of experiencing major valuation write downs as a result of climate risk (stranding risk). It will be critical to adapt our built world to address physical risk (heat waves, extreme weather, flood risk) and transition risk (regulatory compliance and reporting, capital market adjustments).

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$83tn to retrofit the Built World

Over $83tn spend will be required to achieve a net zero built world by 2050, with $51tn spent on buildings alone. In Europe, 90% of the building stock that will stand in 2050 has already been constructed [4], making the retrofitting of existing buildings through energy efficiency and electrification measures key.

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$7.2tn per year in new construction

A rising global population and growing urbanisation will see $7.2tn a year spent on the construction of new built world assets from 2020-2050. Distribution will vary geographically: 90% of existing buildings in Europe may be standing in 2050 but 80% of the African building stock is not yet built. Prioritising carbon neutral or negative development will be critical.

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70% of Built World tech investment has climate impact

Over time, built world tech investment has become increasingly focused on climate solutions. Over two thirds of built world tech investment is allocated to climate themes, up from less than a fifth five years ago (A/O research). The remaining built world solutions include retail, hospitality, property management and real estate transactions, which are excluded from this analysis.

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Introducing the A/O Built World Climate Taxonomy

Tackling the built world’s footprint is not without its challenges. One of the world’s most analogue industries, the heterogeneity of the global building stock and the complexity of supply chains ensure there is no silver bullet –rather an ecosystem of solutions will be required. This creates an urgent need for both direct decarbonisation technologies (such as heat pumps and carbon negative cement) alongside critical digital enabling tools (such as advanced design software and high resolution imagery) that provide a foundation from which to introduce other climate technologies. Below we outline decarbonisation and climate adaptation opportunities in the built world through the lens of the building lifecycle, across design, construction, operations, and disassembly workflows.

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