Michael Rudd, partner and co-head of the Energy & Utilities sector group at Bird & Bird, says: “London has always set out to present itself as a global brand – as a global city of excellence and as a city of innovation. But if it wants to maintain and promote that brand, it has a responsibility to improve the physical and social environment of the city to benefit the lives of citizens that live here, commute to work here and those who visit.”
“London should also be an exemplar. It needs to harness its citizen’s expertise to (co-)innovate and share best practices.”
Is London up for the challenge? Absolutely, but the paths to environmental sustainability successes for the city remain incredibly complex.
London has significant plans in place. The Mayor’s Office and London Assembly’s net zero target is for 2050 but it is accompanied by other bold ambitions, for example, to have the cleanest air of any major city by that date. There are plans for London to become a zero-waste city too, meaning that by 2026, no biodegradable or recyclable waste will be sent to landfill and by 2030, 65% of London’s municipal waste will be recycled.
The pandemic has accelerated awareness of, and engagement in, environmental sustainability within London. There are two potential concerns: accelerating some environmental sustainability initiatives too quickly; and maintaining the momentum post-pandemic.
On maintaining the momentum, Matthew Farrow, Director of Policy at the Environmental Industries Commission (EIC) says: “It will be interesting to see if the focus on the link between public wellbeing and the environment is maintained post-COVID. London is an exemplar for better or worse, given its policy resources. For example, the London Ultra Low Emission Zones tend to be adapted elsewhere in the UK such as Birmingham’s recently launched Clean Air Zone. It is crucial that London is a leader.”
On the legislative front, some wonder whether the pandemic should spur politicians to make the Environment Bill more ambitious.
Jim Mills, founder of Air Monitors Ltd and Managing Director of Scotswolds Ltd and who was instrumental in London’s Breathe London initiative says: “Trying to unpick the effect of the Ultra Low Emission Zone from the lockdowns is difficult, but it does show the level of ambition that politicians could have.”
“A lot of people went into active travel (i.e. cycling and walking) and the London boroughs brought in ultra-low emission streets admittedly with some controversy.”
“We have the Environment Bill coming through. Will they be bolder and take the pandemic into account? They could be far more ambitious if they want emissions to remain lower.”
EIC notes in its “Strategy to reality: Getting smart cities to deliver for the environment” report that although “environmental data sets are often rooted in analogue methods…this is changing as cities open up their data” citing the Breathe London initiative as a positive example. EIC recommends maximising “the amount of open environment data” and making it “available, and in usable formats, to citizens and businesses” to “engage the public, spur behaviour change and create opportunities for commercial smart innovations”.
EIC notes in its “Strategy to reality: Getting smart cities to deliver for the environment” report that “Breathe London combines state-of-the-art sensor technology with new data analytics to better understand Londoners’ exposure to air pollution. Measuring harmful pollution at thousands of locations informs data-driven solutions to clean up the city’s dirty air. Three complementary projects are taking place to help citizens understand what’s happening at ground level.”
Mills says “The project was born out of the GLA who became aware new technologies were coming out at much lower cost, sometimes 50 to 100 times lower than the conventional cost. They wanted to determine if these worked. That attracted philanthropic funding from the Clean Air fund and from Google and other big blue chips.
“The project included highly instrumented Google View Street cars and 100 sensor pods on lamp posts and buildings throughout the city. The project was to determine did they work? The answer was yes. We could measure hyper locally.
“We also looked at large population areas, hospitals and care homes. Sensing in real time is much faster than conventional networks for compliance. For the first time, we could separate local emissions from imported emissions. Knowing this enables stakeholders to better determine strategies both to tackle local emissions and engage with other urban centres from where London imports or exports emissions.”
The Greater London Authority (GLA) must rely on the 32 boroughs and the City of London to drive change. Transport responsibility involves Transport for London, Highways England and the 32 boroughs and the City of London. Beyond public bodies there are regulated private businesses. This fragmentation is further complicated by the array of private sector stakeholders needed for London to achieve its targets.
Yet such diversity of perspectives and expertise represents a significant strength. Farrow cites the London Energy Transformation Initiative, a network of a thousand building and environment professionals that is driving change across the sector.
“For London – in all of its component parts, public, private, infrastructure, technologies, citizens, expertise – there needs to be a systems-based approach to identifying, strategising, and implementing solutions.”
Michael Rudd, Partner at Bird & Bird
Rudd says: “The other challenge to solve is regulatory fragmentation – environmental sustainability goes beyond environmental policy and legislation (including the Environment Bill) and existing powers, such as planning, cannot solve everything. A possible solution could be a umbrella legislation, such as a Sustainable / Future Cities Act, which seeks to achieve one of the objectives of the Climate Change Act –unblocking regulatory barriers without having to amend the current fragmented regulatory landscape.”
“When seeking co-innovation, such as in our Innovate UK project, we assessed the market gaps and verified this through user journey testing. Co-founders came from an energy management and efficiency background, not from energy trading or software background and therefore we collaborated with a proven technology provider that already had been trading in other countries using their Virtual Power Plant platform. It has taken nearly three years 3 years to understand the plethora of markets, regulation, and potential revenues and to apply this in a technology-driven solution in order to bring the technology and market solution together in a simple approach.”
“We are also supplier agnostic; collaborating with other route to market providers and energy suppliers to provide best value to our customers. By using a whole systems planning approach, simplifying the user experience and optimising site usage, we can understand the surplus for trading into electricity markets. This is enabling customers to forge a pathway to Net Zero and remain profitable at the same time.”
The public sector can also drive positive change through projects that create (co-)innovation, enable data gathering and instil market confidence.
Stuart Cairns, partner and co-head of International Projects and Procurement Group at Bird & Bird says: “The public sector has the spending power to change things for the greater good. UK procurement spend is £220bn per annum. If sustainability can become a core requirement or a significant factor in award decisions, then this will be the catalyst for a huge shift. Central government is leading the way in terms of messaging with Build Back Better and other similar initiatives. That said, ultimately, it is the individual buyers that can make all the difference, including London’s key public stakeholders that are matching the policymakers’ ambitions with actions. Procurement is the key to all of this. Getting the selection and award criteria and contract specifications right makes all the difference.”
“TfL is committed to reducing carbon emissions wherever possible as part of our wider work to make public transport as green and accessible as possible. The Mayor’s Transport Strategy has committed us to making our rail network carbon neutral by 2030 and reducing our carbon output by 60 per cent of 1995 levels by 2025. As part of these ambitious targets, we are working with innovative partners to help ensure sustainable and green ways of working are at the heart of what we do.
“We’re proud of the work we have achieved so far by using new ways of thinking to bring together the best innovators from cities across the world, those leading research in academia and the private sector to innovate solutions. Our work with industry leader Bosch is just one example of can be achieved when public transport and technology combine to work towards lasting change. For example, with Bosch we collaborated with start-ups and innovators who wouldn’t usually get to work on projects that affect London and showed us new ways of working that we may have missed by using traditional methods. By finding new and innovative ways to work within current processes we are seeing results that help us work smarter and achieve great results.”
London’s global financial position places both a responsibility and opportunity on the financial services sector to embrace and embed environmental sustainability.
Factors driving this include:
Embedding is multifaceted as noted by Raphaela Schmid, Vice President, Sustainable Investing at SUSI Partners.
“We view ESG analysis as a fundamental part of investment risk management and value creation. Accordingly, we have created a framework that is designed to review sustainable investing matters, assess potential risk factors, and provide transparency to our clients. The framework sets forth a trajectory that every potential investment opportunity has to pass through – from the initial screening and due diligence process to an active asset management approach, including the detailed monitoring of environmental and social KPIs post-acquisition.”
Raphaela Schmid, Vice President, Sustainable Investing at SUSI Partners
Marco van Daele, Co-CEO & CIO: “To us, it has always been clear that a successful transition towards a sustainable energy system cannot be achieved by only pulling one lever, e.g. energy production. Addressing issues of intermittency through energy storage and making full use of potential efficiency gains on the demand side are equally important to our holistic approach. That is why we have moved away from technology-specific funds towards a fund model that allows us to incorporate all these elements in one strategy. This new approach also takes account of the increasing convergence of these technologies, which in turn creates new ways of monetising those assets. One example of this would be the combination of behind-the-meter solar rooftop generation with battery storage systems.”
Richard Braakenburg, Managing Director, Investments: “In a densely populated city like London, one of the main areas of potential investment at scale could be to increase the penetration of distributed electricity generation and/or related energy storage options (in-home or business batteries or electric storage heaters) to ensure the local grid can be used as flexibly as possible.”
London’s energy transition needs require cooperation, networking and strategy.
As an example of a need for a systems-based approach Rudd says: “Key stakeholders need to work together to determine an investment strategy that co-ordinates the competing needs for the green electrification of vehicles, local data centres and distributed generation.” Rudd cites the Green Recovery initiative involving Ofgem and DNOs as an example.”
“Gaps (policy, regulatory, standardisation, etc.) also need to be filled, which prevent built environment permanent energy reductions to be delivered at scale.”, Rudd says.
Richard Braakenburg, Managing Director, Investments at SUSI Partners agrees saying: “One of the single largest challenges faced by London and other major cities is the necessity to make the existing housing stock more energy efficient. A concerted effort of all London stakeholders to revive a comprehensive programme for housing energy efficiency, taking the lessons learned from the green deal programme and boosting frameworks such as Re:fit, could yield significant results.”
There are also huge costs to this but experts are grappling with market solutions.
Rajvant Nijjhar, Director of BankEnergi Ltd says: “The key challenge that we are addressing is to find profitable ways for organisations to decarbonise, through a move away from fossil fuels to electric heating and vehicles.
“Many organisations have set early 2030 targets to achieve net zero. However, decarbonisation inevitably means electrification. The price differential between electricity and gas will likely increase operating costs in the short-term.
“Our users tell us that there is internal resistance to the implementation of clean energy projects since this means increasing OPEX, and are turning to us to simplify the options available to them.
“We believe the immediate future to net zero will be 80% Demand Side Reduction and 20% energy storage. New technologies such as hydrogen hybrid heating systems and fuel cells for HGVs will be important for balancing energy system use but these realistically won’t be implemented until the late 2020’s or early 2030’s, especially in London, and may also be expensive.”
“London’s other major utility challenge is water in which I remained concerned that water regulations continue to constrain innovation (certainly by comparison to electricity and gas).”, Rudd says.
Vattenfall want to make fossil-free living possible within one generation – so how does London achieve this?
Holgate says “Whatever you’re talking about – whether it’s heating or electricity or transport or something else – London will only achieve fossil free living in one generation if there is a coordinated plan and if there are well-thought through ways to make it affordable for consumers. Technology isn’t the problem, what’s needed is better coordination – right the way across every sector of the economy – to reduce emissions in every area of our lives. But none of this is new. What we need to see now is action: practical policies to put this into action so businesses like Vattenfall can get on and make it a reality”
In considering Vattenfall Heat UK’s role, Holgate says “Heating is responsible for a third of UK greenhouse gas emissions and over 25 million homes are still burning fossil fuels to keep warm. The district heating sector is ready to invest. According to the Committee on Climate Change, it could deliver 20% of decarbonised heat in homes by 2050. Vattenfall Heat UK builds low-carbon district heating and wants to play its part in meeting the heat decarbonisation challenge. Rolling out low carbon heat requires a different approach – which we call ‘zoning’ – to ensure that the most appropriate technologies are installed in different parts of London, and that property owners are incentivised to connect to low carbon heating. In London we already have two projects under way: Brent Cross Town (partnering with Argent Related; and Belvedere, South East London (partnering with Cory Riverside Energy).”
Looking ahead, Holgate says “We have a vision for a much bigger heat ‘super network’ which would run through four London boroughs, connecting the equivalent of 75,000 homes to low carbon heat and helping improve air quality in Bexley, Greenwich, Newham, and Barking & Dagenham. We have done this elsewhere – our heat network in Amsterdam now connects almost 180,000 properties, with new sources of low carbon heat as well as more properties able to join and expand the network. The infrastructure we install to power climate smarter living is future-proofed to allow new technologies and sources of green heat to take advantage of it.”
London’s building and construction sector has significant challenges due to its high CO2 emissions, reflecting the global trend of the sector contributing 39% of all carbon emissions according to the World Green Building Council.
Sophie Phillips, a senior associate in Bird & Bird’s construction group says: “In the construction market, awareness of these issues has increased hugely.”
Finance is an important driver.
“Banks are being pushed to ensure that a certain amount of funding is directed at sustainable projects, and this can impact pricing with preferential margins being offered. That is feeding into the construction market.”
Sophie Phillips, Associate at Bird & Bird
Although higher sustainability standards are expensive, they may also be cheaper long term.
She says: “Even where sustainable solutions may increase initial capital expenditure, the intent is to reduce whole life costs. Plus the equivalent cost of a post construction retrofit in order to address sustainability requirements are likely to be higher.”
In turn, she says “stakeholders are also wary that legislation could leave them with stranded assets that cannot be monetised because they fall foul of tightening regulations.”
To achieve BPS’s vision of creating a place that embraces their heritage, engages with their present and protects their future, they focus on four inter-connected sustainability priorities: Jobs & Education; Economy; Environment; and Community.
“BPS has always taken a holistic view of sustainability and the interconnectedness of building a new town centre in a brownfield site within London’s Central Activities Zone. At the heart of this is people and human activity, without whom they would be no town centre. The place needs to be environmentally welcoming and attractive. We are custodians not only of a Grade II* listed former Power Station, but also of the sites urban ecology including two species of Schedule 1 birds, Peregrine Falcons and Black Redstarts. As well as greening the site with two new parks, it was also important to replicate the brownfield habitat with ‘brown’ or sedum roofs to encourage the vertebrates that Black Redstarts feed from. The Falcons required a temporary nesting tower so works could proceed on the Power Station (their previous nesting site) and a specialist was appointed to continually monitor and advise on maintaining the birds at BPS who will hopefully relocate back into a purpose built nesting ledge in 2022.”
“Building a new town centre also brings huge benefits and opportunities in terms of jobs – circa 20,000+. By partnering with our local authority (Wandsworth) and contractors we have been able to maximise construction opportunities for local people (150+ apprenticeships), including an onsite construction training centre and furthermore establishing Battersea Academy for Skills and Employment (BASE) for the jobs on the operational estate and targeting a Local First approach with businesses moving to BPS.”
“As for most people our physical world and experience of it dramatically shrunk when the first lockdown was announced. The challenge was how to continue a programme of meaningful community building and engagement without being able to meet people face to face and to understand the urgent needs of our community. The first response was to go hyper local and grass roots and talk to the organisations and local community leaders who were dealing with these challenges in the vicinity. Immediate issues around food poverty were quickly identified and we worked closely with the BPS Foundation, set up by the shareholders, to direct them to the projects such as Waste Not Want Not that were making a real difference on the ground.”
“Very quickly we were made aware by a local headteacher who we had worked with on our schools programme, that many children were unable to access home learning as they had no device or broadband. Out of this need, Power to Connect was born, to raise awareness of digital exclusion and to support local families across Wandsworth. We partnered with Wandsworth Council education department.”
There is some risk that some regeneration projects concentrate on delivery in the immediate post pandemic phase. However, the long-term nature of such projects should see this addressed.
Vimal Bhana, director at Joule Infrastructure, says: “For some projects, the pandemic has shifted the current focus away from environmental/sustainability priorities to more immediate delivery priorities. This creates the risk that some initiatives may not be implemented, particularly, if they need to be integrated during the development phase.
“However, the benefit of major regeneration schemes is the extended build out which means sustainability and environmental initiatives will make their way back as a priority.”
The key is a coherent approach within projects and from regulators and policymakers. Bhana adds: “The effectiveness of sustainability and environmental innovations is a direct function of its ability to be deployed across the whole regeneration project in a coherent manner. The transient nature of the regulatory framework needs to change to give certainty to projects with long build programmes spanning multiple building and planning regulations.”
Concerns about the environment but also broader ESG criteria are coming to the fore in the Hotels, Hospitality and Leisure Sector.
Bird & Bird real estate partner and head of international hotels, hospitality and leisure, Karen Friebe says: “Clients are elevating all of their considerations on sustainability, to a degree that I have not seen before, and reviving discussions about greening up their contracts and their leases.”
She says one significant development comes from the Energy and Environment Alliance which is working to produce a precedent bank of clauses for contracts to ensure sustainable practices are followed.
There is certainly demand.
“The big estates in London are saying when we grant a lease for a shop or an office, we’re going to give the tenant our green standards and put a covenant in the lease that says you have to comply with these.”
She says we are seeing a broader cultural, economic and social sustainability approach which also includes diversity and inclusion.
“People are now choosing hotels that fit with their own ethos. There is customer demand, but I think it is bigger than that now. There are also organisations doing this because they think they should be.”
Karen Friebe, Partner at Bird & Bird
Despite other pressing concerns, the retail and consumer sector is seeking a sustainable recovery.
Graeme Payne, partner and head of Bird & Bird’s international Retail and Consumer group, says: “Sustainable recovery would be the phrase rather than just pure recovery. For the majority of our clients, whether that’s hotels, food and beverage or luxury retail and fashion, sustainability, alongside diversity and inclusion, are two topics that are top of mind for most of the C-suite.”
He says that businesses have had time to reflect on strategy, customer and staff concerns during the pandemic.
Calculations of CO2 footprints and other ethical concerns now must be considered well beyond the core business and buildings.
“In both fast fashion and luxury fashion, the larger players are investing in end-to-end sustainable and ethical supply chains. Some are realising they’ve got to put their hands into their own pockets to help and support their supplier network.”
Graeme Payne, Partner at Bird & Bird
of all respondents see it as important or extremely important to “find innovative ways to collaborate externally with competitors and partners to achieve their sustainability strategies”
He says that his team is working on contractual obligations and contractual consequences, in some cases with “termination of long-term high value supplier relationships where certain suppliers will not or cannot meet sustainability and ethical criteria”.
But companies are looking at ways to work together as well. A newly published Bird & Bird sustainability survey of 110 clients conducted with its consultancy arm OXYGY, showed that 80% of all respondents see it as important or extremely important to “find innovative ways to collaborate externally with competitors and partners to achieve their sustainability strategies”.
Payne sees specific London challenges for some sectors.
“There is going to be a lot of repurposing of retail real estate – there will be some prime opportunities for certain brands and a challenge for all brands to get consumers both back in to stores and to spend in stores. The in-store experience will need to step up a number of notches. In addition, London needs to maintain its place at the luxury fashion top table, in terms of working with and not losing ground to Milan, Paris and New York. London will need to think about its place and prominence in the fashion calendar, as well as the business and legal environment that it provides for brand collaborations, designers and how business and consumer data can be used to drive innovation.”
The environmental sustainability challenge facing London is profound as is the opportunity. City leaders and indeed citizens are seeking ways to make London more liveable and workable, while meeting a host of testing environmental targets and setting an example for the UK and the world. Post-pandemic, the issue of sustainability has risen up the agenda for city stakeholders but the delivery mechanisms are still emerging and developing.
We are already seeing important developments from green finance to technology, better focused regulations, different business approaches, improved data and measurement, and the creation of more effective networks of relationships. Every sector is impacted. The legal implications are huge as regulations shift from a soft to a hard approach, the vocabulary of contracts changes and new business opportunities are formalised with the demand for strategic advice rising significantly as a result.
Jennifer Holgate, Senior Legal Counsel at Vattenfall Heat UK
Jim Mills, Founder of Air Monitors Ltd and Managing Director of Scotswolds Ltd
Marco van Daele, Co-CEO & CIO at SUSI Partners
Marius Dorfmeister, Co-CEO & Global Head of Clients at SUSI Partners
Matthew Farrow, Director of Policy at the Environmental Industries Commission (EIC)
Rajvant Nijjhar, Director of BankEnergi Ltd
Raphaela Schmid, Vice President, Sustainable Investing at SUSI Partners
Richard Braakenburg, Managing Director, Investments at SUSI Partners
Rikesh Shah, Head of Commercial Innovation at Transport for London (TfL)
Sarah Banham, Head of Community and Sustainability at Battersea Power Station Development Company (BPS)
Vimal Bhana, Director at Joule Infrastructure
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