Five months into his role as head of sustainability at Legal & General Capital, John Alker is still getting to know the business. Having left the UK Green Building Council after 15 years, he has switched from advocacy to spearheading a financial institution’s green agenda – one that already had aspirations but needed leadership.
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“A lot of the good things that have been done [at LGC] were being done somewhat on instinct, so one of the tasks put to me was to create more structure around the sustainability approach,” Alker says.
Among those good things is the company’s pledge to make all its new housing stock operationally net zero carbon by 2030. Adding to that challenge is the “huge breadth and variety” of LGC’s housing businesses, from build to sell to suburban build to rent, later living, modular and affordable housing.
No wonder, then, that Alker and his team still have a lot of work to do formulating LGC’s green strategy – and delivering it.
Speaking to PlaceTech in his first interview in the private sector, Alker sets out his priorities and approach to sustainability for housing.
If it were easy, everyone would do it
Among Alker’s first jobs is defining the structure and strategy that LGC needs to deliver on its green pledges: what should the housing divisions monitor and report? What should the metrics be?
“It’s quite easy for organisations to set targets some way out in the future,” Alker says. But the more important thing is “getting the basics right”, establishing policies around fabric, renewables and energy performance.
For example, from this year, the company will start reporting modelled lifetime CO2 per home in its housing divisions. The path to the 2030 target will be different for each one, but the goal will be the same.
Alker says: “What we want to avoid at LGC is the idea that we have our positive ESG sustainability story over here, and then you have all the other investments over here.”
It’s not good enough to have one particular area that’s sustainable in order to balance out less sustainable business elsewhere. Everything LGC does should have a positive social and environmental impact, he says.
“That’s not easy, because if it was, everyone would be doing it.”
The embodied carbon question
While LGC has an operational carbon target, it has yet to set one for embodied carbon – emissions from the development process.
Though he says he can’t reveal any details yet, Alker confirms there will be a target for embodied carbon that the company will announce later this year (Cala Homes, the housebuilder L&G fully acquired in 2018, does have an embodied carbon target – reaching net zero between 2040 and 2050 – and is one of only three housebuilders to set one in the UK).
But the question of embodied carbon does trigger Alker’s concern over the lack of regulation around it. While conversations in the industry are starting – for instance, a company called Kenoteq has created a brick with 90% less carbon than a regular brick – these are still purely voluntary.
“[Decarbonised products] are now sort of starting to come through, but it would come through a lot quicker were there to be a stronger regulatory driver for it,” Alker says.
In particular, he points to the government’s Future Homes Standard consultation response last year, which set out regulatory changes to cut carbon emissions in homes by 75-80% by 2025 but made no mention of embodied carbon.
Some local authorities have stepped in and required reporting against embodied carbon in major projects, and while Alker says that we’re likely to see more of that, it falls short of actual regulation.
For now, the industry has to sort out that question voluntarily and encourage its supply chains to do so as well. Cala Homes uses timber frames in Scotland, which Alker says reduces embodied carbon by about 20%. Other changes LGC is considering include switching to HVO fuel (hydrotreated vegetable oil) in construction machinery as a transition towards electrification. Hydrogen will also “come into the mix”, he says.
When reporting embodied carbon emissions, Alker encourages the industry to align with RIBA’s 2030 targets and guidance on reporting emissions per sq m to ensure transparency and a “common currency”.
Role of modular construction
L&G’s modular homes business is central to its sustainable housing strategy. At its factory in Sherburn-in-Elmet in Yorkshire, L&G aspires to build 3,000 homes – designed to be EPC A – in 2024.
But while Alker says these factory-built houses are important in decarbonisation, he adds: “I think in a way it’s important not to kind of silo modular and assume it’s all based around efficiency and low carbon.”
He takes L&G’s Bonnington Walk development in Bristol as an example. The project is based in a Site of Nature Conservation Interest and, as a result, L&G had to be “incredibly sensitive” to breeding patterns of different birds and had to relocate hundreds of slow worms to protect them.
Alongside the 185 modular homes, the site also has hedgehog highways, bat boxes and insect hotels.
“All housebuilders are going to be grappling with nature and biodiversity in a much more meaningful way than previously,” Alker says. Last year’s Environment Act will make biodiversity net gain mandatory in England from the end of 2023, requiring developers to enhance biodiversity on new developments.
But the extent to which L&G Modular Homes plays a role in sustainable housing depends partly on how much it ramps up production. As of December 2021, its pipeline has topped 800, including 450 in development and 400 more awaiting planning permission. However, the modular business has yet to become profitable, posting a £30m net loss in 2020.
A spokesperson for L&G said the growing pipeline demonstrates that the business has “gained significant momentum”, adding: “Our modular housing business is designing and manufacturing homes in an innovative way, which will transform the way homes are built. True innovation doesn’t happen overnight and, like most startups, our business plan anticipated a number of years of upfront investment to develop the products and processes required for the business to deliver profitably at scale.”
When will we see LGC’s progress report?
Getting the basics right and defining its green strategy is LGC’s priority right now, but when can we expect to see how effective that strategy is?
The company has committed to setting targets verified by the Science Based Targets initiative, which Alker says will be verified and published in 2023. This will set yearly emissions targets that the company will be required to hit.
But SBTs aren’t everything at LGC. These targets apply to the company as a whole, but individual businesses have their own voluntary targets as well. Reaching operational net zero across housing is one of these. Alker says some updated commitments will be included in LGC’s climate report coming in March, but that some of these metrics will not be formally reported on until early 2023.
Regarding the operational net zero housing targets, Alker says: “We haven’t at this precise point in time set granular interim milestones, partly because of the different approaches of the different businesses.”
He contrasts this with the “linear trajectory” that SBTs take due to their annual targets. “Because of the nature of development, where obviously, as you can imagine for any developer, they could be involved with a very large development and then there’ll be years when less comes online.
“That glide path is going to look a little bit less linear, and that’s just the nature of it.”
What hasn’t real estate cracked yet?
Turning to his thoughts on real estate more broadly, Alker highlights two issues the industry has yet to figure out.
The first is circular economy. While recycling and dealing with waste has “a long history”, thinking around adaptability, reuse and reimagining spaces is still under-developed.
“We’re still talking about resource use in waste terms, not in terms of positive resources,” he says. “We don’t have the sophisticated long-established KPIs that we have for other topics.” What the industry needs to figure out, he says, is how to benchmark circular economy.
Alker’s other concern is what he calls “social value washing” (“I’m sort of making this phrase up”) – a social equivalent of greenwashing. “Over the last few years, there have been a lot of headlines produced around social value that developers have created, literally putting a pound figure on non-financial outcomes that have been delivered.”
But by focusing only on benefits that they can quantify, developers might fail to consider the sum total of the social impact. How the industry should think about social value is another question on Alker’s to-do list: “It’s really important that there are some underlying principles to both how we deliver social value on projects and how we measure that social value as well.
“The challenge is delivering that in a meaningful way and also robustly capturing and measuring and communicating progress made.”
Despite the enormity of what real estate – and the wider world – has to achieve to cut its carbon footprint, Alker believes the UK will reach net zero carbon by 2050. What that will mean for the planet, however, has yet to be determined. “Realistically, whether we’re looking at a 1.5ºC outlook or a 2ºC outlook or something much more chaotic, unpredictable and damaging than that is still to be seen,” he says.
Yet where there is uncertainty, there is opportunity – opportunity for those in Alker’s position to make sustainability an achievable goal. There are financial reasons for doing so. Alker certainly believes in making the business case for pursuing a green agenda. But what drives him and his team is that, when it comes to sustainability, he says: “It’s the right thing to do.”