In this VX News interview with Sara Neff, Lendlease Americas’ Head of Sustainability speaks to the exciting progress being made by Lendlease in incorporating sustainability in their global property developments, including Scope 3 emissions neutrality, 100 percent renewable power, and reaching absolute zero emissions. Additionally, Neff discusses how Lendlease is using its global scale to empower firms in the supply chain with sustainable products to start to make a difference in the global marketplace
Sara, in your last Planning Report interview, you shared, “It has been very exciting to join an Australian company to see what the cutting edge of sustainability around the world really is.” As Lendlease America's present Head of Sustainability for the last two years, share how your plan is enticing other global developers to embrace the art of the possible in terms of sustainability.
Sara Neff: It's been a really fun two years. When I got to Lendlease, we had these very ambitious sustainability targets. In fact, these are the most ambitious sustainability targets in the world, which involve, in addition to being Scope 1 and 2 net neutral by 2025 and 100 percent renewably powered by 2030, the objective to be absolute zero across every scope by 2040, which is where the real fun is.
When I arrived, Lendlease had set that target and didn't have a clear path of achieving that goal. But, what I appreciate about an Australian company is they don't just set bold ambitions; they go ahead and immediately start executing and implementing. The first thing I got to do was to come up with a roadmap: how is the Americas region going to reach these targets across construction, development, investment management, and military housing?
We are the kind of company where we don't just hire consultants to do this; it's got to happen with senior buy in. So, we convened groups and senior management to come up with the right roadmap for our region, and that got signed off by our regional leadership team.
Other things I'm really excited about are around that ambition of electrification. In the Los Angeles market, electrification isn't particularly difficult. We're in a temperate climate, so, with the exception of life science in operations, most asset types can go fully all electric. The case is quite different when you're building in places like Chicago, Boston, or Alaska where it's quite cold, but the company has very much given me the leeway to push on electrifying even difficult assets, like multifamily high-rises in Chicago.
Another thing I'm very excited to be working on is Scope 3 emissions, which are the emissions not associated with energy we directly control, and are our largest source of emissions in real estate.
There isn't a real estate company out there that has created a full inventory of its Scope 3 emissions and is on the path to try to reduce them, so that's what we're doing right now. We'll have our Scope 3 inventory published next month, saying here's what we're committed to getting to absolute zero, and then off we go.
There are lots of other examples, but those are some pretty industry-leading initiatives that I've been able to work on.
Elaborate on Lendlease’s real estate portfolio.
Lendlease is a global real estate company with Australian heritage, based in Sydney. In the Americas region, we are five business units. We are a large construction company with 30 to 50 projects going across the country at any one time. About half of that is multifamily. We are a development and investment management business raising money with foreign joint venture partners and pension funds, which currently includes organizations in Australia and Canada. Those are building multifamily and life science assets, including in Los Angeles, and a project I'm very excited about located at La Cienega and Jefferson. We are also the largest operators of military housing. We do all the military's hotels and approximately 40,000 military homes. In fact, one of our beautiful military communities is Tierra Vista Communities in San Pedro. We are also Google's partner on the largest development in America in Silicon Valley.
There’s little doubt about the scale of your company’s global portfolio & commitment to sustainable development; likewise, there’s little doubt about your personal passion and leadership re ‘sustainability’; but, have other real estate competitors been actually adopting Lendlease’s best practices?
The short answer is yes, but not as fast as I want them to. We definitely see other partners and competitors making inroads into Scope 3, for example, acknowledging embodied carbon, which is the carbon associated with building materials, as an important source of carbon emissions and committing to reducing those. Many companies, like Lendlease, have also set what are called ‘science-based targets,’ which ask you to have a pathway towards reducing all of your emissions on a science-based timeline.
Where I haven't seen as much progress in the industry is on a couple of fronts: It's very important to electrify our construction equipment. If we're all going to get to Scope 1 and 2 carbon neutral, we really can't get there with fuels. There's not enough renewable diesel, and that's a transition fuel anyway. We desperately need market transformation around construction equipment.
The other place where I invite my peers to do more is on partnering down the supply chain for procurement to make low-carbon materials happen. For example, I'm working on my third deal for low-carbon materials where we're using Lendlease’s scale to provide guarantees around procurement. This is so that companies with promising products have the knowledge of what their customers want to buy so they can go get a bunch of debt and scale up. It's great to have zero-carbon Portland cement replacement; it is not as helpful to have about a teaspoon of it. We need these things at scale. I wish more of our partners were willing to really invest on the supply chain to get more of what we want to see in the market.
You assert that the real estate industry needs a 'market transition.' Elaborate.
We saw this in real estate around 2018-2019. Prior to 2018, no real estate company had set a Scope 1 and Scope 2 target around neutrality on a short time horizon. Now, we have seen, just a few years later, basically any publicly traded real estate firm and certainly almost every publicly traded REIT has set those targets and is making progress. The entire market has transformed around “Yep, we need to get to neutral, and what's the pathway to getting there?”
Market transformation happens when there’s enough critical mass in the real estate industry that decides to do something, and then everybody else gets brought in. A good example that may sound boring is low-VOC paint. I'm sure the paint in your offices right now doesn't have any bad off-gassing compounds that are going to make you ill. That was not the case 15 years ago when we painted all sorts of stuff with it, but enough real estate professionals who cared about sustainability pushed the paint industry. So, those chemicals left paint, and it’s hard to buy paint with VOCs in California now. That's market transformation.
We need to do the same for things like zero-carbon steel or zero-carbon concrete or for the pieces of construction equipment that will make electrification of existing mixed-fuel assets easier.
We need to see more of that, and we've seen it before. We've seen the cost of LED lights come down because of demand. We've seen EVs go from a tiny niche to a significant percentage of sales and growing. Those are the kinds of things we want to catalyze at Lendlease. The company's willingness to do that kind of thing is why I'm having a good time.
Expand on what Lendlease is, through its developments, trying to ‘catalyze.’
I can’t give a ton of details, but I'm trying to do some procurement deals for low-carbon materials in the hopes that we can find a partner with a promising technology who will take the Department of Energy Loan Program Office funding to scale up. They would only feel comfortable doing that if they know that they have enough demand for years to come.
So, we want to close these deals and then, through organizations like VerdeXchange and USGBC and others, inspire our competitors to make similar deals with the same companies. I'm trying to inspire other folks to do the same kinds of procurement deals and say “I am going to need 10,000 tons of steel a year, and I'd like that to be zero-carbon steel. Here's the investment I'm going to guarantee to inspire folks to make more of that product.”
I'm picking on steel because actually Nucor has done a great job of providing zero-carbon steel. You can actually buy their net-neutral steel product already; they've electrified all their arc furnaces.
DOE’s Jigar Shah and, specifically, Arnab Pal, who is attending VerdeXchange this Spring, are looking to identify opportunities for DOE’s Loan Programs to accelerate commercialization of technologies to meet the Biden administration’s aggressive decarbonization goals. If you were advising those already in the supply chain on how to utilize DOE’s loan funds, what would you say?
I would say, basically, if we could guarantee that we had the demand for X tons or pounds or pieces of equipment or whatever it is, we would be able to scale up at X timeline and in doing so would save X amount of tons of carbon. That's what we need.
I think the industry needs to know that if they do these procurement deals, they change the market. They can make these factories exist that didn't. They'll have competitors that will also want to join. Those companies need to explain exactly what it is they need from buyers like Lendlease and other construction companies and developers so that we can strategically choose who we'd like to partner with to help them close those loans.
Identify for our readers a few of the technology companies that have the potential to scale to meet the building materials demand that you so eloquently described?
There are a lot of players in this market right now, unsurprisingly. I'll tell you the things I'm most excited about.
There are a few players in the low-to-zero to carbon-negative concrete space. Concrete has a bunch of different components. Portland cement is a component; there's aggregate; there's other stuff. There are various folks tackling that part of the supply chain.
I applaud Jigar Shah for really expanding that program beyond just energy. The concept that the Department of Energy would be willing to fund a concrete company is new and very much needed.
The trend that keeps not materializing that I think might is prefab. There are companies out there interested in Loan Program Office funds to really make prefabricated buildings happen at scale, which reduces embodied carbon a lot. It also helps buildings be energy efficient, reduce packaging, and theoretically, have a faster build time. But, it really only works at scale.
This is going to sound a little bit odd, but in military housing: plastics. There are a few very low-carbon plastic feedstocks that can go in anything. It’s not bendy or see-through, so it’s not good for a Ziploc bag, but fine for a doorstop. There's only a very small amount of it, but that feedstock is universal to all of those products.
In my line of work, we buy a lot of siding, and so we're very excited about scaling that up quickly. We don't think of plastics very much when we think of buildings, but especially in single-family residential and military housing, we actually consume quite a bit of it, but there's little low-carbon plastic out right now.
Let’s pivot to how Lendlease is now addressing parking. What are some of the new opportunities for incorporating sustainability into meeting the parking need of your tenants?
Well, parking is a very interesting area right now, and not for the reason you think.
We believe that it will not be long before the majority of our residents are driving electric cars, and we want to be ready for that. It's not easy, so we need to put in both the physical conduit as well as the capacity to deal with a lot of charging stations. Trying to do that planning now is really important.
For example, we're tackling electrifying our military maintenance vehicles. We have our first electric maintenance vehicles showing up this year. Obviously, those have to get charged and that's something that we get to navigate. There is a charging station at Tierra Vista Communities in San Pedro, so it can be done.
In some ways, what's most exciting about parking is that it now has a spotlight on it from an embodied carbon standpoint. When you're using an overall understanding of embodied carbon of a building and you have a cap on how much you can emit, underground parking garages really use a lot of materials. There is a movement away from that because they're just so intensive from a material standpoint.
You know, the pendulum swings a lot in sustainability. You used to want to do an underground garage because you didn't want to use more land than you needed. That really has to get balanced with the amount of materials you're putting into the garage. Is there another solution? Is there a way to sort of hide the parking above the ground plane? A lot of those issues are being tackled as we grapple with the emissions of materials, which is fairly new to real estate.
What, if anything, is different about the real estate markets of Australia, the United States and Canada re sustainability?
It's quite different around the world, and a lot of that is regulation based.
For example, England just set a biodiversity requirement on new development, which sounds so foreign to us, the idea that new developments have to prove a net benefit to biodiversity.
On the flip side, for example, in England, it's not hard for them to procure 100 percent renewable power right from their utility wherever they are. Certainly you can do that in America, but not everywhere.
Australia has a real estate market in which the owners are all, in my opinion, quite sophisticated on sustainability. That has driven them towards this kind of market transformation a lot earlier in their journeys, so we see a lot more depth. A lot of folks in American real estate just showed up to sustainability within the last couple of years with all this investor pressure, ratings, agency pressure, and SEC rulings, but this is not new to Australia.
Pivoting, you attended Stanford University well before Doerr’s billion-dollar contribution funded a whole new school focused on the issues/ practices you care most about. As you watch the Doerr School evolve, and as an alum who is deeply invested in this space, what do you advise Stanford do with its new resources?
I am beyond excited about Stanford's new climate school. I would say that the best thing that Stanford can do, in addition to gathering all of these world-class minds to tackle the biggest problems in sustainability, is not to leave implementation to someone else. Make sure that they're convening folks in the private and public sector who can take the great ideas that are going to be coming out of that school. Great ideas are fantastic, but if they don't go outside of an academic paper, they're not going to change the world.
Stanford needs to keep a clear focus on engaging sectors outside of academia to make sure that fantastic knowledge is going to make a dent in global emissions.
Lastly, over the last 16 years, you’ve been a part of many VerdeXchange Marketmakers’ Conferences. As a platform to showcase what's in market, about to be in market, or needed in market, what should VX2023 importantly focus on this coming spring re the Built Environment?
We've been talking about materials for a long time, but I'm seeing quite a change in what's actually available and the tools to measure it. I love VerdeXchange because it was one of the first conferences to really tackle the material side of things, but things were quite theoretical. The path to success was not clear. This year, we have numbers; there are case studies; there are pathways to success,
There are also surprises. Just yesterday, I found out that we have a project where a switch in the seismic approach more or less cut our materials use in half. I don't know a single sustainability person, including me as of like 11am yesterday, who would ever have thought to question the approach to seismic as it would relate to embodied carbon.
Also, one of the things to talk about is that the future of electric vehicles is here. It's just not evenly distributed. There's definitely an environmental justice focus on how to bring electric cars to everybody. It's very important in Los Angeles, as it is elsewhere else.
Then, I think the Olympics are beyond exciting. It's going to change the infrastructure of Los Angeles, and developers who are not anticipating that might get left out.
We're also seeing exciting things at the Santa Monica Airport, which might be a development opportunity later on, so there are things to talk about there.