What will turn the dial for Green Leases?

At our recent Bidwells Bitesize event on Green Leases, we invited Jamie Trivedi-Bateman, Director of Investment, Property, Trinity College Cambridge; Laura Ludlow, Real Estate Development Lawyer, Mills & Reeve; and Claire Sunderland, Partner, Investment and Property Management, Bidwells, to shed light on the evolving discourse surrounding Green Leases.

Chaired by Alistair Blackmore, Head of Sustainability at Bidwells, our panel offered insights into Green Leases’ significance, implementation, and potential impact. 

What is a green lease?

While there is no single agreed definition of a green lease, the Better Buildings Partnership (BBP) describe a green lease as “a standard form lease with additional clauses included which provide for the management and improvement of the Environmental Performance of a building by both owner and occupier(s). Such a document is legally binding and its provisions remain in place for the duration of the term.”

Green Leases are a cornerstone for fostering sustainable practices within the built environment. Yet, as discussions unfold and strategies emerge, it becomes apparent that navigating this landscape requires a nuanced understanding of its intricacies.

The BBP has taken strides by releasing a comprehensive toolkit that provides guidance, explanations and model wording for constructing Green Leases, offering a structured framework for integrating sustainability ambitions into lease agreements.

The toolkit includes a range of model Green Lease clauses categorised with a scale of light green to dark green obligations, depending on where the owner or occupier is on their sustainability journey.

Why are green leases important?

As highlighted by Jamie, who manages Trinity’s £1 billion property endowment, the College's approach to green leases underscores its commitment to balancing financial returns with environmental stewardship.

For Trinity, Green Leases help them align with tenants on common sustainability objectives, facilitating constructive dialogue and setting the stage for collaborative action. By incorporating green clauses as standard practice, Trinity emphasises accountability and provides a governance structure essential for navigating the complexities of sustainability in real estate.

For successful implementation, it’s important for all those involved in a building lifecycle - from owner, asset manager, agent, building surveyor to the property and facilities managers - to understand the intentions and commitments made in the Green Lease.

Challenges do persist, particularly concerning data transparency and tenant engagement. As Jamie emphasised during the seminar, data plays a pivotal role in the journey towards net-zero emissions, necessitating a culture of openness and cooperation among stakeholders.

Furthermore, while the benefits of Green Leases are evident, ‘money talks’ says Laura - cost considerations remain a significant hurdle, requiring proactive communication to elucidate the tangible advantages for tenants, such as reduced utility expenses.

A big impact can be made with little financial outlay, but it requires the commitment of both owner and occupier for building optimisation. A Green Lease can enable this by creating a platform for documenting the intention of the parties and how they are to collaborate on environmental and social impact matters.

Beyond environmental concerns, Laura pointed out that the scope of Green Leases can extend to encompass social impact, reflecting a broader commitment to community engagement and responsible business practices. By integrating considerations such as local employment and charitable initiatives into lease agreements, Green Leases transcend mere environmental compliance to embrace a holistic approach to sustainability.

What will turn the dial to accelerate the adoption of Green Leases across the industry?

Looking ahead, the path to widespread adoption of Green Leases hinges on several key factors.

First and foremost is the imperative for engagement between landlords and tenants, fostering a shared commitment to sustainability objectives.

Additionally, technological advancements hold promise for streamlining data collection and reporting, facilitating informed decision-making, and driving operational efficiencies.

Ultimately, the success of Green Leases lies in their ability to deliver tangible benefits to all parties involved. For landlords, the promise of better returns on assets serves as a compelling incentive, while tenants stand to gain from reduced operational costs and enhanced environmental performance. By embracing Green Lease Clauses as a fundamental component of lease agreements, stakeholders can collectively steer the real estate industry towards a more sustainable future.

Conclusion

Green Leases represent a pivotal tool in pursuing sustainable real estate practices, but they are just one aspect of an owner-occupier engagement strategy; education and data-sharing are key to achieving sustainability ambitions.

As organisations grapple with climate change and resource depletion challenges, integrating environmental considerations into lease agreements offers a pathway towards resilience and responsible stewardship of the built environment.

Through collaboration, innovation, and a shared commitment to sustainability, Green Leases have the potential to transform the way we conceive, construct, manage and evolve our built environment for generations to come.