ESG Building Certification

This article originally appeared on the CBA Construction and Infrastructure Law Section's articles page.

FOREWORD

ESG refers to the application of Environmental, Social and Governance factors to evaluate a particular organization or project. With respect to the construction and maintenance of our built environment, ESG certifications signal to the general public (and investors) that a given project meets or exceeds certain ESG standards.

The intention of incorporating ESG standards into the construction and maintenance of the built environment is that projects and buildings will be constructed in a resource-efficient method. In turn, healthier buildings will be produced, the impact on the environment will be lessened and maintenance costs will decrease.

ESG standards are developed and maintained by independent organizations which allow for the evaluation. This paper offers a non-exhaustive summary of certain ESG certifications which are available on the market and touches upon certain legal considerations as well.

Ultimately, this paper concludes that, the proliferation of ESG certifications in the built environment has positively affected owners, builders, end-users, and society as a whole.

INTRODUCTION

Negative consequences emanating from the construction and inhabitation of the built environment are major concerns to those constructing, working in or living around buildings of all sorts. Buildings generate nearly 30% of all greenhouse gases, 35% of landfill waste, while consuming up to 70% of municipal water.¹ Those spending significant time in buildings are prone to suffer from Sick Building Syndrome (SBS); a situation in which building occupants experience acute health and comfort effects that appear to be linked to time spent in a building, but no specific illness or cause can be identified.

In order to address issues such as those mentioned above, the real estate and development market has seen a proliferation of certifications and accreditations designed to publicly demonstrate that not only can a building be considered “green,” “socially responsible” or “healthy” but just how “green,” “socially responsible,” or healthy that building actually is. Numerous certifications are available on the market. Some have caught on, others have languished. Regardless, the list of certifications is long and is seemingly expanding further. The following paper provides a non-exhaustive summary of select certifications and culminates with practical tips counsel can employ when advising clients in their pursuit of ESG Building Certifications.

Research has demonstrated significant benefits for buildings/projects which obtain ESG Building Certifications. For example, one study found that a WELL Gold certified office saw absenteeism drop by more than 50% in one year and employee turnover dropped 27%.² Another study demonstrated that WELL certification improved overall occupant satisfaction by nearly 30%, as well as occupant perceived well-being scores by 26%, reported mental health scores by 10% and productivity gains by 10 median points.³ The environmental benefits of ESG Certifications are also significant. According to the Canada Green Building Council, LEED accredited facilities are responsible for creating 6.8 million tonnes less GHG emissions, 35 million eMWh of energy saved, 60 billion litres of water saved and 3.85 million tonnes of waste diverted.⁴ In light of the above, the potential advantages of implementing ESG Building Certifications are significant notwithstanding the (not inconsequential) cost. Green building is a resource-efficient method of construction that produces healthier buildings which have less impact on the environment and cost less to maintain.⁵ AECOM notes that though developers naturally need to invest more to gain certification, these costs are readily recovered by way of the improved market-positioning of a property, reduced operational costs through lower utility bills and increased occupant health and wellbeing, which can lead to higher productivity and lower rates of absenteeism in workplace environments.⁶ In short, ESG Building Certifications seem to be a very good thing.