Why C-PACE and the Commercial Real Estate Industry Should Take Action on Embodied Carbon Now 

In August, the State of California became the first state to pass legislation limiting embodied carbon emissions from new construction of commercial buildings¹, which will begin in 2024. As the built environment continues to generate 40% of annual global carbon emissions, similar policies are expected to follow across the country. The good news is that commercial real estate leaders can reduce embodied carbon to capitalize on emerging tenant preferences without a significant cost premium. 

For smart CRE leaders, acting on embodied carbon now is both a sustainability strategy and a financial imperative. 

What is embodied carbon? 

Embodied carbon is the carbon dioxide (CO₂) emissions associated with materials production and the construction processes of a building or infrastructure. It includes any CO₂ created during the manufacturing of building materials and the transport of those materials, as well as construction practices used.²  Think of each material as an “ingredient” with its own “nutrition label,” called an environmental product declaration (EPD). Today, standard materials such as concrete, steel, and aluminum consistently have weak performance on environmental, health, and carbon impacts.³

While commercial real estate owners and regulators have historically focused on energy and water consumption from building operations, embodied carbon is the other half of a new building’s total impact. Over the next 30 years, new construction projects are projected to produce just as much carbon from embodied sources as from operations.⁴ Going forward, a comprehensive sustainability strategy will be needed to target whole-building decarbonization through both operational and embodied improvements. 

Here’s the good news: Taking action on embodied carbon is simple. Today, new construction can reduce embodied carbon by 19-46% with less than a 1% cost premium.⁵ In a study from RMI and SKANSKA⁶, the greatest embodied carbon reductions were achieved through no-cost measures, such as substituting different concrete mixes that maintain material specifications. 

Why take action now? 

Premiums for “green” certified buildings have reached an incredible 6% (JLL)⁷, and modern tenants are demanding sustainable, “net zero” spaces that produce no additional carbon emissions. A truly “net zero” space must reduce its embodied carbon footprint in order to make this distinction possible.⁸ Furthermore, because materials with lower emissions have no, or low-cost premiums, they are a smart strategy to earn credits toward green building certifications, such as LEED, that now incentivize action on embodied carbon.⁹ Embodied carbon is quickly becoming an essential step to achieve attractive green premiums and maintain sustainability-minded clients. 
Acting on embodied carbon now is also a smart financial choice. Emerging tax incentives will reduce the cost of high-performance materials¹⁰, and there are early indications that high-performance, low-carbon materials can achieve lower price points.¹¹  

Finally, the commercial real estate industry has an opportunity to collaborate with policymakers on appropriate embodied carbon goals. The SEC’s climate-related disclosures rule¹² may require some companies to report on embodied carbon levels, and more local policymakers are following California’s example to pursue embodied carbon legislation.¹³ These new policies are driven by local sustainability goals, as well as the opportunity to reduce energy consumption¹⁴, spark new economic development¹⁵, and improve air quality.¹⁶ 

Embodied carbon in commercial buildings is an emerging industry and less understood than operational energy use, so we expect some initial “growing pains” for compliance with new regulations. These may include:

• Material availability and performance varies widely by region. 
• Contractors anticipate some technical learning curves to work with new materials. 
• Standard contracts need updated material specifications. 
• Data protocols and performance standards are still emerging and evolving.

Firms that act on embodied carbon now can get ahead of regulations while developing industry-defining expertise and growing the market for high-performance materials. 

How can my company get started? 

Looking forward, Nuveen Green Capital believes C-PACE financing can support the acceleration of decarbonization by providing more affordable capital to new construction projects that are leading the way on embodied carbon, and we will be supporting our public-sector partners on this opportunity. 

Reach out to Jessa Coleman, Director, Programs and Policy at: jessa.coleman@nuveen.com,  to learn more about opportunities in your state. 

Commercial real estate leaders can start planning for lowering embodied carbon today. Next steps and industry-backed resources include:

1. Request environmental product declarations for high-impact materials in new construction, including concrete, steel, and aluminum. Get started with resources from Building Transparency’s Embodied Carbon Action Plan. In Washington state, two major projects required EPDs from their concrete providers at time of bid and saw embodied carbon in ready-mix concrete products drop 18%.¹⁷
2. Collaborate with contractors and material manufacturers to identify no or low-cost material substitutions to reduce embodied carbon. The Carbon Smart Materials Palette from Architecture 2030 provides a starting point for design, manufacturing, and construction guidance. 
3. Develop internal guidance documents and consider setting initial goals for embodied carbon. Reference existing peer developed tools such as the Hines Embodied Carbon Reduction Guide and Salesforce’s Healthy and Sustainable Materials Guide.  

Valerie Crum is an MBA/MS candidate at the Ross School of Business and the School for Environment and Sustainability at the University of Michigan. She focuses on emerging finance and technology to build the next generation of resilient cities. Prior to graduate school, Valerie led grant investments at a Miami foundation to guide the future of one of the fastest-growing US cities. Her background also spans green building and municipal energy policy. She is a LEED Green Associate. 

Valerie was the Environmental Defense Fund Climate Corps Fellow at Nuveen Green Capital during the summer of 2023.