However, an even bigger challenge is to tackle the total GHG emissions used to produce a built asset, known as embodied (or capital) carbon. As urban growth continues and new buildings are erected, the contribution of embodied carbon is projected to double by 2050, making it urgent to address mitigation strategies in the design phase.

While some types of building passport exist, a climate-ready building passport could provide the means to capture and share data on a building’s life cycle (design, build, operation) and provide owners with a pathway to meet GHG reduction goals.

Various disparate tools exist that serve specific needs, but there is a wide gap between current data availability, its formats, discoverability and useability and a fully functioning, transparent, interoperable and scalable system that could capture the diverse requirements of potential users. In other words, there are many barriers that prevent stakeholders accessing the data they need that could help to reduce the GHG emissions of a building.  

The creation of a digital “building passport” could enable a variety of stakeholders to discover and share appropriate data in a secure environment, underpinned by robust standards for data sharing, allowing for real-time reporting to enhance risk analysis that would in turn incentivise climate-ready behaviours and allow for the development of innovative insurance products. There is an urgent need to collaboratively develop the shared data infrastructure where multiple use cases for digital building passports can help incentivise net-zero behaviours.

Icebreaker One is actively looking for feedback on the idea of climate-ready building passports. We’re currently consulting with industry, and building Advisory Groups to meet this Spring. The Advisory Groups will explore the idea and provide a forum for discussion to ensure this product meets user needs.

To share feedback or express your interest in joining the Advisory Groups, send us an email on seri@ib1.org

What is a building passport?

A building passport is a tool to capture appropriate data in a digital format that could be useful to building owners, occupiers and those that have responsibility for monitoring and reporting on a building’s performance. The idea of a building passport is not new. Indeed, the European Union through the European Commission’s Directorate-General for Energy is providing technical support to investigate the feasibility of introducing optional building renovation passports (BRP) in the EU. Following Article 19a of the Energy Performance of Buildings Directive (EPBD), the relevance, feasibility and potential impact of BRPs was studied and the results showed that there is low awareness of the benefits of energy renovation and insufficient knowledge of what measures to implement and in which order.

Existing building passports are able to store historical information about the design, construction and fitting out of a structure that could be made available on demand to restricted users, such as the fire services. The desire for safer built environments has been the impetus for the creation of organisations like Building Passport. For example, in the light of the Grenfell Tower tragedy and subsequent Inquiry and Phase 1 report, a vital use case for building passports is making floor plans and information that could exacerbate fire risk instantly available to rescue services. 

A climate-ready building passport could go further than providing specific information to rescue services. To enable the widest possible adoption, the concept needs to be enabled by a standards-based approach to data sharing. The Standard for Environment, Risk and Insurance (SERI) is looking to develop open standards to enable insurers to access shared environmental, financial and risk data across organisations and silos. Capturing additional environmental data will provide incentives that could support more meaningful actions to reduce GHG emissions and so underpin net-zero goals.

There are several other uses of the climate-ready building passport that could provide credible reasons for all stakeholders to collectively agree on a shared data infrastructure to support more comprehensive access to information about a building, in a secure environment with the appropriate governance structure in place. For example, the rich data captured in Building Information Modelling (BIM) does not get shared as exposure input data used in risk assessments or the catastrophe modelling process used in insurance pricing. Data standards could assist asset owners where there is no normalised process for capturing and reporting climate-related disclosures, which will soon become mandatory.

How would the data be used?

Creating a digital building passport would open up a wealth of opportunities, but it does pose an expanding hierarchy of questions depending on the user. To narrow the scope, key questions need to be answered from each stakeholder:

– What are you trying to do?
– What data are you using to do it?
– What data do you need?
– What data elements are missing?
– What data formats are missing?
– What data do you not have access to?
– Would a digital passport be the right tool to capture open / shared data?

For SERI, our goal is to encourage the development of innovative insurance products that incentivise carbon net-zero behaviours. Insurers use a wide range of data inputs to assist in pricing decisions and risk management. This data is captured from individual buildings and residential properties, through to massive schedules of information from corporate buyers (such as hotel or fast food chains). None of this data is currently structured to be captured and shared easily.

While third-party catastrophe model vendors are beginning to make their proprietary standards open, and open exposure data standards exist through the work of platforms like Oasis Loss Modelling Framework, the data that is captured is limited. Data on age, construction, number of stories together with primary modifiers like occupancy and location are supplemented by secondary modifiers such as construction quality and cladding. This data is mostly captured in spreadsheets, CSV formats or worse in PDF files. The industry is looking at new tools that could capture additional data elements leveraging more scalable software solutions such as JSON. This allows for a more powerful ability to capture hierarchical and relational data. For example, for buildings this could include:

–> Physical characteristics including its structure, orientation, materials, locations, neighbourhood
–> Use and building performance characteristics including occupancy, services & utilities, critical dependencies
–> Legal and financial characteristics – owners, portfolio relationships, leases

How to get involved!

We believe that there is an opportunity to leverage the work that was originally achieved for Open Banking, and now being used for Open Energy and help crystalise a “Shared Data Infrastructure” that could provide utility for many downstream activities.

Icebreaker One is looking for representatives from diverse organisations that are involved either in the supply or use of data to assist in developing a use case for creating a shared data infrastructure that is aligned with the goals of SERI.

We’re currently building Advisory Groups that will meet over the next few months to do this. Being part of an Advisory Group means meeting occasionally with other sector leaders, and providing insight and feedback on what Climate-Ready Building Passports could be most valuable.

To share feedback or express your interest in joining the Advisory Groups, fill out this short form. Alternatively, write to seri@ib1.org.

Meanwhile, join Icebreaker One here and help us deliver a net-zero future!

Photo credit: City of London Skyline by Trine Syvertsen CC by 2.0

Urban planner.

Julia is an urban planner based in Newcastle. The city is growing rapidly, but the council is not able to keep up with the demand for services nor assure compliance with regulation. The demand for social housing following the Covid-19 pandemic and subsequent economic collapse in the region is now at a crisis point, creating an urgent need to build new housing on BrownField sites. Risks from disasters (mainly flood,) are increasing, as the city is in a well-known flood area.

The city has invested funds into retrofitting some critical infrastructure to mitigate risks and developed a master plan for future infrastructure growth. They have census data that provides some information about buildings, and they have an asset database for critical infrastructure, but very little is known about the typology of buildings or their vulnerability, their distribution, or replacement costs. 

Julia wants to know how the city can optimise the investment in improving critical infrastructure to improve day-to-day performance, how to maintain the infrastructure over time, how to reduce impacts from disasters for current urban infrastructure as well as the risks 20 years in the future, and how to have funds in place to recover from events that may occur. Julia would also like to know how much to invest in developing better control mechanisms such as building codes, and enforcement of code compliance. Can a climate-ready building passport, using the latest in sensor technologies, leveraging 5G network for real-time reporting help? (Data marked blue can all be covered by a building passport, the last item is related to a building passport – data on what materials / parts used in the building).

Asset Owner

Pink Asset Managers (PAM) want to know the economic impacts of climate change on their substantial portfolio of commercial and industrial real estate. Their focus is on a long-term “buy and hold” strategy providing a stable dividend for their investors. They know that greenhouse gasses from construction (mainly cement manufacture) as well as the heating and ventilation of their aging portfolio are major contributors to climate change. They are concerned that substantial portions of their portfolio may be too costly to retrofit and over 20% of their total assets could be worthless if investors decide to “dump and run”. The talk of transition risk is increasing. They have a legal obligation to report their Scope 1, 2 and 3 carbon emissions as part of the TCFD reporting.

They want to be able to compare investments and estimate what the future value of their building stock would be with and without the impact of climate change in the next 25 years. This way they can ascertain how much of the value is at risk from climate change. They are interested in the impact of changes in extreme events as well as weather such as mean temperatures and extreme heat cold. They want to know things like the impact of climate change on physical locations / facilities, production & export capabilities, operating / energy costs (e.g. cooling/heating) and factors such as workforce supply, and the economy of the country in which they are operating needs to be taken into consideration. They are aware that some investments may be more able to adapt to climate change than others and would like to know what mitigating impact this could have.

Asset Manager

Jack is a fund manager for Sustainable Real Estate Investment Trust. The real estate asset manager acts as an owner of the investment property and looks out for the property owner’s best interests. They are proficient in repositioning a property and streamlining operations to reduce expenses, increase income and improve property value. Jack is in charge of reviewing and managing a real estate portfolio, analysing the performance of the individual investments and identifying areas or opportunities for growing the portfolio.

He is keen to use technology to provide real-time information on building occupancy that would allow for the control of lighting, heating and air conditioning. He also wants data to support his responsibilities to the asset owners, who have a legal duty of disclosure on the carbon footprint of their properties. 

Jack is keen to find solutions for the following areas:

• ESG Planning: He needs data to implement & monitor ESG strategy, targets, action plans; track regulatory compliance (EPC compliance); standardise and automate disclosure & reporting to GRESB and other stakeholders.
• Climate Resilience: Understand climate risks and mitigation strategies; Scope and visualise the trajectory of decarbonisation pathways; Track asset and portfolio progress including financial planning
• Data Intelligence: Performance Benchmark Reporting to make informed decisions;  Improve efficiency and quality of data collection
• Transparency to ease data assurance and auditing
• Reporting: Live visualisations of assets; ability to feed into external reporting software like GRESB, BREAM, EPRA, INREV, SECR, etc; connect actual performance monitoring with disclosure
• Smart buildings: Asset and portfolio management; energy efficiency monitoring; integrate building performance, health and wellbeing data
• Infrastructure: Collation of asset and network performance data; data governance; repository for CEEQUAL accreditation and AA1000 assurance.

Insurance Company

Icebreaker Insurance provides insurance for households and businesses against the risks of catastrophic loss from extreme events such as floods, windstorms, freeze and subsidence that are known to be increasing in frequency and severity. They see a massive “protection gap” growing where companies and individuals are choosing to self-insure as they see insurance as prohibitively expensive and not geared to their business. Insurers’ reputations were badly damaged following the Covid-19 pandemic where many refused to pay out on valid business interruption policies claiming there had been no physical damage. They know that losses from climate change are inevitable and that insureds need to do more to protect their assets.

Only 70% of the population currently takes out insurance, and after recent major flooding events, many people had to take out high-interest loans to re-open their businesses, and the government had to finance the rebuilding of 10,000s properties, a process which is still underway. Research from Lloyds has shown that a 1% increase in insurance penetration can reduce the disaster recovery burden on taxpayers by 22%. There is now support from multilateral development agencies to increase insurance penetration against climate-related risks in the country. However, previous claims have been much larger than expected and one of the other 8 insurance companies in the country went out of business. Icebreaker Insurance wants to understand what its potential losses might be from its growing portfolio, what level of risk they can afford to take on and at what price, what perils they will cover, and how much reinsurance they need to purchase to remain solvent in a worst-case scenario.

Financial Regulator.

Dimitris is a regulator working with the Financial Conduct Authority and has been trying to get an under-resourced team to be able to enhance value by evaluating the risk management procedures of the Insurance Industry. Currently insurers are using what are often called “black box models”, which are very complex and hard to understand to price and monitor risk aggregations. 

Dimitris hopes that Icebreaker One’s Standard for Environment Risk and Insurance (SERI) will create an Open Standard for data so that he can access models that will give a greater insight into the complexity of catastrophe models. He is also aware that many in the Insurance industry don’t have models available for all climate change scenarios and hopes that this initiative will be able to fill some of these gaps. He does think that this will be tough as the organisations he meets are already complaining of the amount of work to meet the existing regulation and hopes that whatever is done is consistent to merging standards of data, schemes and technology.

Stakeholder Recipients for ESG Reporting

Data from https://www.accountability.org/insights/esg-frameworks-explained/ 

Voluntary Disclosure Frameworks

• CDP – https://www.cdp.net/en 
• DJSI – https://www.spglobal.com/esg/csa/indices/index 
• GRESB – https://gresb.com/about/#do 

Guidance Frameworks

• TCFD – https://www.tcfdhub.org 
• SASB – https://www.sasb.org 
• GRI – https://www.globalreporting.org 

Third-party aggregators

• Bloomberg – https://www.bloomberg.com/professional/solution/esg/
• MSCI – https://www.msci.com 

SustainAlytics – https://www.sustainalytics.com

Insurance frequently gets a bad press for not covering what consumers want or for charging prices that force more to self-insure. Indeed, over the last 20 years, only one third of total global economic losses have been insured – so over $2.5 trillion uninsured! The coronavirus Covid-19 has again highlighted potential gaps in cover: businesses may be unable to claim on business interruption policies if there is no actual physical damage to insured premises.Insurers provide a crucial role in society though, and have already reported losses in excess of US$25bn for Covid-19. They contributed massively to rebuilding cities post-catastrophe, like New Orleans following the devastating [$50bn insured] loss from Hurricane Katrina in 2005.

Climate change is next year’s problem?

Most non-life (re)insurance policies cover risks for a period of 12 months. Some classes of business do align insurance with specific projects (such as Contractors’ All Risks Insurance), but insurers have been more reluctant than others in risk finance (such as mortgages or bonds) to offer greater durations of cover. Don’t forget that claims on some policies (e.g. liability insurance) may attach years after the expiry date of the policy, especially for claims involving occupational diseases and environmental pollution. So-called “short-tail” policies, like Property, tend to capture claims very quickly, so pricing tends to be more reactive to actual claims experience.

Insurers exposed to greater frequency and severity of “weather” losses caused by climate change can reflect this increased exposure by adjusting next year’s annual premium. But this does not incentivise any change in behaviour in the customer, other than to shop for a cheaper deal elsewhere.

What’s the incentive?

Policyholders already have some tools at their disposal to influence the price they are charged. Crude measures, including limiting cover or increasing excesses may reduce premiums, but they don’t encourage greater uptake of insurance cover itself. Building resilience, building back better [post-loss] or adaptation are all tools that can negate the impact of climate change. Unfortunately, individual adaptation may not be enough; community solutions are required to shore up flood defences, enhance infrastructure and build preparedness. All of this requires local or national government intervention and may not be reflected in individual policyholder’s insurance premiums. It may just be the difference between being insured or not.

A paradigm shift in product design is required. Rather than pricing based on the rear-view mirror, climate-ready insurance requires a systems- and outcomes-based approach. This will incentivise adoption of carbon net-zero goals. Big data, machine learning and artificial intelligence will all enable insurers to harness technology to offer new products and services in this space.

How are corporations responding?

Reputational risk is now one of the biggest risks faced by businesses. Asset owners and portfolio managers (such as through organisations like the IIGCC) are responding to investor demands to better align their holdings to meet the goals of the Paris Agreement, follow the latest science and allow them to become “net-zero investors”. Similarly, there has been an acceleration in the number of companies publicly agreeing to transition to a low-carbon economy. Organisations like Science Based Targets are encouraging companies to commit to reducing Greenhouse Gases (GHG) emissions by set percentages and target dates. 

All of this leads to peer pressure on other companies to be seen to be aligning with investor demands; failure to do so could lead to increased litigation exposure for Directors and Officers.

What can insurers do?

Insurers’ biggest challenge is to remain relevant to the needs of their customers. The “Protection Gap” [being the difference between the total economic cost and insured loss covered] has been well-studied and its impacts are different for developing and mature insurance markets; the gap is not closing and “non-damage business interruption” (where business interruption cover is excluded when there is no first-party damage) is an increasing exposure. Innovative products that support carbon net zero goals could provide opportunities for insurers to do more than provide post-loss financing options to the few that can afford the limited cover available.

You can help!

Icebreaker One is working with insurers, brokers and other stakeholders to develop new climate-ready insurance financial products that support carbon net-zero goals. These could be changes to or extensions of existing policies or new policies using shared data with pre-emptive licences. What gaps exist in existing policies? What new products could be developed using new technology to make them insurable for the first time? Can the greening of infrastructure risk, perhaps supporting the circular economy, aligned with real-time sensor technology be the next big thing?

Join us here and help us deliver a net-zero future!