Environment assessment of the impact of the real estate sector and mitigating its risk

(opportunities and challenges Literature review)

There are core problems that the global world is facing and environmental impact is one of
them that real estate projects pose. With the advent of colonialism, corporate capitalism, and
competition among elite and developed countries, the use of environmental-vulnerable
locations for real estate business has become common practice. Real estate has no doubt
caused a serious negative impact on the environmental security of countries and provides
opportunities and challenges to find innovative and eco-friendly mitigating its negative
impact on environment security. The following literature review provides key insights into
challenges and opportunities from the perspective of 2023 to assess and mitigate the
environmental impact of real estate projects.

There has been vast research conducted in the real estate sector, according to Rosenkranz,
(2022) real estate causes 40% emission of energy consumption at the global level and more
than 30% emission of deadly greenhouse gases major reason for depletion of the ozone layer.
The year 2023, proved to be highly polluted and real estate paved the way to cause more
waste during material construction, production, and demolition process. According to
research conducted by Global Alliance, real estate projects of building construction are
accountable for 5% of global energy consumption and the process that builds material is
accountable for more than 11% of global energy emissions. The studies further reveal that the
noise and pollution that construction work creates are major reasons for environmental
insecurity. A vast literature study agrees with the fact that real estate construction work
accounts for 64% of space heating and 15% of water heating which causes serious
environmental issues.

Another study conducted by the World Economic Forum (2023) also reveals staggering
figures that the real estate sector is responsible for 20% of world carbon emissions and has a
major portion of using water and wasting natural resources. The 2023 landscape reveals
statistics that by the end of 2030, the real estate sector will cause an increase of 56% in CO2
emissions. The other figure for solid waste generation is around 25-40% of the real estate
sector with water consumption of 12%. This heavy waste in the environment is damaging and
causing serious illness for life and the ecosystem.
The following section gives insights into challenges from a landscape of 2023 that real estate
has posed to the world;
Waste and air pollution
Taking the example of the UK, total national waste is in proportion to 59% of waste caused
by construction work, and in the US 94% of waste that construction accounts, for comes from
the demolition of buildings. This causes bad air quality and a dusty environment making
livelihood riskier and miserable (World Economic Forum,2023)
limiting the ability of coastal wetlands
No doubt, coastal wetlands have many advantages to sea life and biodiversity. It provides
armor from flood and recreational activities to humans. Coastal wetlands also provide fishing
and help shorelines from erosion. However, the recent mass activities of real estate building
construction near coastal wetlands have limited the eco-friendly activities of coastal wetlands.
There is an expansion of buildings and restaurants which is raising the sea level and posing
flood threats and erosion of seashore lines (Palardy, 2023).
Amazon under threat
The real estate business involves heavy use of wood and the business colonialism encourages
deforestation in Amazon. According to Edward et al., (2023) around 18% of the Amazon
ecosystem has been deforested. Amazon is home to around 47 million households and
supports 140 billion of greenhouse, failure to keep its forestation can turn it into a carbon
source rather carbon sink.
Recent studies by scholars suggest that real estate capitalism is unaware of climate risk by
ignoring the growing pollution and only seeking profits. The real estate business has caused
environmental insecurity due to heavy reliance on consuming heat energy and completely
ignoring the environmental protection metrics (Michael,2023). The leaders of firms have a
constant urge to dominate the real estate industry completely at the cost of environmental
security. (Khan, 2023). The challenges that real estate capitalism has posed can be cited from
the following examples:

Opportunities to mitigate the environmental risk by real estate

From the landscape of 2023, there have been many opportunities revealed to motivate the
environmental risk. These are mentioned below:
Climate-resilience approach
Real estate should go for a more climate-resilience approach with sustainable strategies.
Several factors should be considered by real estate investors in their decisions; avoiding
riskier zones for building, skipping flood zones, and where there is a high possibility of
storms and earthquakes. This would be a risk-return assessment in their real estate projects
and will be the more resilient approach. An example of climate climate-responsive country
that the world can follow is Bangladesh which has an “adaption strategy” to work for
environmental security issues. Another example is the joint agreement between US and China
made in Glasgow Cop where both countries have agreed to limit the use of heat and
emissions in building and construction work. These examples set a zero-sum approach to
bringing environmental security (Parsons,2023).

Encouraging green building in real estate projects can be an innovative method to reduce the
use of carbon and adapt building codes to use renewable energy sources in construction. This
technique proves to be attractive for investors and rental properties as green building
leadership will save energy bills and electricity costs to a great extent.
Financial assistance to developing countries that heavily depend on fossil fuels for real
estate material transportation process. For example, Morocco highly depends on oil and fuel
imports making 40% of domestic needs fulfilled by non-renewable energy sources that also
make a great part of the building phases and demolition process. Shifting the attitude of
Morocco and other countries towards renewable energy sources can bring much change and
opportunity to practice modern techniques of innovating and fixing the cracks in building and
construction work (Aydin et al.,2023).

Tax imposition
Imposing the tax on the real estate sector can help shift their attitude toward using
greenhouse gas and net-zero carbon emissions can be achieved by the end of 2050. Asian
countries like China form a dominating real estate sector which can shift the attitude of the
real estate sector by imposing heavy taxes. According to studies, market failure has also
caused an increase in carbon usage and greenhouse gas emissions in real estate work (Angela
and Margit,2023). There is a term known as greenhouse gas emission tax. This can be
achieved by imposing heavy taxes on business tycoons that use carbon and rely heavily on
non-renewable energy sources in different phases of construction and building. Market
policymakers have the opportunity to increase the taxes efficiently to replace the carbon
energy sources with more innovative energy sources in the real estate sector. An example of a
carbon fund is 27 countries including the EU, Singapore, Canada, Ukraine, Japan, and
Argentina that use taxes to reduce the use of carbon and make their efforts to make a
pollution-free world.
Another opportunity is to reverse the process of deforestation into real estate work and
protect the valuable resource. An example of this is the Netherlands which has brought a shift
in the real estate work by using alternative resources and avoiding deforestation.

Addressing the market demand

Nowadays, tenants, investors, and property dealers have an increasing demand for buildings
and houses having sustainable and eco-friendly certifications. Buildings that are close to
green space and access to a healthy environment have high demand in the market. This
creates a potential opportunity for real estate businesses to find eco-friendly resources for
construction purposes and comply with green certification by meeting the market demand.

Efficient resource conservation

There are many ways to reduce the waste of natural resources. Real estate businesses can
move to water-saving technologies, also rainwater harvesting is a new method for sustainable
sources of replacing space and water heat in real estate work. These innovative measures
enhance the worth and marketability of construction projects to a great extent.

Enhance property desirability by conserving biodiversity

The study World Economic Forum (2023) reveals that people have become highly conscious
of conserving green space and maintaining biodiversity by connecting with nature. Real
estate builders have the opportunity to support the ecosystem by protecting ocean life, and
wildlife and avoiding using the already depleting natural resources. Building developers
should make the conservation of the green environment an integral part of their work.

Government reregulation and incentives

According to a study, the government of any nation plays a crucial role in driving the attitude
of real estate developers and providing them incentives to work for more sustainable and
energy-efficient projects. With strict regulation of government, developers will be aware of
having incentives to promote sustainability and will be held accountable and responsible for
maintaining environmental security and conservation of biodiversity.
 To sum up, the above studies provide insights into how 2023 has created challenges and
opportunities to address the changing environment dynamics caused by the real estate sector.
There are many challenges that the real sector has caused due to heavy greenhouse gas
emissions and the use of carbon. Noise, pollution, and bad air quality are some negative
environmental impacts that this sector has caused. Ranging from extreme temperatures to
drought and the attitude of the corporate world to heavily seek profits at the cost of
destroying or eroding coastal areas, and mines and encouraging deforestation. It is important
to bring a shift in the attitude of the real sector by imposing greenhouse gas taxes on them or
in the shape of imposing regulations by creating zones to avoid more use of renewable energy
sources. The use of the potential demand of investors and the preferences of tenants provide
an opportunity for developers to adopt eco-friendly practices and become responsible for
environmental damage. The real estate sector has also an opportunity to connect people with
nature by conservation of biodiversity and green environment with a sustainable landscape.
Other opportunities include recycling and harvesting rainwater. Avoiding the land that is
climate vulnerable and zones with a high risk of earthquakes, floods, and extreme weather.
References

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responsibility, and firm performance. British Journal of Management, 34(4), 1791-
1810.

2. Köppl, A., & Schratzenstaller, M. (2023). Carbon taxation: A review of the empirical
literature. Journal of Economic Surveys, 37(4), 1353-1388.

3. Larsen, B., & Shah, A. (2023). Carbon Tax as a Tool for Tax Reform and Protecting
Local and Global Environments. In Taxing Choices for Managing Natural Resources,
the Environment, and Global Climate Change: Fiscal Systems Reform
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4. Butt, E. W., Baker, J. C., Bezerra, F. G. S., von Randow, C., Aguiar, A. P., &
Spracklen, D. V. (2023). Amazon deforestation causes strong regional
warming. Proceedings of the National Academy of Sciences, 120(45), e2309123120.
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7. Parsons, S. (2023).” 4 Environment and Development Stories to Watch in 2023.

Source: World Resources Institute (WRI). https://www.wri.org/insights/environment-
development-stories-2023

8. Khan, Z. (2023). What are the current opportunities and threats facing environmental
security? Source: Modern Diplomacy. https://moderndiplomacy.eu/2023/08/12/what-
are-the-current-opportunities-and-threats-facing-environmental-security/

9. Mohamed, E. (2023). Climate change displacement: ‘One of the defining challenges.’

https://www.aljazeera.com/news/2023/9/15/explainer-climate-changes-effects-on-
global-migration.

10. Palardy, J. (2023) “2023 Brings New Conservation Challenges—and Opportunities”

https://www.pewtrusts.org/en/research-and-analysis/articles/2023/01/10/2023-brings-
new-conservation-challenges-and-opportunities

11. World Economic Forum. (2023, January). Environmental Sustainability Principles for
the Real Estate Industry 2023.
https://www3.weforum.org/docs/GAC16/CRE_Sustainability.pdf

12. Rosenkranz, E. (2022, February 10). How Does Real Estate Affect The Environment?
– 3 Factors. Smart CRE. https://smart-cre.com/how-does-real-estate-affect-the-
environment-3-factors/