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Home » MECLA Spotlight on Embodied Carbon and the Finance Sector

MECLA Spotlight on Embodied Carbon and the Finance Sector

Infrastructure influences 70% of Australia’s emissions, and infrastructure decisions can either lock in emissions or accelerate decarbonisation across all sectors. The embodied carbon in the key materials used in construction, namely concrete, cement, steel and aluminium, are significant and responsible for over 14% of global GHG emissions. The decisions made today on infrastructure investment and material specifications will lock in carbon for many decades at a time when governments have agreed to ambitious 2030 and Net Zero by 2050 commitments.

Investors are increasingly looking beyond financial and economic value in assets to understand their ESG credentials, with carbon profiles and scope for decarbonisation as key considerations.

In this session learn about the MECLA initiative, the opportunities for investment in new markets and the transition to a low carbon economy, get up to speed on the rapidly changing regulatory, climate risk, government procurement expectations and ESG landscape around embodied carbon.


Key Takeaways:

  • Finance has a significant role to play driving down emissions in the built environment by setting expectations for reductions across assets in their portfolios
  • Government can lead the transition to a low embodied carbon future because they are large procurers and repeat clients that can take measures to harmonise supply and demand. Government is a constant presence and can send a clear market signal to drive future trends. Government procurement accounts for 15-20% of global GDP and roughly 50% of that is at the sub-national level
  • Infrastructure NSW has recently released a discussion paper on principles guiding decarbonisation in infrastructure
  • Embedding embodied carbon targets into sustainability strategies is becoming commonplace, with organisations such as Cbus Property targeting a reduction of 20% for all new projects and delivery of all new development projects as net zero embodied carbon from 2025
  • Investment and finance can be the driver of change by deploying capital to spur forward innovation and the establishment of industrial scale processes for low emissions materials
  • Expectations around investment, development and procurement have fundamentally changed in the world of ESG. There is immense opportunity to realise co-community benefits on large scale projects in the transition to a net zero economy

If you missed the session, read a summary of what was discussed below:

On November 7 Monica Richter, MECLA Project Director, welcomed everyone online and in the room to the session hosted by Cbus Super in their Melbourne Offices.

Rosalind McKay, Head of Responsible Investment at Cbus Super took the podium to discuss the leading investor perspective on embodied carbon and the climate transition opportunity. Cbus manages about $70 billion, 40% managed internally across a range of asset classes. Cbus develops climate roadmaps every two years and reports against them over time. Their ambition of net zero operational emissions by 2030 has already been realised by Cbus Property eight years early. Cbus infrastructure managers have committed to net zero by 2050. The third Cbus roadmap, released in early November 2022, includes specific actions on embodied carbon in the built environment.

Cbus is also engaging their property managers to encourage them to commit to 40% less embodied carbon in new buildings and renovations by 2030 and net zero embodied carbon by 2050. Cbus also has a 1% allocation to climate opportunities and investments that help support the transition, this allocation does not have to sit with their standard risk/return portfolios. Ros explained that finance has a significant role to play in driving down carbon emissions in the built environment through knowledge sharing, setting expectations for reductions in their assets, supporting appropriate policy settings, and deploying capital to accelerate the transition.

Sustainability Director at Development Victoria Clare Parry presented on government perspectives and the initiatives being driven in the state. Development Victoria renovates and builds a diverse range of property developments and urban renewal projects as the Victorian Government’s development arm. The organisation has five key pillars: housing, economic development, urban renewal, value creation and social and economic infrastructure. As the sustainability team Clare’s team focuses on embedding sustainability into all five of the pillars. Development Victoria’s sustainability strategy includes delivering best practice, achieving carbon neutral by 2030 for scope 1,2 and 3, and investing in the transformation.

Development Victoria has already achieved several sustainability outcomes in their portfolio including Ballarat GovHub. Ballarat achieved 48% embodied carbon reduction. Clare also spoke about the Riverwalk Acoustic Wall, where 61 tonnes of recycled and recyclable plastic was used to build the structure, equivalent to 15,500 homes worth of annual plastic waste.

Government should lead the transition to a low embodied carbon future because they are a large repeat client that can take measures to harmonise supply and demand, they are a constant presence and can send a clear market signal to drive future trends, Clare explained. Globally, government procurement accounts for 15-20% of global GDP and roughly 50% of that comes from the sub-national level.

Dena Jacobs, Director, Strategy, Planning and Innovation at Infrastructure NSW then discussed Infrastructure NSW’s new principles on decarbonising infrastructure delivery. This work comes out of the NSW infrastructure strategy 2022, and built on the existing work by the SEPP, NABERS, Transport for NSW Sustainable Procurement in Infrastructure initiative, MECLA, GBCA and recommendations by Infrastructure Partnerships Australia and the Business Council of Australia.

The discussion paper sets out six principles to guide decarbonisations in infrastructure. These include:

  1. Use consistent methods and data
  2. Reduce embodied carbon from options analysis and early design stages
  3. Account for embodied emissions in business cases
  4. Establish minimum expectation for reducing embodied emissions in tenders
  5. Evaluate tenderer performance on embodied emissions reduction
  6. Improve education and capability on carbon reduction across the asset lifecycle

Infrastructure NSW has had extensive engagement with agencies ahead of publishing the principles, an open forum for industry feedback and is now running a series of round table discussions.

The conversation then pivoted back to the private sector and Marc Gillespie, Manager Sustainability & ESG at Cbus Property. Operational emissions will abate as the energy grid decarbonises, leaving embodied carbon as the challenge. Cbus Property have shifted their focus to this challenge through engagement with MECLA and others building momentum in this space.

Cbus Property is a wholly owned subsidiary of Cbus Super that is their direct property developer and investor. Their strategy on embodied carbon starts with measurement of all embodied carbon for new projects, targeting a reduction of 20% for new projects. From 2025 they are aspiring to deliver all new development projects as net zero embodied carbon.

Jarrah Bassal, Acting Head of Sustainability at Transurban, presented Transurban’s sustainability strategy. The organisation is targeting net zero in scope 1,2 and 3 by 2050, a 50% reduction in scope 1 and 2 emissions by 2030, a 55% reduction in scope 3 carbon intensity of their major projects by 2030, a 22% reduction in their scope 3 carbon intensity of purchased goods and services by 2030, and a 10% energy efficiency savings by 2023 from a 2013 baseline. Transurban has avoided 644,000tC02e of construction emissions by changing the design, specifications, and using low carbon materials. Jarrah spoke about the important role investment and finance can play in the next step of Transurban’s decarbonisation journey, shifting from material reductions to acquiring and implementing more zero emissions and low emissions materials. To do this, investment in innovation and establishing industrial scale processes for low emissions materials is crucial.

The last presenter Simon Currie, Principal at Energy Estate, highlighted the community co-benefits of investing in driving down embodied carbon. Simon began by speaking about the changes he has witnessed in industry as ESG drives procurement and business practices. As an example, Simon discussed the 120MW solar farm Energy Estate developed in partnership with Wirsol and Beast Solutions that services 45% of Westpac’s 100% clean energy target. Community co-benefits were built into the contract including requirements by Westpac to increase the number of women working in the solar farm’s construction, a $500,000, 10-year partnership with Mount Austin Highschool to keep girls in school longer and support the transition to the workforce upon graduation, a $50,000 scholarship fund for female workers to undertake further study, and a $1 million Community Fund for local community initiatives.

Simon stresses that just because you are green does not mean you are good. Many developments must occur for the transition and making sure these are done with transparency in responsible ways is important. NSW Government recently released new rules for procurement of renewable energy and storage projects that include a commitment to educating workers, providing apprenticeships, and including underrepresented groups. Simon encouraged everyone to read the guidelines from the First Nations Clean Energy Network who lay out the basic building blocks of how to develop enduring relationships with first nations peoples.

In early November an update to federal regulations on offshore electricity infrastructure demonstrates how we embed these community co-benefits into developing for the transition. The revised working in the regulations stresses a projects “impact on, and contribution to, the Australian economy and local communities, including in relation to regional development, job creation, Australian industries, and use of Australian goods and services”.

For the final 30 minutes of the session speakers answered questions from the audience. You can watch the panel discussion recording on the MECLA youtube channel.