Lodha addresses climate change risks by taking a leadership stance on both physical and transition risks and to collectively address decarbonization in the built environment it forms ‘Lodha Net Zero’

Real estate assumes significance on two crucial fronts. Firstly, it stands as a major contributor, that is the built environment of the industry accounts for 40 per cent of global greenhouse gas (GHG) emissions. This underscores its pivotal role in the climate discourse and emphasizes the need for strategic measures to mitigate its environmental impact. Secondly, in the broader economic context, real estate emerges as the second-largest employer after agriculture, says Aun Abdullah, Head-ESG, Lodha in an interview with BW Businessworld.

This dual role positions it as a critical player in the global economy, with India notably contributing nearly 15 per cent to the overall global growth, he added.

Can you share some key initiatives that have been instrumental in shaping Lodha’s ESG strategy over the past decade?

In dissecting the role of construction, it becomes evident that, unlike other industries, the real estate industry encompasses various emissions from sectors such as steel, cement, and transportation, profoundly influencing the way cities are shaped. The critical impact lies in urban planning—whether it encourages sustainable practices like reduced driving or contributes to high emissions through dispersed commercial hubs and residential satellite towns, necessitating daily commutes.

Lodha’s approach to this multifaceted challenge is twofold. Firstly, recognising real estate as a significant contributor to emissions, Lodha has taken a leadership stance, considering it imperative to pave the way for the entire industry ecosystem. Our sustainability strategy is anchored on resilience, addressing both the physical and transition risks associated with climate change. Initiatives span across water conservation, biodiversity enhancement, and innovative incorporation of global climate models and Intergovernmental Panel on Climate Change (IPCC) scenarios into designs, especially concerning flood risks, water stress, and heat stress. This forward-thinking approach aims to not only influence our designs but also generate wider interest in the ecosystem, potentially prompting urban local bodies to adopt similar methodologies.

On the front of decarbonisation, Lodha has forged a strategic partnership with the Rocky Mountain Institute, resulting in the formation of ‘Lodha Net Zero.’ This platform unites the supply chain, policymakers, and industry to collectively tackle the decarbonisation of the built environment. By breaking down the carbon spectrum into components—emissions from materials, operational phases, and demand-side considerations—Lodha aims to address these aspects comprehensively. Initiatives extend from resilience to various elements of decarbonisation, emphasising clean energy transition and sustainable transportation practices, including walkability, shared transportation, and electric vehicles.

Socially, Lodha’s impact extends beyond its developments to encompass the larger ecosystem where it operates. Best practices engage communities, residents, and their workforce, fostering participation in their sustainability journey. The company also undertakes nation-building initiatives, such as the ‘Glue the Genius’ program, ‘Go Down 80’ for women’s empowerment and upskilling, and foundational work in education, livelihood, and health through the Lodha Foundation.

In essence, Lodha’s ESG spectrum reflects a comprehensive and forward-looking strategy that not only addresses the environmental impact of the real estate industry but also considers the social implications, demonstrating a commitment to sustainable and inclusive practices.

Can you provide insights into the eco-friendly projects undertaken by the company and elaborate on how ‘green bonds’ function as a financing mechanism for these projects, and the broader impact on the company’s commitment to sustainability?

Eco-friendly initiatives are integral to our ethos. We are currently evaluating the implementation of green bonds. It’s important to note that green bonds represent just one facet of our diverse financing strategies aligned with sustainability. A noteworthy example is the sustainability-linked credit line secured through a local bank with financing from the International Financing Agency last year. This innovative financing mechanism is contingent upon the project’s performance against predefined environmental criteria. Successfully meeting the criteria enables us to access preferential rates in loans or credit plans.

Moreover, the market landscape is evolving, and we’ve witnessed the emergence of green home loans over the past several months. In this scenario, projects that are either green-certified or adhere to specific environmental criteria can benefit from banks offering loans to customers at preferential rates. This interconnected system ensures that financing institutions incentivise sustainable practices by providing discounted rates to projects that align with environmental standards.

Our approach to sustainable financing extends beyond green bonds, showcasing a commitment to tapping into various avenues within the finance ecosystem. These strategies not only bolster the financial viability of eco-friendly projects but also align with our broader dedication to sustainability, fostering a symbiotic relationship between responsible financial practices and environmentally conscious initiatives. As the market continues to move in the direction of sustainable finance, we remain poised to leverage diverse instruments, ensuring our commitment to sustainability permeates every aspect of our operations.

Can you shed light on the specific aspects of embodied carbon, passive design, and capability that Lodha’s Net Zero accelerator focuses on and how it contributes to the net-zero carbon goal for built environments?

Breaking it down into three parts:

Embodied Carbon:

Embodied carbon, which constitutes up to 25-30 per cent of a building’s lifecycle emissions, remains largely overlooked. We initiated a baseline exercise to identify

key contributors like steel, concrete, aluminium, glass, blockwork, paint, and tightness. The aim is to target these materials through strategies like material selection and design efficiency to reduce emissions. However, due to data scarcity in the Indian supply chain, we’re actively working to raise awareness and encourage data disclosure. Our ongoing initiatives include pilots on low-carbon concrete, recycled steel usage, low-carbon blockwork, and exploring alternative construction technologies like 3D printing and mass laminated timber.

Passive Design and Equipment Efficiency:

In pursuit of adaptive thermal comfort, we’re challenging conventional norms, experimenting with elevated temperatures, and developing a model to demonstrate that thermal comfort can be achieved without excessive air conditioning. On the equipment front, we’re testing next-gen air conditioning technologies through collaborations with companies like Rocky Mountain Institute. We aim to participate in the development of commercially viable and energy-efficient options. Additionally, efforts are underway to accelerate the usage of Brush-Less Direct Current (BLDC) fans and aggregate energy-saving impact data.

Transportation:

Recognising the inevitable transition to electric vehicles (EVs), our focus is on establishing a charging infrastructure. Collaborating with Rocky Mountain Institute (RMI), we’re determining the optimal trajectory for scaling up this infrastructure, avoiding both overcommitment and underutilisation. Learning from global examples like Norway, we’re working towards creating a supportive ecosystem for EVs within our developments. With over 100 public transit points and increasing vehicle charging instances, we’re committed to shaping a sustainable future in transportation.

In essence, our Net Zero accelerator tackles multiple fronts – embodied carbon reduction, innovative passive design, and efficient equipment strategies – all contributing to our overarching goal of achieving net-zero carbon in built environments. As we progress, our data-driven approach and transparent sharing of lessons learned will contribute to industry-wide advancements in sustainability.

How is the evolution of ESG metrics and reporting shaping up and what benefits do they offer to both investors and developers in terms of decision-making and risk management?

ESG reporting metrics exhibit a diversity influenced by industry and geography. In India, we observe the prominence of frameworks like Business Responsibility and Sustainability Reporting (BRSR) from the Securities and Exchange Board of India (SEBI), where top companies align their reporting. Our reporting also integrates with the Global Reporting Initiative (GRI), providing an interoperable foundation. Voluntary and involuntary benchmarking assessments, such as the Global Real Estate Sustainability Benchmark and the S&P Global Corporate Sustainability Assessment, introduce nuanced perspectives. These assessments, including those from The Financial Times Stock Exchange (FTSE), and Morgan Stanley Capital International (MSCI) and others, align with industry and country considerations.

Our reporting journey, initiated around 2017-18, enhances transparency by showcasing our stance on ESG issues to the public. For investors, this means

accessing benchmark data to evaluate our performance. Beyond transparency, reporting yields valuable insights, helping us understand our operational impact. These insights drive continuous improvement, allowing us to refine policies, update systems, and institutionalise impactful initiatives. This iterative process of learning, communicating, and evolving aligns with the maturation of the ESG reporting ecosystem, promising positive developments in the future.

Can you share some successful examples of collaboration between stakeholders, government, developers, and investors in the real estate sector, and what outcomes have they achieved in terms of sustainable development? Any initiative from your company?

Collaboration can be challenging, but impactful outcomes emerge. For instance, in pioneering EV charging partnerships with Tata, we observed a ripple effect. The government’s EV subsidy complemented this initiative, aligning policies with sustainable practices. This triggered a shift across major developers who followed suit. Similar dynamics unfolded in promoting green buildings. Initially less common in residential spaces, corporate uptake and government incentives drove wider adoption.

Take our venture into sustainable materials like new cement. By disclosing and signaling demand, we encourage broader adoption. This pattern repeats in initiatives such as using 5-star AC units in affordable housing. Our sizable orders stimulate demand, benefiting both consumers and manufacturers economically. It’s a domino effect—initiate, test, scale, and witness the ecosystem flourish.

From an industry perspective, what role do you believe real estate developers should play in the collective endeavour towards a more sustainable future?

Looking at the bigger picture, 40 per cent of global greenhouse gas emissions originate from the built environment. Even if we focus solely on real estate, excluding infrastructure, it still contributes around 25-30 per cent. Now, given India’s goal to decarbonise and achieve a 45 per cent reduction in emissions by 2030, the onus falls on the developer ecosystem. Individual efforts won’t cut it. We, as developers, must lead the charge—setting benchmarks, generating demand, and showcasing viable green alternatives. The scale of upcoming developments, especially in mass and affordable housing, necessitates getting things right from the start. Time is of the essence, and we developers need to take the lead.