FREE CHAPTER from ‘A Practical Guide to Green Leases for Property Professionals’ by Clare Harman Clark



Change the precedent, change the world.”[1]

And the fact is the world needs changing.

Since the dawn of time, the world’s climate has been continually in flux but the enormous, existential threat of human influence on that natural variation is now established fact. There is a legitimacy of consensus between environmental scientists, conservation groups and green activists throughout the globe: the climate is changing and the rate of warming challenges life as we know it. In the last century or so, since trackers have been able to obtain reliable data for baseline comparison, we have collectively, and dramatically, hiked average global surface temperatures. At the time of writing, new records for daily temperature anomalies (i.e. departures from the meteorological norm) peaked at around 1.9°C higher than the so-called “pre-industrial” levels of 1850-1900.[2] Yet since the Intergovernmental Panel on Climate Change (IPCC) released its Fifth Assessment report on 2 November 2014, it’s been widely understood that an average increase must be kept to an absolute maximum of 1.5°C. This is the aspirational goal of the United Nation’s November 2016 Paris Agreement, and sits at the heart of many science-based targets (SBTs) for climate action (more on drafting these in Chapter 4). There is a clarion call is for genuinely effective action.

Understanding the nuances of the crisis and its ultimate impact can be extremely challenging; scientific literature is dense and technical. Still, the world’s climate scientists (including those at the IPCC) make predictions using the relatively accessible Representative Concentration Pathways (RCPs) tool. RCPs are not a strict measure of emissions per se, but they make assumptions about atmospheric greenhouse gas (GHG) concentration in our atmosphere and build remarkably visual models for policy makers, which consider rising temperatures in the context of possible adaption and mitigation strategies. Depending on the volume of GHG emitted in the years to come, they set out a series of different pathways to possible futures in 2100, each relative to that earlier, nineteenth century world.

Each RCP scenario is named in relation to targets for atmospheric radiation, expressed in watts per square metre. And each exhibits socio-economic assumptions relating to our technology, economy and population trajectories, making very real what could come to pass. Towards the more hopeful end of the potential climate change spectrum is the RCP 2.6 scenario, which should keep the best estimate of global average temperature rise to 1.6 °C by 2090-2100. But it is a “very stringent” pathway that requires GHG emissions to decline dramatically from 2020 and reach zero by the end of the century. The intermediate pathway of RCP 3.4 meanwhile includes the considerable removal of GHG, but still leaves mean global warming of up to 2.4°C by 2100.

If we cannot, collectively, put into place effective, protective climate policies, RCP 4.5 sees GHG emissions peak around 2040. These will then decline, thanks ultimately to the exhaustible character of non-renewable fuels, but more likely than not we will face a global temperature rise of 2-3 °C by 2100, and a mean sea level rise 35% higher than that in RCP 2.6. Many plant and animal species are unlikely to be able to adapt to the effects of RCP 4.5.

Across each RCP pathway, the picture for the late 21st century is concerning. In aggregate, they project a global mean temperature rise of between 0.3°C and 4.8 °C, with global mean sea level rise of between 0.26m and 0.82m. Towards the (even more) worrying end of the RCP spectrum, RCP 6 sees emissions peak around 2080. They will then decline thanks to technologies and strategies, but by 2100 global temperatures will still be up by 3–4 °C (i.e. at least double the maximum IPCC target). The best basis for our worst-case climate change scenario is RCP 8.5. Here, emissions continue to rise unmitigated throughout the 21st century, leading to a global average temperature rise of 4.3°C by 2100. RCP 8.5 is often used to predict a “very high baseline emission scenario”: what could happen, in the worst case, where no effective policies are put in place.

Ultimately, expect huge and unprecedented consequences on our personal and business lives. On a global scale, the World Economic Forum’s Global Risk Report 2022 listed climate action failure, extreme weather and biodiversity loss as the three most severe risks of the next decade. Closer to home, in July 2020, the UK’s Met Office recorded a mock weather forecast for 2050, based on that high emissions scenario. A serious meteorologist looks into the camera: “Do what you can to stay cool […] the most severe heat warning is currently in force.” The same scientist offers a debrief after the forecast: “Now possible and could are words that express uncertainly, but don’t let that lull you into a false sense of security.” The message was clear. Business as usual mean we can expect multiple days of extreme heat; record breaking temperatures; high alerts for wildfires, storms and drought. Apocalyptic weather. Inevitable breakdowns in infrastructure, communications and homes.

No doubt since before Cassandra’s curse, polite society has dismissed doomsayers. But even a cursory recent glance at genuine weather reports suggests the Met Office’s dramatic high emissions scenario is already manifest, a generation ahead of time. 2023 brought the warmest summer ever reported in the northern hemisphere. When the world’s average temperature reached a new high on Monday 3 July 2023, it topped “17 degrees Celsius for the first time. […T]the highest in any instrumental record dating back to the end of the 19th century.”[3] The Guardian quoted climate scientist Friederike Otto, of London’s Grantham Institute for Climate Change and the Environment, who called the heat “a death sentence for people and ecosystems.” And it was squarely blamed on climate change.

Shifting the dial

There is a compelling argument that the country’s future growth and prosperity depends on pivoting its entire economy towards the green revolution, just as it has pivoted in the past from agrarian to manufacturing, to services professions. In the long term, renewable energy must be manifestly cheaper and more sustainable than fossil fuels. We can of course debate the pace of change. We can balance the politic of measured contributions and personal sacrifices against the demands of a climate emergency that would dictate shifts virtually overnight, like wartime industrial pivots. It doesn’t really matter: either way, whole sectors need to be equipped with clear strategy and policy to have the confidence to invest for the challenge, attract capital and serve communities, however the challenge will be faced.

When it comes to tangible national leadership in this climate change battle then, we will explore in Chapter 2 how, together, the existing statutes, regulations and policies constitute a rather flimsy and frustratingly unclear manifesto for concerted action. Indeed, at the time of writing, Prime Minister Rishi Sunak had just made a political U-turn on key net zero targets and industrial commitments. It “signal[led] a retrograde step at a time when other countries are accelerating action to decarbonise their economies” said Sarah Ratcliffe, CEO of BBP. And swathes of UK scientists and environmental groups expressed anger: “short-term political gain will undermine the transition to net zero and with it the future opportunities, prosperity and safety of the entire country.”[4].

Nonetheless, there is some light at the edge of this leadership lacuna, and it’s not wildfire. On the ground, the socio-economic drivers behind responsible capitalism are greater now than they have ever been. People want change, and despite the best efforts of personal carbon footprint proponents,[5] they can’t do it alone. As campaigners, as consumers and ultimately as investors they are looking squarely at corporate colleagues. Relatively nimble and often cross border in reach, businesses certainly have the potential to define and embed global societal change – and Environmental, Social and Governance (ESG) standards are subsequently bedding into the board room, evident also in capital allocations and asset valuations. They are key to the concept of each and every sustainable future, be it environmental, personal or commercial.

The commercial real estate sector in the UK is working hard then to support and promote the necessary net zero transition, despite the policy lacuna. Almost every business needs property to operate and buildings are being developed, redeveloped and operated with a clear eye on carbon emissions. It’s simple enough to place the “E” in a property context (see Chapter 3): the physical risks of climate change will pummel bricks and mortar and its services infrastructure whether they are event driven and acute (involving incidents such as floods or cyclones) or the result of chronic, longer-term climactic shifts (such as this year’s heat wave). But the “S” picks up on its operational impact on the people in, on and near the buildings; the type of initiatives that directly affect employees, service providers, communities, customers and/or suppliers. The “G” limb is more inward looking, concerned with the organisational structures and processes of the corporates owning and managing property.

Businesses are encouraging the proliferation of industry-set benchmarks, to rate the sustainability of their operations and their property assets. Organisations like the Global Real Estate Sustainability Benchmark (GRESB) generate a rating by considering every aspect of physical, in-building operations, and the extent to which they support broader ESG goals. When it comes to the assets themselves, there is certainly less talk in the property market of a green premium and more of a brown discount, as owners and operators understand that their brand standards are reflected to the outside world in their buildings. Understanding the relationships that play out on land is vital. The well-publicised post-Covid war for talent means the sustainable working environment and clean green air is key to attracting and retaining the best staff. Of vital importance to this book, a new generation of collaborative and innovative landlords and tenants are shifting the dial on traditional practice with green leases.

Greening the lease

Against this backdrop, green leases offer an exciting opportunity to make a deep, commercially aware and relatively swift sea-change in how the built environment responds to the climate challenge. The companies that fully embrace more impactful green lease drafting can embed in their longstanding commercial relationships and building operations the kind of mitigation measures that could, ultimately, help drive us towards the less terrifying end of that RCP scenario spectrum.

It’s early days. There’s still no such thing as a market standard, institutionally accepted green lease, but the ideas discussed in Chapter 4 are coalescing around various features that can support the generation and centrality of ESG performance targets in how a building is occupied and operated. Fundamental to their take up then is empowering real estate practitioners and their clients to approach and manipulate them confidently. By first exploring the various tools freely available to help with green lease drafting in Chapter 3, we’ll learn how lawyers and industry bodies are devising a new generation of products, of staters for ten on the green lease journey, and see how clients are increasingly keen to understand and adopt these provisions; to learn how their leasing documents can help them meet their own ESG targets, and drive real change.

Changing the world

To be clear at the outset, greening an investment grade lease is not a straightforward business. Quite apart from the difficulties catering for the nuances of every building; the differing strategic aims of every business; the competitive outputs of every commercial operation; even the differing degrees of every building’s reliance on technology or engagement with the local community, the fact is that we are, in the UK’s commercial property world, heavily wedded to a model of leasing known as full repairing and insuring (FRI). For decades, FRI principles have underpinned commercial real estate investment. FRI works essentially to push the costs of occupation onto the tenant occupier, thus providing the landlord with a clear (usually) and pleasingly reliable quarterly income stream akin to dividends.

In this well-established FRI world, green leases call for a whole new mind set. To turn sustainable ambition into a lowered emission reality, the parties must work together and commit to shared goals that generally upend FRI concepts. Done properly, both landlord and tenant will now have a stake in the future not only of the square footage itself, but also in its whole environmental lifespan. Rather than signing up to a simple (ish) FRI cash flow mechanism, landlord and tenant must agree to cost sharing, information sharing and ambition sharing with all the gusto that they might have previously lent (and still do lend) to bartering over alienation or user prohibitions.

Added to this conceptual challenge is the fact that the earliest attempts to introduce “green” drafting were both limited and lacklustre. Arguably, this early cul-de-sac of green lease development still taints newer attempts at change; the more visionary landlords’ green drafts are regularly redlined by tenant lawyers who are, fairly, used to reading nothing more than a backdoor attempt to shift costs and responsibility onto their clients. Unsurprising then, the early concept has been slow to capture attention and properly bed into the market.

Today though, my experience of the commercial property sector is that many, many companies are serious about the change. Future generations of green leases may have risked starting on the back foot, but they are gaining serious traction. JLL reported in June 2021 that, “globally, 34 percent of occupiers had green lease clauses in 2021, while a further 40 percent plan to sign them by 2025.” As the general election lumbers towards us over the horizon, it remains to be seen how any political party will look to formulate and place top-down net zero regulation on the commercial real estate industry, but they would all do well to engage with this forward thinking and surprising nimble sector, to understand what changes are already building the brave new net zero world from the ground up.


[1]     This quote is from Matthew Gingell, GC of Oxygen House Group and the founder and chair of TCLP, who was speaking at the TCLP Plenary Session (2nd Annual Hackathon) on 5 November 2020.

[2]     Hausfather, 29 September 2023.

[3]     Guardian, 4 July 2023

[4]     Professor Dave Reay, executive director of Edinburgh Climate Change Institute, University of Edinburgh, is quoted in Laville, 2023.

[5]     Solnit, 23 August 2021