Climate Change and Construction Overview

Climate change: the construction industry

The world’s climate is changing rapidly. Leading scientists, most nation states, their politicians and many corporations agree that climate change is the biggest threat to humanity. Global infrastructure resilience, economic development, food security, trade flows, and human health all stand to deteriorate under current projections and this will have a profound impact onbusinesses.TheUK government has committed to reduce greenhouse gas emissions to zero by 2050. EU and UK regulators have emphasised that the physical transition and liability risks from climate change and their associated impacts are becoming an increasing area of focus. In July 2019, the UK launched the Green Finance Strategy which indicates that the National Infrastructure Commission will be examining the resilience of the UK’s infrastructure and integrating climate considerations into the next National Infrastructure Assessment.

Also, under the Strategy, BEIS will be supported by the Infrastructure and ProjectsAuthority to seek to apply a“green filter” to the National Infrastructure and Construction Pipeline. Banks and insurers are taking notice of climate change and sustainability, impacting investments in the construction industry, and it is expected that all listed companies and large asset owners will be required to disclose in line with the TCFD (Task Force on Climate-related Financial Disclosures) recommendations by 2022. contributes around 40% of the UK’s total carbon footprint, with new construction accounting for 14%. There are already substantial decarbonisation efforts well underway in the construction industry and it will be important over the coming years to continue to address this at all stages of a project from design, procurement and construction through to ongoing operation. According to the UK Green Building Council, the built environment

The construction industry accounts for 11% of worldwide energy related CO2 emissions with 8% of CO2 emissions contributed by cement production 1 11%


Buildings account for 28% of worldwide energy related CO2 emissions 1



Energy use in the construction industry represents 6% of total worldwide energy consumption 1

The UK construction industry is responsible for around 3% of the UK’s

total CO2 emissions and 40% of the UK’s energy consumption 2

1 UK environment – Global Status Report 2017 2 Office for National Statistics

HOW OFF-SITE MANUFACTURING CANOFFSET CLIMATE CHANGE RISKS The construction industry is responding to climate change in various ways, including sustainable building design and operation and green construction practices on site. Modern methods of construction, such as offsite manufacturing (OSM), have a key role to play in this. OSM has the potential to: – Reduce waste materials, over-ordering and contingent ordering thereby reducing CO2 emissions from the manufacture of such materials – Reduce on-site labour and materials and associated CO2 emissions from the transportation of personnel and materials to site – Lead to more energy efficient buildings through precision manufacturing and reduced defects in construction – Reduce emissions from cement through the use of precast concrete and alternative materials Over the past year, Clyde & Co have been looking closely at industry and legal perspectives on the potential use of OSM in UK construction.


Clyde & Co have been focusing on the changing legal landscape around climate change, for example in the areas of liability, regulations, governance and disclosures (such as the TCFD recommendations). We recognise the importance of this to the infrastructure sector and are keen to partner with our clients to help identify risks and potential opportunities their businesses face. Some of the work we have already done in this area includes:

Following on from our ‘ Innovation in Construction ’ report, which brought together industry and legal perspectives on the potential use of OSM in UK construction, we have recently been focusing on its role in procurement structures and strategies, contract negotiations and supply chain management in relation to climate change. It is clear that modern methods of construction and OSM have the potential to help the industry tackle its impact on the climate. It is imperative for construction businesses to adapt their business models to manage their exposure to the risks that climate change legislation may cause.

Developing a Climate Risk team to help clients understand their current risks, prepare their business for future risks, and evolve in a way to capitalise on opportunities that will come with shifting to a low-carbon economy

Launching our Resilience Hub to assist business leaders in understanding the importance of resilience awareness and to provide guidance on risk management and regulatory issues

We are a founding member of the Coalition for Climate Resilient

Working with Chapter Zero: The Directors’ Climate Forum

Investment, launched at the UN Climate Action Summit in New York, which aims to transform infrastructure investment by integrating climate risks into political and financial decision-making Over the next year, our Projects & Construction team will be continuing to focus on climate change risk management and mitigation for our clients

Nigel Brook Partner, London T +44 (0)20 7876 4414 E Robert Meakin Partner, London T +44 (0) 20 7876 4249 E Liz Jenkins Partner, London T +44 (0)20 7876 4248 E

Significant research and thought leadership; for example considering how new laws and regulations, strategic litigation and duties of care emerging in response to climate change are giving rise to new liability risks. Find out more at


1137172 – December 2019

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