How do green leases work?


Within Grosvenor’s London estate, tenants account for more than 90% of operational emissions from buildings. Whilst as a business we have committed to reaching net zero by 2030 and published our net zero carbon pathway, we simply cannot do this alone. Collaborating with occupiers and suppliers must be at the heart of our sustainability approach.

One important element of this partnership is green leases. A green lease is an agreement made between tenants and landlords to increase transparency, consolidate services and accelerate innovation.

According to Dr Kathryn Janda from the Environmental Change Institute at the University of Oxford “Green leasing is a promising tool that tenants and landlords can use to develop joint environmental actions”. Whilst these leases are becoming increasingly prevalent in the UK market, they are still not commonplace, vary in their ambition and are not always effectively implemented.

One reason for that is their complexity. It isn’t as straightforward as just signing all tenants up to green clauses and mandating more environmental behaviours or greater energy efficiency.

When developing green leases for our own tenants we focussed on three principles to ensure they were both attractive and delivered tangible environmental outcomes.

Firstly, going green must be both easy and cost-effective. It isn’t enough to simply demand green behaviours. We must provide the means and opportunities for tenants to behave sustainably with minimal or lower cost implications for their business.

Green energy is a perfect example. Many landlords are uniquely placed to leverage their size to procure green energy at lower and less volatile prices for tenants, helping them drive down CO2 emissions whilst also saving money. Typically, we have been able to save tenants an average of 6% on their utility bills.

Secondly, green clauses must be collaborative. They need to include commitments from both parties. For example, agreeing to share environmental data to help landlords improve the energy efficiency as well as enable tenants to use their buildings more sustainably.  

We are installing smart meters in many of our buildings so we can act on this data together with tenants to retrofit low EPC rated buildings and provide advice on how they can save energy themselves.

Finally, green clauses should facilitate an ongoing dialogue between tenant and landlord on environmental topics. As a landlord we have a responsibility to educate ourselves and our tenants about environmental sustainability.

Landlords don’t always know best, and we need to listen and learn from our occupiers (we have over 1,000) as well as enable conversations within the communities that we operate.

By sharing knowledge through tenant forums, we can significantly advance the sustainability agenda not only in London but across the UK and globally, by learning from and influencing tenants whose businesses have a national or global footprint.

Going green should be easy, cost-effective, collaborative and enable ongoing dialogue. These are all essential elements of our evolving environmental approach. We are still at the beginning of our journey, but we are seeing great things already. And green leases form just one part of our strategy of collaborating more closely with tenants on green issues.

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