The Role of the Built Environment in Climate Adaptation

The built environment shapes the way that communities interact with each other and with nature. In the fight for climate action, the Built Environment and Climate Adaptation cluster considered how different sectors of the built environment can be changed to create more meaningful strides towards meeting our global climate and sustainability targets.

Underpinning different strategies is the need to change the way we approach and think about the built environment. The existing practices do not lead us towards urgent climate action. A significant shift is needed! Daylighting waterways, nature-positive stormwater management, financing mechanisms, waterfront interaction, and other small steps individually contribute, but have potential to make a great difference to our communities when done together. Michelle Too, Ming Hong Choi, Thomas Klein, and Ethan Gacek address these points below.

*Figure 1:* *Seeded mussel lines to improve water quality from beneath Te Wānanga, as part of Auckland Downtown upgrades.*

*Figure 2:* *Rain garden in Arlington, Massachusetts. This is part of a long-term commitment to improve Alewife Brook and Mystic River water quality.*

BRIDGING THE SUSTAINABLE FINANCE GAP IN REAL ESTATE
BY MING HONG CHOI

Real estate's pursuit of net-zero goals faces a formidable obstacle: an unprecedented sustainable finance* gap that demands urgent and innovative solutions as the sector confronts its profound climate impact. Recent data from Jones Lang LaSalle (JLL) highlight a stark reality: of the $7.1 trillion in sustainable debt** issued globally over the past five years – including green bonds, sustainability-linked loans (SLLs), and other instruments – only 7% was allocated to real estate. Furthermore, just 12% of all green bonds were used for decarbonizing buildings. [1]

This underutilization of sustainable finance in real estate is particularly concerning given the sector’s outsized contribution to global emissions. Buildings account for 39% of global energy-related carbon emissions – comprising 28% from operational energy use such as heating, cooling, and electricity, and 11% stemming from the carbon embedded in building materials and the construction process. [2] This highlights the urgent need for massively increased investment in energy-efficient systems, green materials, and low-carbon concrete technologies – not only for retrofitting the existing building stock in developed nations but critically, for shaping sustainable new construction trajectories in the world’s rapidly urbanizing regions where the bulk of future development will occur.

The scale of transformation required is staggering and presents distinct challenges globally. While commercial real estate owners in the Global North alone will require nearly $2 trillion in debt financing over the next two decades primarily to retrofit existing office properties, [1] a different but equally vast challenge looms in rapidly urbanizing regions, particularly in the Global South. Here, the focus must be on embedding sustainability into the immense wave of new construction anticipated, avoiding carbon lock-in from the outset. Compounding these diverse needs, the fact that 80% of the buildings that will exist globally in 2050 are already standing [3] underscores the critical imperative for widespread retrofitting alongside, not instead of, sustainable new development worldwide.

To meet this capital need, innovative instruments such as sustainability-linked loans (SLLs) have gained prominence. SLLs are a flexible financing tool that ties interest rates to a borrower’s ESG performance, rather than earmarking proceeds for specific green projects.

Since their introduction in 2017, SLL issuance surged to a peak of $610 billion in 2021, reflecting broad uptake across sectors such as real estate and infrastructure. [4] However, issuance dropped by 36% in 2023, largely due to concerns over the credibility of sustainability targets and rising scrutiny around greenwashing. [3]

While overall SLL volume rebounded modestly to $463 billion in 2024, [4] their declining share of the broader financial landscape points to lingering challenges. Sustainable loans saw their portion of total syndicated lending fall from 12% to 10%, [5] a significant relative contraction. This reduction, alongside critiques of SLLs benefiting high-emitting industries without clear positive environmental impacts, [3] underscores persistent confidence issues within the market. Rebuilding trust and ensuring these instruments genuinely drive the net-zero transition will require greater standardization, robust third-party verification, and clear, science-based KPIs.

Governments have begun to step in. The U.S. Commercial Property Assessed Clean Energy (C-PACE) initiative, Germany’s Federal Subsidy for Efficient Buildings (BEG), and Singapore’s outcome-based Green Mark Incentive Scheme for Existing Buildings 2.0 (GMIS-EB 2.0) all provide targeted mechanisms to fund energy retrofits.

A critical uncertainty is whether sustainable financing mechanisms can evolve quickly enough to meet the scale and urgency of the climate challenge in real estate. Success will depend on our ability to develop innovative, accessible, and effective financing structures that drive meaningful environmental changes without compromising financial viability.

As a Harvard’s Master in Real Estate (MRE) candidate and a climate-focused real estate professional, I recognize that today’s gaps in sustainable finance are not merely structural deficiencies, but also strategic entry points for catalyzing systemic change in the built environment. Mobilizing institutional capital toward large-scale retrofitting, decarbonization, and guiding sustainable new development, particularly in rapidly urbanizing regions across Asia-Pacific, is essential to advancing climate resilience where the stakes are highest. Tackling these challenges demands innovative financing models that actively align investor incentives with long-term environmental performance, alongside sustained efforts in research, practice, and policy to close the funding gap that continues to impede the real estate sector’s transition to net zero.

* Sustainable finance refers to a suite of financial instruments designed to direct capital toward projects that generate measurable ESG benefits, while aligning investment strategies with broader ESG objectives and long-term value creation. These instruments encompass both equity and debt instruments including green/climate bonds, sustainability-linked loans, and ESG-focused equity investments.

** Sustainable debt refers to debt instruments – distinct from equity – issued by corporations, governments, or other entities, specifically structured to raise capital for projects or initiatives that deliver measurable ESG benefits. Unlike equity investments, which represent ownership stakes, sustainable debt involves the borrowing of capital with the obligation of repayment, typically under defined terms.

*Downtown Cedar Rapids, June 2008, Army Corp of Engineers Rock Island District*

*The Albany Skyway converted a highway offramp into a park that connects downtown Albany with its waterfront. Photo credit: Stantec.*

CONTRADICTIONS OF INHABITING A WARMING WORLD
BY ETHAN GACEK

The demand for traditional mechanical air conditioning (AC) is increasing, not only due to general global warming, but also as development progresses in regions increasingly exposed to extreme heat. While it may tempting to view AC as a necessity for this moment, its proliferation encapsulates an uncomfortable tension – one of many being laid bare in the built environment: AC is critical for providing essential cooling in an increasingly warm environment, while at the same time contributes to the global warming from which it provides relief. This post introduces AC as a case study to illustrate the challenges involving climate change and the built environment.

Traditional AC comprises “fans, ductwork, and vapor-compression refrigeration to cool indoor air by circulating it over coils filled with cooled refrigerant or water.” [1] From its creation in the early 20th century, it has become one of the most prevalent cooling methods in modern buildings as demand continues to surge in a warming climate. As of 2018, over 50% of households in China, Saudia Arabia, Korea, the United States, and Japan had air conditioning, [2] with growth in other markets surging, with countries like India anticipating an estimated 9x increase in AC ownership by 2050. [3]

However, AC as we know it also contributes to a warming climate, specifically driving 4% of greenhouse gas emissions. [4] This is in part due to the fact ACs use hydrofluorocarbons (HFCs) in their systems which have significantly higher warming impacts than CO2. [5] Furthermore, the use of traditional AC implies a reliance on standard energy grids which may also contribute to environmental warming and expose individuals to extreme heat should those systems fail. [6]

Solutions have been proposed to address the paradox of AC dependence in a warming world, including innovative passive cooling solutions, updating regulations to limit the use of HFCs, and shifting the dialogue to focus on “cooling” beyond the definition of “air conditioning.” [7] [8] [9] Yet existing regulation, limited education, and status quo biases – among other factors – present challenges that must be overcome.

As a student at both HBS and HKS, I see the need for cross-sector approaches to solve complex problems like this. A coordinated mix of complimentary initiatives across public, private, and nonprofit actors is likely to be most effective. Indeed, I approach climate leadership with this lens, in roles that bring private sector principles to public sector organizations – such as my past work with Azerbaijan’s Ministry of the Economy. [10] Collaborating closely with other members of the Built Environment and Adaptation Cluster, most of whom are practitioners in the field, has also demonstrated that cross-sector interaction must be complemented with subject-specific expertise.

While my professional experience is not in the built environment, the Climate Leadership Program has helped me engage thoughtfully with its challenges. Growing up in Southern California, I have seen firsthand how housing and insurance markets impact livelihoods amidst increasingly frequent and deadly wildfires. [11] Though this may appear distinct from the issues discussed above regarding AC, I believe they are linked: both situations reflect the challenge of living and inhabiting a world with an increasingly hostile climate. Indeed, these situations may even beg normative questions of how and in what ways it is appropriate to live in parts of the world increasingly exposed to climate risk. As I continue my studies, I am committed to identifying what lessons may be drawn across disparate crises like these to ultimately identify creative, effective solutions to addressing climate change.

***CLP Cluster logo generated by Fotor AI.***

NATURE-POSITIVE SOLUTIONS AND OUR BUILT ENVIRONMENT
BY MICHELLE TOO

The development of cities and communities has come at a cost to biodiversity. We are now facing a triple-planetary crisis of climate change, pollution, and biodiversity loss. However, that is not to say that nature and the built environment cannot co-exist. In my work, I have seen how nature can be thoughtfully integrated into the built environment. I have also seen how regulations, funding, and policies have restricted or created additional barriers to incorporating green infrastructure and nature-based/nature-positive solutions. It is the path forward for increasing climate resilience in our communities. We need to rethink and reimagine the way that we plan, design, and build solutions and we can accomplish this by looking beyond grey infrastructure - Imagine rain gardens and swales instead of concrete gutters.

I ask, “What are the challenges limiting widespread adoption and what can we do to address these?”

We need to increase collaboration - between sectors, with Indigenous communities, with local communities. Industry and procurement practices can be updated to create a delivery environment where engineers, architects, ecologists, contractors, policymakers, and Indigenous and local communities collaborate meaningfully. This includes updating standards and policies for the built environment which currently restrict the ability to implement nature-positive infrastructure, especially for infill development.

Another challenge to widespread implementation is the fact that nature-based solutions should be tailored to local biodiversity. The most appropriate approach recognizes that nature positive solutions are tailored to the local context to avoid negatively impact existing local biodiversity. For example, a strategy to increase climate resilience can be increasing control of invasive vegetation and plants.3 Therefore, if nature-positive solutions increase invasive vegetation, it may not provide the intended resilience impacts. It is the challenge of managing locally tailored solutions and creating scalable applications. There are some limited examples of early-stage widescale replication of nature-based/nature-positive solutions, such as Hamburg’s Greenroof strategy, highlighting the need for policymakers, early-adopters and first movers, and industry to work together to deliver resilience to our communities through the integration of nature in our built environment.

The good news is that there is increasing industry recognition of the importance and urgency for nature-positive and nature-based solutions. Although this is a concept that has been around for a while, the built environment industry has been looking to make this more widespread through creating playbooks, reviews, and case study reports - but this is only the first step. I am excited and encouraged by the work already happening in this space. I am also looking forward to doing more research on how we can shape infrastructure and urban development strategies and policies to better enable green infrastructure. The longer we wait, the more difficult it will be to ensure a resilient and climate positive built environment for our current and future communities.

**Embodied and Operational Carbon Emissions Across Building Life Stages**
Source: New Buildings Institute

REDEFINING URBAN INFRASTRUCTURE IN THE FACE OF CLIMATE UNCERTAINTY
BY THOMAS KLEIN

In recent years, communities have felt the physical impacts of climate change in increasingly visible and costly ways. These impacts are not shared equally, with historically underserved communities shouldering a disproportionate share of harms including extreme heat, flooding, and other storm impacts. [1] This entrenched inequity is further complicated by development patterns which have resulted in uneven health and economic outcomes, including exposure to air pollution, [2] and economic opportunity. [3] I experienced these impacts firsthand when my hometown of Cedar Rapids, Iowa experienced a 500-year-flood with the Cedar River cresting at an unprecedented 31.2 ft, flooding 14% of the city. [4] Today, the scars of this flood are still felt in parts of the city where challenges obtaining insurance and a lack of capital to rebuild have left communities with vacant parcels and empty storefronts.

Further confounding efforts to reduce these harms is the reality that critical infrastructure is vulnerable to a changing climate. Transportation systems in the United States (including bridges and tunnels that are long past their design life) are often unable to withstand increasingly intense storm events. The American Society of Civil Engineers estimates that 45% of bridges in the U.S. have surpassed their 50-year lifespan. [5] In New York City, for example, Hurricane Sandy resulted in severe flooding that damaged the subway and vehicular tunnel systems, resulting in $4.6 billion in repairs. [6] The city invested an additional $2.9 billion to future-proof the system. Energy systems have struggled to adapt to extreme heat and cold, stressing electric grids and resulting in prolonged power outages. In 2021, a grid failure caused by a winter storm in Texas left 4.5 million homes without power, resulting in at least 246 deaths and $195 billion in property damage. [7] Water systems are also at risk. It is estimated that the Great Salt Lake in Utah has lost 73% of its water due to prolonged drought conditions. [8]

To meaningfully address these issues and create resilient communities, we must first redefine infrastructure. In the United States, infrastructure has largely referred to large-scale physical systems that move people, energy, and other resources. This type of infrastructure has focused on big, efficient deployment of systems in ways that are not adaptable to a changing climate, increasing the risk to cities of failure during a cataclysmic event. And when they do fail, large, monolithic systems like those that comprise our critical infrastructure today are costly to repair, further threatening economic and social outcomes in our communities. By expanding our understanding of infrastructure to include both physical and organizational structures, we can begin to create systems that are interwoven within our communities. One framework for thinking about this type of infrastructure is through Dr. Linda Samuel’s Next Generation Infrastructural Criteria which holds that next generation infrastructure must be:

*Criteria for Next Generation Infrastructure, from “Infrastructural Optimism,” Dr. Linda Samuels, 2021, Routledge.*

While each project is not expected to achieve all eleven of these categories, they establish a lens for thinking about climate-adapted infrastructure. I have focused my work on this theme, working with communities to redevelop infrastructure that embeds resilience into the design by incorporating next generation infrastructure thinking. I believe this is a great opportunity to develop human-scale infrastructure that is multi-functional. Cities are facing many challenges, such as shrinking budgets, increased uncertainty, and competing interests to name a few. How they design their infrastructure is thus critical in shaping how they will thrive in the future. By developing urban systems that think holistically about how they can perform at scale, we can begin to heal the scars of past infrastructure on our communities while embedding resilience in our cities for decades to come.

Harvard Climate LeadersMay 14, 2025