How the profit motive will drive sustainability

JOE: We're building a net-zero residential community in upstate New York, 53 units across 114-acres. We're also designing a triple-net-zero, seven-villa eco-resort in Mykonos, Greece – the first in the European Union. Triple-net-zero means it's zero waste (with anaerobic digesters on site), zero water (it's on a recycling closed loop) and zero emissions. When we choose materials, we use our carbon triangle as a tool. So, traditional steel is at the top and then it goes down in descending order of global warming potential. The lower you go, the lower the material's carbon emissions. Then there's low-carbon concrete, materials that emit zero carbon and even carbon-sequestering materials – essentially a carbon sink, for instance algae and cross-laminated bamboo.

The market for these upstate New York units is millennials who are starting families. The driver is that millennials want to live more responsibly and are convincing their baby boomer parents to support them financially. The amount of wealth that baby boomers are expected to transfer to millennials globally is estimated to be between $68 trillion and $90 trillion.

G: Technologies and innovation are accelerating opportunity. Do you feel you're in the midst of a period of genuine lift-off?

JOE: Yes. Granted, we're past the chance to limit the global temperature rise to 1.5℃ —we should be talking about 2℃. And COP29 ended with a $300 billion loss-and-damage fund for the Global South, when they should have been allocated about $1.2 trillion. So, a lot of people left COP unhappy and unheard. The last two COPs were hosted by petroleum titans, so what should we expect?

Still, I believe that rapid advancements in technology will begin to solve these problems. But even as connectivity accelerates our ability to build responsibly, we should recognize that we can make an impact now, not just in the future.

At Urban A&O, we are trailblazers in tech-driven, sustainable architecture. Our latest venture—a scalable, net-zero clustered community development in the Hudson Valley—combines years of experience in climate technology with advanced parametric design we have been nuancing since 2004 based on a Dassault Systèmes foundational model.

This is just the beginning. We can replicate this model across multiple locations, leveraging our expertise to create sustainable, tech-enabled communities nationwide.

Our proprietary algorithm optimizes the cluster's design, adapting to orientation, climate, and topography. This advanced parametric approach aids in maximizing environmental performance and efficiency, with the goal of setting new standards for climate resilience. We're not just building the future; we're developing a model that's ready to scale. This project represents not only an investment in sustainable living, but in a highly replicable, tech-driven solution with tremendous growth potential.

The missing link is the private sector. Investment banks could easily dump a few hundred billion dollars into the loss-and-damage fund. So far, they are not doing that. They will do it if it is profitable, so we just need to be more strategic.

For instance, Miami Beach is essentially sinking, yet there is massive movement of money to Miami from New York. They're building these incredible residential towers. Why would they do that if they were worried about climate change? Because in tandem, the wealthy people who live there are sponsoring artificial mechanisms, such as dams or man-made coral reefs. So, instead of a mass exodus from Miami, it's the reverse. A huge infusion of capital can help us make real inroads.

G: You refer to Miami: does the city and mayoral level offer an opportunity to experiment without federal, national, almost international constraints? Should we let a hundred flowers bloom and learn, adopt, and adapt?

JOE: During Climate Week, a woman from Miami Dade County spoke exactly about this, and their massive economy sweeping the state, funding these kinds of projects.

We're also finding in the favelas of Rio that they're self-organizing, creating micro-businesses, innovating to handle storm water, establishing educational programs, etc. So, it's not citizens who are the roadblocks to change. They're already doing things on their own. This is also true in Buenos Aires, as another example.  

The roadblocks often occur at the state level. New York, for example, has Local Law 97 in place to basically get bigger buildings to decarbonize. But in some cases, it would cost more to do that than the building is worth. Then there's Local Law 96, that established the Property Assessed Clean Energy (PACE) financing program, which is supposed to give financial aid to small businesses to meet Local Law 97. Unfortunately, it's poorly organized and they can't get their act together financially. They've essentially imposed Local Law 97 without a guaranteed financial mechanism to help you make it there. This is especially problematic for the small business owner.

G: So not all "action" is automatically productive. How do you measure the success of what you’re doing?

JOE: One measure is how the tech financial community at large - not just the residents - respond to our projects. The ambition is to scale it. Gaining funding for these climate clusters would be the proof they're good, which is exactly what we're doing.

G: And does it matter if people do it just for profit, without being driven by sustainability goals? Does it matter how we get there?

JOE: I think it's interesting. Millennials are very aware of the climate crisis and will be the ones to drive this. I don't think those builders and developers who ignore this issue and seek profit only are going to last. New York did something contentious, making every condominium or office building in downtown Manhattan put up a giant sticker, showing the grade of their decarbonization efforts. They're unmissable. If it gets an 'F' then every time a resident opens their front door, they're reminded of that. It absolutely works. There's a tremendous and obvious effort to get rid of those bad scores. In addition, corporate tenants are demanding premium space, as they battle the return-to-office agenda.

G: Does that millennial, "people power" drive from below give you hope that we are going to create a world of net-zero cities?

JOE: It's going to take longer than we think. Artificial deadlines, like the premise that the entire global economy will be net zero by 2050, don't help. That's unreasonable, although it's good to have declared targets, because then you must live up to your declaration. As 2030 fast approaches, we see corporations walking back those commitments.  

But what really should be happening is we should be densifying our cities. Atlanta, Georgia is probably the most sprawled-out city in America, with highways everywhere. I met an Australian architect who had won several awards for his net-zero residence, but it was a three-bedroom, single family home with a two-car garage in the front of it. He was building it in the suburbs of Atlanta. I just thought to myself: "We're not on the same page..." America has a housing crisis, and mid-rise multi-family is the solution.

It's not a question of whether net-zero cities are going to happen: they're going to happen. It's a combination of that grassroots demand, along with mayors, up to state and then federal level. There is a powerful global organization called C40 cities. C40 Cities, a global network of mayors working to address climate change, has around 97 member cities.

The real driver is going to be the developers, and the architects they choose to work with. Developers are the ones with the money. They take their sustainability reports and their ESG reports very seriously. Big developers will not engage an architect without a track record for sustainability. Design firms that don't take it seriously aren’t going to be in business for long. And that's probably true whether it's developers, architects, innovators, technology companies, whatever. In short, the driver is going to be tried-and-true stakeholder capitalism.

More specifically, I think we’re going to see arbitrage enter the picture, nationally, once we scale. Arbitrage is the practice of buying an asset in one market and selling it in another market at a higher price to profit from the price difference. In this case, the asset is real estate. Just one example of that is assignment arbitrage: obtaining the right to purchase a property, often a new construction unit before it's completed, and then selling that right to another buyer for a higher price before closing.