November 2, 2021 - From the November, 2021 issue

Sara Neff on Lendlease’s Sustainability Leadership & ESG Commitments in the Americas

With residential and commercial buildings in California contributing roughly 25 percent of the state’s GHG emissions, decarbonizing the built environment represents an important pillar for achieving meaningful climate goals. TPR interviews Lendlease’s new Head of Sustainability in the Americas, Sara Neff, to update reader on the advantages of the Australian company’s global integrated business model and leadership in sustainable buildings. Here, Neff underscores the impact of ESG-minded investors in driving the market for sustainability, healthy living, and social equity practices.

Sara Neff

“…investors are asking a lot of questions about sustainability that maybe they were not a while back. We are ready with company goals and products to demonstrate that we are aligned with ESG investing goals.”—Sara Neff

Sara, you've started a new position with Lendlease here in Los Angeles. Share what your new professional responsibilities include.

Sara Neff: I am the Head of Sustainability for Lendlease in the Americas. Lendlease has a number of business units, almost all of which impact Los Angeles. We have been doing construction in Los Angeles for more than 30 years, totaling some 200 projects and we also manage one of the largest military housing portfolios in the US, about 40,000 military homes across the nation, with a community in San Pedro.

We also have a development and investment management business that is developing assets to own for the long-term. One I am very excited about is our project at 3401 S. La Cienega in Los Angeles. There are two buildings: office and residential. We are going for LEED Platinum on the office and LEED Gold for the residential. The reason I'm excited about this is that we are going to be showing how to do all electric construction for residential in Los Angeles, which is fairly new for the region. I know The Planning Report is well aware, but in San Francisco new construction is required to be all electric for residential and office for heating and cooling as well as cooking. Even though it’s not required in Los Angeles yet, that is how we have structured our 3401 S. La Cienega project. There will be on-site renewables, biodiversity, and reuse of stormwater in irrigation. This project will help Lendlease’s overall goals of being Net Zero Scopes 1 and 2 by 2025, and then a world leading commitment to being Absolute Zero, meaning no offsets, across Scopes 1, 2, and 3 by 2040.

Elaborate on Lendlease’s real estate holdings and in-development projects.

Lendlease is an Australian-based company, based in Sydney. It has been around for more than 60 years. It has offices around the world including London, Singapore, New York, and Los Angeles. It builds, owns, and operates different kinds of assets, having constructed or financed everything from the Sydney Opera House to the 9/11 Memorial. Recently, Lendlease began partnering with Google to build an anticipated 15,000 residential units across four mixed-use districts in Silicon Valley, an area that desperately needs more sustainable housing.

We are not brokers; we are builders, owners, and operators of existing assets.

Did Lendlease truly know what they were getting when they lured you away from Kilroy to manage sustainability for all their developments? 

The great thing is that, to me, the Australian real estate community is really leading the world on sustainability. A lot of the trends that I adopted in my previous role came from Australia. It was very exciting to join an Australian company and see what the cutting edge of sustainability around the world really is.

What are some of the projects, technologies, and commitments Lendlease is making to achieve Net Zero targets?

There are several. To address our Scope 1 emissions, our major focus is on all-electric construction. We recognize that the electricity grid can get to 100 percent renewables, in line with California's targets, but the natural gas grid is not going to get to 100 percent renewables. Because of that, we recognize that if we are going to get to Absolute Zero across Scopes 1, 2, and 3, we must stop using natural gas. So, we are building without natural gas in Los Angeles, San Francisco, and in other markets around the country and world. We are being smart about our heat pumps, HVAC systems, and energy monitoring to make sure that we are operating electric buildings as efficiently as possible.

In terms of technology, we are trying to be smart about how we deploy solar and batteries. Lendlease has installed 40 megawatts of solar in its military housing portfolio and additional solar in its investment management business. In addition to smart building technology, we also use technology for lifecycle cost analyses (LCAs) and climate related risk assessments (CRRAs). Regarding LCAs, we want to reduce the embodied carbon right now in our construction materials, so we are reaching out to suppliers in all of our regions to see how we can procure lower carbon concrete and steel. Our LCAs help us understand where the big opportunities are to reduce embodied carbon. We use CRRAs because we want to make sure that the buildings we build are resilient in the face of climate change.

How is Lendlease approaching the selection of construction materials ie. embodied carbon?

We recognize that the largest impacts on the environment from our projects are in the embodied carbon of our construction materials. Even though we do not have a short-term Scope 3 target, which is the target that includes construction materials, we are not waiting to tackle those emissions. Projects need to have an LCA in the design phase, so we understand what the embodied carbon is and we can actively work with our suppliers in order to be able to deliver the lowest embodied carbon project we can.

At Lendlease, we have an advantage in that we have an integrated business model. We develop, construct, finance and operate, which is unusual, so we are able to maintain a focus on sustainability throughout a project’s lifecycle. When we are deciding, for example, if a project should include solar, if we were just one part of that integrated model, that would add cost without benefitting us directly. When we are able to take into consideration the cost savings once we start operating, suddenly we are able to unlock a lot more potential. We believe our integrated model supports our long-term success on sustainability, and that is very true of the embodied carbon goals we are setting.

This is a very bullish pitch you're sharing. Is Lendlease’s building model really that good?

Lendlease has been a builder in the United States for many years. When we are not the client, cost is always a consideration, and we want to be able to deliver what was promised to the client. We certainly have several success stories with environmental wins keeping cost neutral and making sure that we are meeting the design of the construction parameters. For example, on a recent project we were able to procure steel with an embodied carbon footprint almost 27% below industry averages for that region without a cost impact. When we deploy our integrated model, we find ourselves with increasing flexibility to think longer term when we are owning and operating. This enables us to unlock more potential environmentally. 

Sarah, given that you're not new to this field of sustainability, has there been a jump step in technology and regulation within the last 18 months of the COVID pandemic?


Yes, there is additional technology, and there is additional, or anticipated, regulation. I should say that Lendlease has anticipated it and is ahead of it, which is one of the reasons I am excited to work here.

The major increase in knowledge, and therefore pressure on real estate companies, has really come from the ESG (Environmental, Social, and Governance) investing community. ESG investing has tripled over the last 4 to 8 years. Approximately one-third of all investing in the US can be categorized as ESG investing. This means that investors are asking a lot of questions about sustainability that maybe they were not a while back. We are ready with company goals and products to demonstrate that we are aligned with ESG investing goals.

Are you suggesting that it’s not so much the last 10 years of regulatory leadership in California that is driving Lendlease’s sustainability practices, but rather it’s the growth of ESG investing? 

We have been closely tracking and participating in California's regulatory framework around sustainability for many years. For example, I was honored to be invited to the last California Energy Commission hearings a month ago about building performance standards and what those might look like for California. We want to be ahead of regulation and leading the market, which we continue to do because of the investor partners that we choose. For example, the La Cienega project is a joint venture with Aware Super, an Australian superannuation (i.e., pension) fund. They have very deep sustainability goals, and they wanted a development partner that will be able to meet those. We need to fulfill the stringent sustainability targets that those partnerships entail.

Speak to the allure of the LA market for Lendlease and your partners. What do they see as this market’s potential—the upside and the risks?

We consider Los Angeles to be a gateway market with a lot of very strong fundamentals in terms of a need for more residential and office product that serves a variety of attractive tenants. Lendlease also has a commitment to affordable housing, and the Los Angeles market rewards that focus. La Cienega’s residential will be a quarter affordable. A lot of the market fundamentals that Los Angeles has are aligned with our corporate objectives around building high-quality products that advance sustainability and social equity.

Pivoting, update our readers on the status, for builders, of healthy living and the technologies and practices that support the former?

Health is a very critical priority, and it is something that has been embedded for a long time in a lot of Lendlease’s practices. The La Cienega project embeds health throughout the project, such as a focus on active design and healthy building materials.

Pandemic preparedness is obviously an important piece of how we are building our buildings. There is a cold or flu season every year, which costs billions of dollars in productivity losses throughout the country. We want to make sure that people can work in the buildings without exposing themselves to increased risk of cold and flu transmission. We rely on guidance from the CDC, other health organizations, as well as the Center for Active Design in terms of how to design our projects for maximum health and sustainability.

In addition, I will add the deep importance of social equity that we place on our projects. We have an internal team that that works on equity and supply chain. We want to make sure that we are procuring materials that are low environmental impact and healthy materials, but also that are sourced from local businesses, minority-owned businesses, and women-owned businesses. We want to be able to create economic prosperity in the regions in which we operate.

Has the pandemic impacted how developers go about completing projects? How has the pandemic and the lessons learned impacted what developers include in their developments? 

I think the pandemic has taught us the deep importance of connectivity to outdoor space and the ability to be flexible in terms of the programming requirements that we have been able to offer our tenants. La Cienega is a project that is still in design phase, but I can say in other Lendlease projects we have been able to, for example, offer a virtual concert series to make sure that there are virtual entertainment opportunities for tenants. Also, we have provided outdoor yoga and outdoor fitness opportunities to make sure that the amenities are not entirely predicated on being able to be indoors and unmasked. You will see us investing in public green spaces, parks, and similar infrastructure to allow more flexibility in the way that our residents enjoy our projects.

In the Hollywood projects that you were involved in with Kilroy, great focus was given to amenities in terms of restaurants, stores, and street life. Are the latter still given attention, and are these amenities more challenging to justify after the pandemic?

Yes, those sorts of amenities are still very important. We know that public transit ridership in Los Angeles decreased during the pandemic, but we believe in the importance of public transit access and that demand will bounce back. The La Cienega project is highly connected to public transit and is on the Expo Line, and we feel that this is an advantage to the project and will be a major driver of leasing. There may be times where we cannot gather inside and we need to have outside options, but ultimately, the fundamentals of active design, public transit access, and healthy materials are here to stay.



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