Ask the expert: Melissa Jacobs, First Capital REIT

Joining First Capital REIT in 2017, Melissa Jacobs is a subject matter expert to internal stakeholders and coordinates the company-wide sustainability strategy, including program development and implementation, progress measurement and ESG reporting in her position of Vice President, ESG. Melissa is active in several industry organizations including CAGBC and was the recipient of industry distinctions including the Clean 50 Award and the Partners in Progress Award. She was named among the Elite 100 Women in Real Estate. We recently sat with her to discuss the importance of engaging all building stakeholders in the transition of large building portfolios to zero carbon. 

Tell us a bit about your current position and how you got here.

First Capital has a long history of leadership in sustainability, having formally established their program in 2010. I started at First Capital in October 2017 as Director, Sustainability. I stepped into a role that had already existed for several years (since 2010). At the time I was a team of one, and my responsibilities mainly focused on improving energy efficiency at our existing properties, as well as corporate sustainability reporting.

Fast forward to today, ESG is an increasingly strategic priority at the company and is embedded across all areas of the business. As VP, ESG I am responsible for directing and driving continuous ESG engagement and improvement across all areas of our business including sustainable development, decarbonization of our existing portfolio, climate resilience and sustainability reporting initiatives. Over the past couple of years, the team has also grown, and I am now supported by a Manager, Energy & Sustainability and an ESG Programs Coordinator.

In terms of how I got here, after graduating with an Honours Bachelor of Environmental Studies from York University in 2007, I was lucky enough to get hired full-time by the Toronto Region Conservation Authority. Through them, I was seconded to the World Green Building Council as part of a small team tasked with establishing the first WorldGBC Secretariat eventually made my way into corporate sustainability and the commercial real estate industry, working at Bentall GreenOak (Bentall Kennedy back then) before moving to First Capital. 

You charted First Capital REIT’s strategy to decarbonize the company’s portfolio. What are some key lessons learned?

I’d say we are still knee deep in developing our decarbonization strategy, but we have made some significant progress in the last year.

One of the key lessons learned is that you do not have to wait to have it all figured out to set targets and start actioning. I think it is easy to get caught up in the idea that your data needs to be perfect, and your decarbonization pathway needs to be fine-tuned and detailed before commitments are made. The reality is, data is always going to be a work in progress and decarbonization pathways are going to change as the years pass and technology advances – we’re all in the same boat, nobody really has it all figured out.

The approach we took to aid in our decarbonization planning was to set an ambitious and credible interim target through the science-based target initiative – ensuring targets are consistent with the primary goal of the Paris Agreement – to limit the rise in global temperature this century to 1.5° Celsius.

Our interim target is to achieve a reduction in GHG emissions of 46 per cent by 2030 (we used 2019 as our base year), with a longer-term target of net-zero. When working through the target-setting process, we did some high-level modelling to understand generally how we could achieve this, but to reach these ambitious goals, we are now actively working on asset level GHG reduction action plans that include operational efficiency, retrofit initiatives, tenant engagement, enhancing construction standards, capital expenditures, and renewable energy generation. The goal is to complete GHG reduction plans for at least 80 per cent of our portfolio in 2023. 

How critical is it to engage tenants in your retrofit projects?

For First Capital, engaging our tenants in retrofit projects to achieve our decarbonization goals is going to be very critical. Most of our portfolio is made up of grocery-anchored, open-air retail centres and therefore much of the energy consumption under our control is attributed to powering exterior common areas and parking lot lighting. Our Scope 1 & 2 footprint is a small fraction of our overall carbon footprint. We have estimated that our Scope 3 emissions make up over 90 percent of our GHG footprint, with over 50 percent of that being attributed to emissions from tenant energy use.

We know that getting to net zero cannot be done in isolation. We need collaboration and partnership not just with our tenants, but also our industry peers, to achieve our common goal of net zero. To that end, in November 2022, we hosted an inaugural Collaboration for Climate Action Forum in partnership with Choice Properties REIT. The Forum brought together major national retail tenants and prominent retail property owners for a solutions-focused discussion and planning around decarbonization of retail buildings in Canada.

We all left the forum energized and agreed that this should not be a one-off event but rather a starting point for continuing engagement and collaboration. Therefore, we’re establishing Collaboration for Climate Action working groups which will be made up of representatives from both retail landlords and tenants focused on advancing key opportunities and implementing specific initiatives that were identified throughout the forum.

CAGBC’s national conference is only a week away and we are happy to have you back as a speaker. Can you tell us a bit about your session? 

I’m happy to be back as a speaker! This year I will be sharing the stage with a great group of panelists from KingSett Capital, Cadillac Fairview, Minto and WSP. The session is titled Securing Stakeholder Buy-in for a Low-Carbon Transition. We know that transition planning is key to reaching zero carbon across building portfolios and it will be critical to engage a variety of stakeholders to successfully move forward and implement the plan. We’ll be sharing our lived experiences, strategies, and pursuit of continuous improvement to ensure buy-in and engagement from the boardroom to our tenants.

How effective do you think sharing costs and benefits of carbon emissions between the landlords and tenants will be in promoting retrofit projects?

I think this is going to be a key piece of the puzzle in advancing projects to reduce carbon emissions. Currently there is a grey area when it comes to responsibilities and benefits in implementing emission reduction measures, leading to reluctance on both sides to invest in the most efficient option. For example, if the landlord owns the equipment, it may be seen as their responsibility to pay for the replacement, but if the tenant pays the energy bills, they will be realizing the savings from the retrofit. This barrier is often referred to as the split incentive issue and is common in existing lease structures.

A green lease that enables equitable cost-sharing is an effective mechanism to address this but think about all of the pre-existing leases out there that may have 5, 10, 15 years left in their term. One would hope that as an industry we can demonstrate a cost-sharing approach to these projects which is equitable for both the tenant and the landlord, overcoming this barrier in a more time-efficient manner than re-negotiating specific lease clauses.

One of the working groups of the Collaboration for Climate Action Forum will be tasked with conceptualizing and developing innovative tools to be piloted in key processes and transactions. The purpose of creating these tools is to find novel ways to split costs based on realized operational costs savings and achieve net-lower emissions for both retail landlords and tenants. We are all seeking new models and guidance on how to integrate climate considerations into our key business processes and supporting tools and documents and our hope is that we can expedite progress by working together.

What aspect of Building Lasting Change are you mostly looking forward to?

Reconnecting with peers, colleagues and friends in the industry and making new connections is always a highlight for me at Building Lasting Change. You never know what sort of collaboration opportunities you might uncover! I’m also looking forward to the education sessions and building tours and am hoping to walk away with some fresh insight and ideas to further the decarbonization of FCR’s portfolio.

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