The Decarbonization Race is back!

On our season premiere, Michael Daschle, SVP of Sustainability at Brookfield Properties, joins Lincoln to share how the company’s push to decarbonize its commercial real estate portfolio led to powering Brookfield’s flagship New York City property, One Manhattan West, with 24/7 carbon-free energy. Michael dives into Brookfield’s vision and approach to ESG, how to get the tenants on board with Brookfield’s investments in sustainability, sourcing 100% renewable electricity, and Brookfield’s plans for the future.

Key Takeaways:

• As an organization that has invested in ESG, it’s the managers’ responsibility to make sure it’s an investment that tenants want to be a part of—listen in for what they are looking for.
• With the right procurement approach, you can have a large impact on your building’s carbon emissions footprint and make a sizable difference in a short amount of time.
• As a real estate company, it is important to not only say what you’re going to do to tackle ESG-related issues, but to be authentic, transparent, and show that you’re committed to your word.

Resources

• https://www.propmodo.com/anti-greenwashing-tech-helps-brookfield-back-up-esg-claims-at-one-manhattan-west/

Transcript

Dana Dohse: On this episode of The Decarbonization Race.

Michael Daschle: If you want to be able to say that the energy you are consuming is energy that actually is flowing through the grid to your property, you can’t say that you’re buying Texas wind RECs and using it in New York, it just physically does not make it there. It was important for us to show this direct tie to the energy source within the same energy grid, to the energy sink, the source of where we’re using that power.

Dana Dohse: Michael Daschle, SVP of sustainability at Brookfield Properties joins host Lincoln Payton to offer his wide angle lens on the state of decarbonization within the commercial real estate sector. In their conversation, Michael shares how their pursuit of 24/7 carbon free energy is playing out today at their flagship New York City property, One Manhattan West. In this episode, we’ll explore how Brookfield is helping its tenants understand the importance of this initiative and get Michael’s take on local carbon emission regulations like New York City’s Local Law 97. Let’s dive in. Ready to lead the sustainability pack? This is The Decarbonization Race.

Lincoln Payton: Hello and welcome to the next thrilling installment of The Decarbonization Race. Michael, good morning, good to have you.

Michael Daschle: Good morning, Lincoln. Good to be here, thank you.

Lincoln Payton: Rather than me talk about your background, let’s get it from the person who really knows it. Tell us a little bit about yourself. You’ve got a big job at this point and you’re using it, I’m delighted to say, in a very influential and leadership way. Where did you grow up? And how do you come to be in the real estate world?

Michael Daschle: As many of these paths are, it’s kind of a meandering one. So I’m from Colorado originally, born and raised in Northwestern Colorado, and came out to the East Coast for school, attended the Military Academy at West Point from undergrad, studied philosophy and environmental engineering there, which is interesting that it has come full circle to what I studied way back then. [inaudible 00:01:56] did a tour service in the Army as a helicopter pilot, and then transitioning out of the military after some very amateur real estate investing, decided that I wanted to go pro. So I decided to go through an MBA program that has a very good real estate program, which was Wharton at UPenn. And then really since then have been concentrating solely on commercial office, primarily in New York City metro area. I went through a rotational program at Tishman Speyer first, accelerated my learning in this new industry and was able to do a design and construction rotation, an equity capital markets rotation where I was really helping to do fundraising for new development projects.

I did a redevelopment retrofit type project manager role in the development group there, and then ended up doing asset manager at Tishman Speyer. And shortly after that I was recruited for Brookfield because they were growing their asset management team. So came on board with Brookfield in 2018 and then a couple years ago, our Brookfield leadership really did see ESG as an emerging and very important theme that was coming to the market that our investors were communicating it to us about, tenants were asking about, and we had not yet at that point set up a central ESG team. And so I think given the commercial background that I had and my interest in the topic, I was asked to basically take on a brand new role of ESG lead for our New York City office. And in doing so was very fortunate to be able to create a new ESG business plan for our portfolio. It’s roughly 25 properties, 30 million square feet or so in Manhattan.

And as part of that ESG business plan really started to dive into the energy side of sustainability, which put me in a great position to start working on a deal that I know we’re going to talk about today, which is that One Manhattan West renewable electricity deal, but found through that experience that one of the most meaningful ways you can have an impact on the carbon emissions effort is through your energy procurement efforts. I led over the past four months, just at the end of last year, a US office-wide renewable energy and kind of zero emissions electricity procurement strategy development effort where for the roughly a hundred properties we have across the US, Class A office properties, how we’re going to procure our electricity in support of the larger net zero path.

Lincoln Payton: I’m going to take you back because thank you for the service that you’ve put in, in that West Point Military element, I’m sure everybody recognizes and appreciates that. Congratulations on the background and on linking the skillset into positive change. Let’s touch on Brookfield to give a little bit of perspective here because I think everybody will certainly know the name, will certainly know that it’s one of the biggest, most influential in a number of asset classes asset manager in the world today. Tell me a little bit, where do you fit in, in terms of what your responsibilities are across Brookfield, the different pockets of real estate in particular?

Michael Daschle: So as you mentioned, Brookfield Asset Manager is probably one of the two largest alternative asset manager companies in the world. Brookfield Asset Management has roughly I think $750 billion in assets under management and within Brookfield Asset Management, Brookfield Properties is one of the subsidiary companies along with Brookfield Renewable, Brookfield Infrastructure, and then there’s also a [inaudible 00:05:15] of private equity side. So within Brookfield Properties, Brookfield Properties is invested across all asset classes and the Properties team essentially develops, own, and operates real estate on behalf of Brookfield Asset Management. So usually the company is heavily invested right alongside its investors, and I sit within Brookfield Properties overseeing the sustainability effort of our US office portfolio. So that consists of roughly a hundred office properties all again Class A properties in New York City, the DC, Maryland, Virginia region, Houston, Denver, Los Angeles, San Francisco, and we work side by side with our other North American counterparts, our Canadian team, to really enact the broader Brookfield Property strategy for North America.

Lincoln Payton: And in terms of changing things and leading an ESG, it really is a platform of opportunity because it’s in that leadership position, so let’s talk about that now a little bit. You’ve got the background, you’ve got the position in this massive and influential and forward looking asset manager. Let’s talk about how Brookfield and then Brookfield Properties approaches the ESG world. A lot of talk these days, last few years, a lot of talk, a lot of people might argue not quite as much action as talk. How does Brookfield look at ESG?

Michael Daschle: There as I mentioned before, this is something that from an ESG specific context, investors and tenants have really been focused on increasing in the past two, three years, probably, but at a company like Brookfield, I think what was great about that theme is that we had already been doing many of the things that fall underneath the umbrella of ESG, even if it wasn’t formally organized under that title. So when I came into the role where I was managing the ESG strategy for New York and put together an ESG business plan, I mean that’s really a very indicative effort right there is that there is a ESG business plan that sits side by side with the financial and the capital business plan, and it really has very specific metrics and goals across the entire ESG front, so for broad context, we view ESG, obviously, there’s the environmental piece which we view in two major buckets.

One is the impact of climate change and mitigating the impact on our operations from climate change. And then two, is mitigating the broader impact on the environment from our operations. When we go over to the social side, it’s really all about impact, there’s an environmental piece obviously on the E side, but on that S side, it’s really all about the impact that you have in your communities, on your employees and on the broader community and the tenants and your customers. And then on the G side, it’s really what structures and processes do you have in place to hold yourself accountable for what you’ve committed to do and to have transparency regarding the reporting and the communication of all of your efforts and how you’re actually following through on those commitments. And so that was very much the framework that we took in managing the New York portfolio.

And then since focusing in on the E side with my new role on overseeing sustainability across US office, I’m hyper focused on the energy component and the procurement component of the climate change side. There’s certainly a risk assessment component of climate change and I think we’ve gone pretty deeply into that across the organization. And then there’s really the three other, I’d say, categories within E that are going to form the primary pillars of our strategy and one would be a circular economy focus where we’re going a little bit beyond the traditional waste management strategy and really getting more into how do we not only reduce or reuse, donate, there’s the biodiversity angle which is increasingly making headlines not only for the impact on nature itself, but the combined impact of nature and impact to climate of some of these biodiversity related efforts. And then of course water, depending on the region, water conservation is of amazing importance depending on where you are. So climate, biodiversity, circular economy, water are really the main pillars of our sustainability strategy at this point.

Lincoln Payton: Look, because of some of the cutting edge new principles and practices you’re applying, we’re going to focus a lot on the energy side of things today because you really have taken a leadership role in that bridging the asset manager and the asset user on the energy side of things, do tenants care? What are you hearing from feedback from the marketplace of how, and you are obviously Class A and pretty high-end real estate, so that means it’s the big impressive corporate world very often, what’s the feedback you are getting? And your colleagues are getting from the tenant space about if people care or not?

Michael Daschle: It is an asset manager’s primary responsibility to preserve and add value for these investments. And the way to do that is to make sure that it’s an investment where tenants want to be. So we’re very closely listening to what tenants are interested in, what they care about, and I think there’s been this fundamental shift in the market where if you would’ve asked tenants five years ago, even if they were willing to pay a premium on their utility bills for a renewable property, they probably wouldn’t have wanted to do that. In general, the theme was lower operating expenses, lower costs, we want to be in the lowest cost, highest efficiency property we can find. That said, I think we’re years away from that sentiment and now we’re at the point where especially clean power, when I say clean power, I mean renewable, zero emissions power, that is becoming a necessity for many tenants in their search for high-end office space these days.

And I view this as something that is now kind of on the radar from Class A building operators as something that just needs to be offered, just like you would offer a highly connected building, a well located building, a well operated and maintained building, you also want it to be a renewably powered building. And I think that’s becoming more clear for us as we see more and more requests for proposals for leases where they are explicitly putting into their filtering criteria the option to have the property if it’s not already renewably powered, become renewably powered in the near future, and that’s really helping them achieve their own sustainability goals, the tenants’ ESG targets and goals. And many of these corporate tenants, like you mentioned, have made their own net zero commitments and so they see the office space that they’re occupying as a significant amount of the emissions that are associated with their operations. And so we can take an out-sized role in helping solve that problem for them.

Lincoln Payton: Wow, that’s very interesting that you’re really seeing the shift come from it being offered as an optional extra if you like to being asked for as an optional extra. Let’s drill down to the specifics because we very much try to do that in The Decarbonization Race. Tell us about Hudson Yards, One Manhattan West. I think we’ve established that Brookfield Properties some superb investments across even just the US but globally this willingness to take a leadership position in the real estate space around green energy and really making that big impact. What is One Manhattan West and that development to Brookfield and how did that come around?

Michael Daschle: Yeah, first off, it’s one of my favorite properties, we just love being there.

Lincoln Payton: It’s easy for those that haven’t been there, easy to love that property-

Michael Daschle: Yeah.

Lincoln Payton: … it’s pretty amazing.

Michael Daschle: It is a wonderful place to be. So in context, so One Manhattan West, which is the property that was the first property where we bought a hundred percent renewable electricity for is part of the broader roughly 8 million square foot complex that’s between Penn Station, which is the nation’s largest transit hub and Hudson Yards, which is this new cutting edge developing in West Manhattan. And One Manhattan West is essentially the flagship office property of that site. We developed and assembled that site over probably 40 years of assemblage, we had to build active platforms across Amtrak Trains and essentially build a new city block and it has become this fibered hub of activity in the West Side of Manhattan. So when we were pursuing this One Manhattan West deal, it was one of the things where timing wise, we knew that there was climate legislation coming on the books.

It was 2019 timeframe, for example, the New York Local Law 97 was part of the overall legislation that was passed to address climate change at the point and carbon emissions. And so we first started kind of exploring, okay, what can we do to make sure that we are protected in a way from exposure there? And then second, right around the same time is when Brookfield Asset Management made a commitment to the Net Zero Asset Manager’s initiative. And as part of that commitment signed up all of its affiliate companies, Brookfield Properties included obviously to achieve net zero carbon by 2050 and then achieve certain milestone targets, which for Brookfield Properties includes a 50% reduction of scope one, two and three emissions relative to a 2019 baseline. So there’s some pretty ambitious emissions reductions efforts that are associated with that. And as we went through assessing what we could do at the property from a procurement perspective to help us, we ended up finding out that the kind of renewable electricity that we wanted to procure, it didn’t end up meeting the requirements of the Local Law 97.

However, it certainly helped with the net zero carbon effort across the company. So we thought that that was a clear win, the moment that we executed this deal and the clean energy began flowing, so to speak, the carbon emissions of that property were lowered by over 80%. And so we were immediately able to prove out this concept that through procurement you can have an out-sized impact on a building’s carbon emissions footprint and really make a very sizable impact in a very short amount of time.

Lincoln Payton: First of all, everyone in the New York area is going to know this building, it’s a fantastically impressive statement if you like, and the fact that it is as efficient as it is from a carbon point of view, phenomenal flagship, your word, when you were thinking about the energy strategy and the way to match carbon free energy to the usage in the building, how did you run that formula? Because I think sometimes in terms of particularly commercial real estate, there’s kind of three elements. One is physically the building, the windows, the insulation, the operating units makes big differences. Secondly, there’s the human behaviors in terms of grouping people together at certain times, so we are not heating or cooling the whole building when it’s not necessary hours, temperature, thermostat settings. But the third element is the actual energy you’re using into the building.

Now certainly sitting from the Cleartrace point of view where we are measuring and managing that type of activity, it would appear that that third element is the biggest lever, which is ultimately what’s there? You can adjust the amount of energy you are using with the first two, but the third lever really changes the carbon footprint. When you talk about that 80% improvement, is that what your math supported?

Michael Daschle: Essentially yeah, the building is powered by electricity and steam. And so when we removed the emissions associated with the electricity component, all that was left was steam. And really that has a fossil fuel component to it because it burns natural gas to generate the steam. And so like you’re saying, it’s already a hyper efficient building. We have some very sophisticated tenants who are also very conscious of their energy use, but we could have an outsize impact through procurement. And even if we were to achieve at a brand new building, 20, 30% energy savings, which would be very difficult to do at a new building, like you’re saying, the source of the electricity still matters more. And so to source that from renewable hydropower instate, it’s a much more impactful measure. And that’s not to say we’re not going to focus on behavior change and efficiency practices, but you make giant strides through procurement.

Lincoln Payton: Let’s really drill into it now. So fantastic new large high profile building, Brookfield Properties is looking to make statement as well as improve efficiency. What exactly have you done with One Manhattan West? I’m happy to know some of the details, but for our viewing audience here, carbon free energy a hundred percent of the time, 24/7, all these buzzwords that people hear, what does it mean in practice?

Michael Daschle: Now, this is so important, I think going back to what I mentioned before in the governance element of ESG, we very much value the ability to be transparent and show that what we’ve committed to do, we are actually doing in an authentic very real way. And so when we were assessing our options and learning about what’s available in the market, we could do what is traditionally done where we buy the national RECs and those typically come from Texas, but buy an aggregate amount that match our consumption and that would have accomplished what we wanted to. And I’m not going to downplay the impact of doing that because that does have a significant impact on the market. However, we really wanted to show immediate local impact. And so we have the great advantage of being partnered with our sister company, Brookfield Renewable, who is the largest provider of renewable power in New York with something like 70 low impact hydro power plants in the state.

We spoke to them about the options that we have and they had capacity to provide the renewable electricity for One Manhattan West. So we entered into what is referred to as a physical bundled Power Purchase Agreement or PPA, where we contracted directly with Brookfield Renewable under a New York mechanism called an Internal Bilateral Transaction, where you can contract directly with the generator and we gave them our forecast or our annual requirement, they reserved from their facilities that amount of capacity. And then using the Cleartrace technology, we can track hour for hour every bit of renewable electricity that’s generated at these specific hydropower plants and match it with every megawatt hour of electricity that we’re consuming at the property. And so for us, having this energy source that is flowing 24/7, that it is a hundred percent renewable and it’s traceable through this new sophisticated technology was an instant win in terms of transparency and authenticity, the ability to show this track record or following through on our commitment in a way that is also very impactful on the local scene.

The more that people within the same state and within the same grid contract for this type of thing, the more that increases demand for that type of supply. And that is a market transformative effort to do, so we loved the investment in the local industry, we loved the direct connection, the attribution to specific projects, that hourly matching component. I mean it did everything that we wanted it to do.

Lincoln Payton: Yeah. Very impressive, and I’ll come back to one of those elements, but it really resonates with me the fact that what you’re doing is educating people in the fact that having green energy from the location at the time when you are using it actually moves the needle. And the reason I know you’re educating people is I was in the building, One Manhattan West at one point and I was going up in the elevator and you’ve got some very impressive law firms in that, big name law firms in that building. And there were a couple of very well dressed ladies from one of those attorney firm and they actually said to me, “Oh, why are you in the building?” And I said, “Well, I’m actually here because Cleartrace helps and works with Brookfield Properties.” And before I finished the sentence, they finished the sentence for me and they basically said, “Oh yes, we are a hundred percent hour by hour green energy, right?” And I said, “Yes, you are.”

So it’s great because, and that’s a little bit a colorful statement because people who may not otherwise, they’ve probably got pretty busy lives, they wouldn’t be focused on temporal and regional energy procurement are very aware of it, which is a great thing in and of itself, but where it’s taken me, you made some comments there about where the world is today in many respects, and let’s take that into the real estate space because there are a lot of your colleagues in the real estate space who do big picture, look at how much energy they use and then buy RECs in the REC market, the renewable energy credits, and by some of the standards today that certainly allows one to make the statement, we are using renewable energy. What’s the difference with what you are doing with the 24/7 matched, and you talked about the Bilateral Transaction, what’s the difference between someone else in the real estate space or a potential tenant, for example, listening to this and saying, “Well, hold on, someone else is telling me we are using renewable energy.” What is One Manhattan West different?

Michael Daschle: So a brief at your previous point about the tenants, there was an extensive outreach effort with the tenants, and you’re right, there was a significant education component to that because even these sophisticated corporate tenants will ask similar questions to what you just stated, “Are we using renewable electricity? Why are you buying it this way versus that way? Isn’t that way more expensive?” And so we had to have many of these conversations to make sure that we were on the same page with what was actually being achieved here. And I think the biggest difference is that like you mentioned, if you were to buy a national greeny certified wind REC for example, that is still doing good, you are meeting the requirements of what is nationally accepted from a carbon accounting perspective. However, if you want to be able to say that the energy you are consuming is energy that actually is flowing through the grid to your property, you can’t say that you’re buying Texas wind RECs and using it in New York, I mean it’s just physically does not make it there.

It was important for us to show this direct tie to the energy source within the same energy grid to the energy sink, the source of where we’re using that power that we can show like, “Look, this is the same grid. The electron and the electricity that’s coming out of this plant is going to flow through the grid to our property.” And that’s very important. And again, I think there’s this market component to it that’s important to understand because if you want at every single time of day to make sure that there is sufficient renewable power from where you contracted to match your requirement for that building. So that’s a conversation we have to have with the supplier, with your contracts and negotiations and everything. Again, if everyone were doing this in the market right now, there probably isn’t enough supply to meet at an hourly low match.

However, enough demand in this area would create that supply. People would start seeing that, look, there are people who want local renewable power and they want it to be matched hourly so that they could always match that a hundred percent, and there may be certain times of day where that means that we really have to increase the amount of wind or solar or re-power the hydro, add more capacity to existing dams that aren’t yet generating. So this would really create a strong market signal saying that we want this to precisely match the profile of the load from the source. I think that mindset probably comes to us quite a bit from our connection with Brookfield Renewable, from our infrastructure partners. I mean there’s this piece to it that says there has to be some type of physical connection, there has to be some type of real impact and impact on the market from these kinds of decisions.

Lincoln Payton: First of all, from my Cleartrace hat, clearly yes, this is one of the rationale for actually solving the problem. We talk about The Decarbonization Race, the race to fix things and the action you are taking, if everybody was taking that action, it would highlight the fact that more green energy is needed at certain times in certain places, and the market would move it to be built, to be produced. Also, what seems to be a component in the Brookfield approach to things is that helps your community as well, that is making development jobs building in the community where you are actually taking the energy. So a number of very positive factors there.

Michael Daschle: Not to mention the community of the people who are drawing from that electricity. So without getting too technical, there’s an emissions factor that’s assigned to the electricity that you use. Then with every added bit of renewable supply that comes into that grid, everyone’s emissions factors improve, which means the carbon emissions associated with everyone’s electricity goes down. So again, the more people who do this, the better it is for everybody, and again, that’s in addition to the jobs and the economics that are dreaded towards New York state.

Lincoln Payton: I love it, from a Decarbonization Race to get things moving to make difference and to set example. I love it, terrific. You mentioned Local Law 97 and that kind of opens the whole regulatory door. Let’s chat about that a second because we’ve talked about why matched time and location, green energy supply is important and the benefits of it and the transparency in being able to prove it and all of that leadership, that’s what I would call the reputational factor, it’s very positive and really shows something. Zoom back a little bit to your national responsibility here and then compare that to New York and maybe a couple of the other areas. The regulatory pressure is coming, right? A lot of our worldwide ESG reporting is still reputational. People are setting targets, some of them are little vague to be honest, but that’s because it’s ticking public relations boxes, but the regulators are coming up fast, they’re coming up with the ability to measure, makes it easier to regulate. What is Local Law 97? And how is that or is that a harbinger of what might be coming in other places across the US?

Michael Daschle: So Local Law 97 is a local law that sets strict carbon emissions intensity limits for any building that’s over 25,000 square feet in New York City. It essentially begins with the performance year 2024. So the building owners are reporting in 2025 on the previous year’s performance, and if a building exceeds its carbon emissions intensity limits, it is subject to a fine that’s a certain dollar amount per square foot. Essentially over so many of these legacy buildings in New York City that are on gas or that have even very sophisticated high energy efficiency co-generation machines and combined heat and power machines but are natural gas based, have significant exposure to penalties with this law. And New York City is very much a leader in terms of the municipalities that are enacting similar legislation. And there have been many others that you mentioned too. I mean DC, Boston, California is one of the other leaders in this space.

It’s absolutely common, and the reason why is because enough people from a voter base are telling the representatives this is important. And so it may be coming out first in these specific markets, but it’s only going to increasingly happen. And so I think what’s interesting for us is that certainly that public sentiment is a key lever for us because to us that comes through from tenant demands for investor demands and we want to obviously meet our customers where they are and what they need, but it’s obviously a sign of things to come as well. And so I guess the silver lining of it is that Brookfield has made our own net zero carbon commitments and local law and local legislation like which you mentioned to include New York’s Climate Leadership and Community Protection Act, which is mandating a 70% renewable mix by 2030 on the grid.

All of this legislation has set up an environment that’s very conducive to us achieving our goals and we’re doing that on behalf of our customers too, our tenants and our investors while we’re in the fortunate position that the vast majority of our properties fall within these emissions limits that are set by legislation. This legislative landscape is mutually supportive for our own goals and these broader net zero commitments.

Lincoln Payton: That’s one of the advantages of frankly being out in front of things because I do think there are going to be a number of your contemporaries who are going to be playing a little bit of catch up here and I’m sure they’re listening carefully here. Let’s talk about a couple of practical aspects, Mike, and you did say it and I’m going to quote you, which is you are fortunate enough to have one of the best, biggest, most sophisticated renewable energy platforms as a brother or a sister. Congratulations, you’re lucky, not everybody in the real estate space or in industry has that, so that’s great they can certainly provide a lot of expertise. First of all, tell me how did that work with them because they have some pretty impressive New York state facilities that help you with New York, no question. So let’s talk about that first and then we’ll talk about maybe some alternatives.

Michael Daschle: I think the primary advantage of having a sister company like Brookfield Renewable is really one more of market education than sophistication. We as consumers can literally go next door and say, “How does this work? How’s this settled? How do people buy? What’s the typical contract structure? Et cetera.” That said, we still have to pass internal conflicts committee type reviews to make sure that whatever deal we do within the affiliate company is fair to the owners and investors and interested stakeholders of both businesses. And so that was crucially important for us is not only could we learn, but we set up a fair market deal on the external consumer side. I mean, one of the great things about New York and many of these other states that have these opportunities like this Internal Bilateral Transaction that I mentioned before, this ability to transact directly with generators is that anybody can do it, but it’s not something that most people know about.

So even in our circles within New York industry, the different sustainability related committees of the different industry groups and everything, this has been coming up more and more and being like, “Do you all realize this is available for anyone?” And so part of it is really an education and awareness issue. That said, even if you’re aware that it exists, it’s not necessarily clear for most people to say, “Oh, how am I going to actually do that?” It’s something that traditionally you would go to utility to ask about, but even then in these deregulated markets, the utility may not have much of an incentive to actually guide you there.

Fortunately, this market has also created a plethora of consultants and advisors who are experts on how to source and how to contract from these renewable sources. And so I think anyone who has made the effort to understand what’s available in the market, they can go to some of these advisors and to some of these electricity sales companies and these ESCOs and say, “Well, we think this is where we want to go. Can you go out to the market on our behalf and show us our options and then we’ll come back, we’ll assess well to [inaudible 00:31:57] our criteria and then let’s transact.”

Dana Dohse: Contracts like the Power Purchase Agreement, Michael mentioned are a key way that commercial real estate owners are sourcing clean energy for their facilities and operations, but while some very large property owners may have the leverage to source clean energy the way Brookfield Properties has for One Manhattan West, not all have the leverage to do direct procurement themselves. Recent reports including one by the Clean Energy Buyers Association and one we discussed last season by the International Energy Agency have pointed to a new trend. Small and large companies pooling demand and buying power to source clean energy together by combining their energy needs, goals, negotiating teams and contracting processes, companies working together have been able to simplify the contracting process and show large enough demand to secure portions or the entire output of new renewable energy projects.

For example, in 2019, Bloomberg, Cox Enterprises, Gap Incorporated, Salesforce and Workday pooled relatively small amounts of electricity demand to collectively procure a portion of a hundred megawatt solar power project in the PJM region of North Carolina. Aggregation of clean energy demand provides surety for both the suppliers and the off-takers, drives construction of new projects with additionality impacts for the grid and reduces companies needs to rely on RECs that may deliver less carbon impact than direct procurement. For more resources, look for the link in the show notes.

Lincoln Payton: We’ve also had chats with some of our colleagues, Dan Winters from GRESB, all of the, if you like, the monitoring type elements of real estate. If I look at it from my positioning, there’s sort of a menu of activities and practices that the significant real estate player can take. You’ve gone to the top of the leadership board in terms of 24/7 hourly match temple, locational, carbon free energy. It’s kind of the most you can do today, and there’s a whole range of other things that can be done as well. How do the various monitoring players like GRESB, like [inaudible 00:34:08], how does that fit into what you may be doing there?

Michael Daschle: You’re right with this demand for high quality data for organizations like GRESB to communicate the data that authenticates what the organizations are actually doing, and it helps make investors more aware and more informed about the investments they’re making. I think that’s really the main emphasis behind it is these groups like GRESB are helping shine a light on something that’s traditionally been something that’s very difficult to access from an investor’s perspective. The more clear and transparent, straightforward these organizations can be regarding what their members are reporting, the better for everyone. They’re a more informed market. Again, I think that’s the sign of things to come is that these types of observers are going to increasingly scrutinize this and increasingly show investors and stakeholders that if you want to have your business align with the investments in real estate or the real estate that you occupy, here’s the things you should know. And absolutely this type of transparency is becoming more and more critical.

Lincoln Payton: I’ve got a couple of topics I’m going to throw at you and just give me your one minute feelings on it. So first of all, storage batteries. We hear about it a lot mentioned in a bunch of legislation. It’s been the next big thing for a little while. To what degree is that in your thoughts? To what degree is it relevant in what we are thinking of big picture and maybe what we’re thinking of drilling down to some of the regions, some of the buildings that you have?

Michael Daschle: Yeah, storage is going to be an integral component to net zero strategy going forward, full stop. We have partnered with, there’s an energy storage services group within Brookfield Renewable that we’re actively in discussions with to not only install additional capacity within New York, which is a benefit to the grid and potentially a benefit for properties, but also when we start expanding our scope beyond New York, the DC region where some of these 24/7 renewable power sources exist, where we start going further West where it’s primarily solar, primarily wind. I think that the way the market is trending and there’s quite a bit of effort that I think still needs to come in terms of how contracts might work out and how things might be scheduled, but I’m certainly very interested in how I might design a renewable source portfolio that will provide me with 24/7 carbon free power.

And if for example in Texas, that means it’s a combination between solar and wind, I’m going to need sufficient storage to bridge any gaps that are out there when the sun’s not shining, or the wind’s not blowing to ensure that I can still have a 24/7 profile that matches my load. I think there’s this increasingly sophisticated requirement out there that says I need a specific product and I can’t do it without storage. And I can’t do it with storage that only lasts for four hours, I need to probably have a more extensive solution. And I think there are a lot of very innovative companies working on this that we’re going to see some pretty dramatic results in the next few years.

Lincoln Payton: I think the next two, three years, we’re going to see some fantastic evolution in the storage space and the logic is it does work well with the kind of 24/7 real estate supply application that you’re working on. Last throw at you question. Nuclear, okay, again, another love, hate for the energy world topic. We’ve had pretty recently some nice developments in terms of the kind of solution that different applications of nuclear could be providing looking forwards. How does that work? Or how do you feel about that?

Michael Daschle: Personally, I love it. And professionally, Brookfield loves it. Brookfield, if you hadn’t seen some of the headlines recently, a team or basically a group within Brookfield Renewable using funds from the recently raised Brookfield Global Transition Fund bought Westinghouse, which is the world’s largest nuclear services provider, equipment manufacturer, and you’ll see some of our most prolific and public figures out there saying that there is no half to net zero without nuclear. I wholeheartedly agree, I think this is one of the areas where people are recognizing that there needs to be a 100% reliable base load of power that is zero emissions and that is nuclear. If you look across the states, New York itself, for example, uses 20 to 25% nuclear to make up its statewide power. You’ll see some stations that were scheduled for retirement are getting extensions even out into 2050. And so I think even the Department of Energy recognizes that nuclear energy is going to be a key component of the solution.

And firms like Westinghouse are also designing the next generation of reactors that are more modular, that can serve as smaller sizes that are factory designed to lower costs, that are increasingly safe. And you see even some of these foreign governments, I know Poland for example, has just bought recent ones. There’s their new generation of reactors that’s coming up, that’s going to be a key element of the solution. And one more connection there, I come from the military world again, and I was in the Army, but my brothers and sisters in the Navy for a generation have been using nuclear power in their ships and submarines safely and effectively to power the world’s most effective Navy. So the technology exists, it can be done safely, it’s a huge win. I know that from a argument against a perspective, it’s not a renewable supply. We have to deal with the waste solution, and there are effective ways to deal with waste. And you look at the waste generated from the nuclear process relative to the waste generated from coal or many other generation methods, and it paled in comparison.

So I think we need to keep it in context, and it’s one of those things where some things that more you learn about, the more worried you get, nuclear’s the opposite, where it’s like the more you learn about it, the less worried you get. And I think we’re starting to see that come out in many governments across the world.

Lincoln Payton: Again, I think Brookfield proves itself to be forward thinking and prescient because I think it’s a fundamental part of the equation going forwards. And I think that military analogy was a very relevant one, goes through your thinking process again to our earlier topics. Last couple of questions for you here, the future looking forwards. First of all, you’ve got a young family on the East Coast, congratulations, lots of work, lots of fun. When you look at the work you are doing, how do you transpose that to what you hope to be doing constructively for that family, that young family growing up in an East Coast environment?

Michael Daschle: Yeah, it’s pretty interesting when you first have kids, and I know I thought about this often when they were young, I was like, “How am I going to describe what I do?” It was much harder to do when I was raising funds for a new development project. Now it’s very straightforward here, Daddy helps make our buildings good for the planet. [inaudible 00:41:15]. They learn about these things in class. I love the simplicity of the fact that you have a very purposeful role in the organization that has an impact that is going to be positive on the next generation and with the scale of Brookfield is going to have a major impact. So I love that aspect about it, and I think when we think carefully about what these decisions mean for the next generation, I think we can’t take for granted the fact that we’ve lived in a completely different age than what they’re going to live in and the choices that we make could preserve what we’ve been able to experience. That itself is pretty meaningful.

Lincoln Payton: I’m willing to bet that as the semesters go by, you are going to be one of the cool dads to come in and talk about what my dad does at work. I mean, you’ll still be below the firemen and the policemen, but that’s okay.

Michael Daschle: That’s all right, that’s okay, that’s [inaudible 00:42:06].

Lincoln Payton: So let’s take that question internal to Brookfield now. So first of all, think of what does the future of Brookfield Properties look like in this space? And I know that you’ve got a couple of other thoughts, projects expansion US wise, but before you actually go there, which is I think a good spot to kind of wrap up with is you’ve broken some ground with your adoption of 24/7 and the Bilateral Transactions and it’s not everybody’s doing it, and you are at the leadership position. How’s that been within Brookfield? Have you had support from different areas? Have you had to do a lot of education of people? What the buy-in to what you’re doing?

Michael Daschle: There’s immense support from the inside, there’s certainly education required, but to the Brookfield’s leadership’s credit, they are very visionary, very bold. And I’ve even been in situations where I’ve come up with a roadmap for where we want to go from a procurement perspective and received feedback, the well, why is this taking so long? Why can’t we do it faster? And I love that mentality where it’s like we at Brookfield, we literally are across the street from our sister company that’s the largest Brookfield or that’s the largest renewable company. We have abundant opportunity to do very big things, and they see that opportunity, which is fantastic. And I think when you think about the leadership’s commitment to net zero by joining the Net Zero Asset Managers initiative, they’re looking for opportunities that we can take to accelerate our progress towards those targets. And so things like what we did at One Manhattan West and the eventual expansion of that strategy are already showing us that we’re going to meet our 2030 milestones well ahead of schedule.

That’s going to come out in our reporting along with that initiative, but the fact that there is such strong support internally from both leadership perspective and in operational perspective is critical.

Lincoln Payton: Yeah, that’s really great. So that leads into looking forwards for you now the next couple of years. You’re feeling good about the specific targets you’re given? I have to say from a Cleartrace point of view, but from a personal point of view, I feel good about such a big firm being able to prove and substantiate what they’re doing as well, because one of the things that is a personal campaign for me is having transparency around statements, targets and relative performance, and I think you’re doing that really well. Practically, what does that mean for you moving down that roadmap and overachieving?

Michael Daschle: We’ve never had a national sustainability team, the near term is building up that team, building up this program and really ensuring that we have this definite path to net zero across our office properties. I’m obviously responsible for the office property scope, but with any success in this field comes the corresponding responsibility to also share a lesson to learn with our brothers and sisters on the residential side and industrial side, retail side, hospitality, I mean we’ve got a giant organization where it’s going to take some serious work to get this done and meet these milestone achievements. And so one of the things that we’ve also done recently, we recently stood up a renewable energy advisory committee that’s global in respect to reviewing all renewable deals globally, all geographies, all property types, and that group is going to increasingly be the brain trust for Brookfield Properties in terms of all things renewable.

I’m hoping to lead that effort and that is really going to be where we’re focused going forward, is not only achieve our own sector’s goals, but make sure that we’re sharing the knowledge, that we’re teaching each other, how do we want to do it and best practices and be able to really leverage our scale and have [inaudible 00:45:39] impact.

Lincoln Payton: Fantastic. I think you’re really a protagonist in that Decarbonization Race, and I’m really pleased to talk to you today.

Michael Daschle: Always a pleasure, Lincoln, and I appreciate your partnership too.

Dana Dohse: Thank you for joining us on The Decarbonization Race. For more resources to help you lead the pack in the most important race of our lifetime, visit cleartrace.io/podcast.