Green Buildings: Sustainable and Profitable?
ESG investigator discusses benefits of green home building in today’s market.
According to ESG Investor, there has been a post-pandemic trend of building back better and greener, with corporates, developers and the financial community increasingly considering the environmental, social and economic impact of their business decisions and focusing more on long-term sustainable value creation.
The ‘social’ and ‘governance’ limbs have driven demand for real estate assets which are able to demonstrate ESG-related compliance. In addition, we see that our clients that comply with ESG standards generate lower long-term operational costs, deliver an increase in capital values, higher rents and occupancy rates.
In contrast, buildings with lower or no green ratings often result in a so-called “brown discount” since they tend to suffer from higher occupancy voids and operational costs. They also run the risk of depreciating their capital and obsolescence in the face of tightening ESG-focused legislative requirements.
ESG and the property lifecycle
With ESG now playing a much more prominent role in how companies operate, investors are embedding ESG considerations into every stage of the property lifecycle, from due diligence to acquisitions, and from leasing to asset management.
With operational emissions (energy used to heat, cool and light buildings) accounting for around 28% of all global carbon emissions and embodied emissions (materials and construction processes during the entire building lifecycle) generating a further 11%, pressure is growing on building owners, operators and occupants to reduce their carbon footprint.