Since the Paris Climate Agreement in 2015, capital markets have been increasingly focused on sustainability and social responsibility. As a result, the real estate sector is undergoing a profound transformation. Financial returns are no longer the only goal, as investors want to generate a positive impact. Environmental, Social, and Governance (ESG) principles now have a firm place at the forefront of real estate investment and development. We take a look at impact-driven investments for high value, sustainability, and risk reduction.

How ESG scoring influences property valuations

ESG scoring is an independent rating used to evaluate a building’s performance on a range of criteria, including energy efficiency, waste management, and social impact. Properties with high ESG scores often attract a “green premium” and benefit from higher rental yields. They are also viewed more favourably by tenants and buyers. Conversely, assets with poor ESG performance are at risk of becoming “stranded assets”—buildings that suffer from obsolescence due to their inability to meet modern sustainability standards. These properties may face higher operating costs, regulatory penalties, and a shrinking pool of tenants and buyers, leading to a decline in their valuation.

Measuring carbon footprint in real estate projects

In modern real estate development, measuring a building’s carbon footprint is non-negotiable. It involves a comprehensive analysis of both embodied carbon (emissions from the construction and materials) and operational carbon (emissions from a building’s day-to-day energy use). Developers are increasingly using advanced tools and green building materials to reduce their carbon footprint from the design phase onward. This includes everything from using low-carbon concrete and recycled steel to installing solar panels. This will not only appeal to climate-conscious investors but also contribute to global climate goals, such as the EU’s target to reduce carbon emissions by 40% in 2030.

Social responsibility in urban developments

The social impact of buildings may have been overlooked in the past, but the social component of ESG is now reshaping how urban developments are planned and executed. Modern real estate projects are increasingly expected to contribute positively to their surrounding communities, from creating accessible public spaces to providing affordable housing units, or integrating community services like childcare centres and healthcare facilities. Socially responsible developments also prioritise the well-being of occupants by focusing on aspects like indoor air quality, natural light and green spaces. Developers who pay attention to social impact enjoy a stronger reputation, secure public support, and create more resilient and desirable assets.

Make sure your real estate development is ESG-compliant and generates a positive impact. Book a consultation with SWIFT Group.