Verdani's 2025 Sustainability Trends: Protecting, Driving, and Creating Value in Commercial Real Estate
AUTHORS: CARLI SCHOENLEBER, VANESSA VLASAKFEBRUARY 14, 2025Introduction
As climate-related impacts intensify, businesses are increasingly recognizing the importance of sustainability — not only to meet regulatory requirements but also as an essential part of long-term risk management and value creation. The demand for transparency and accountability on climate, biodiversity, and social impact is growing, pushing companies to align their corporate sustainability strategies with global best practices and their own business goals.
The release of our annual sustainability trends article comes at a unique time politically and economically. Over the past four years, the United States saw significant growth and support for sustainability initiatives, but with the new administration’s shift away from climate and DEI efforts, U.S. companies are now facing a more fragmented and uncertain policy environment. This shift has increased pressure on businesses to navigate sustainability effectively, addressing financially material climate risks and sustainable innovation while also avoiding potential pushback from various stakeholders.
This article highlights what Verdani sees as the key forces shaping sustainability in commercial real estate (CRE) today, organized into three key areas: protecting value, driving value, and creating value. By leveraging these insights, CRE companies can align their sustainability efforts with evolving market and regulatory demands, ensuring they remain competitive and foster responsible, sustainable growth.
Table of Contents
Protect Value
Adapting to a changing climate: Crucial for health and asset protection
Aligning biodiversity and climate strategies to protect financial stability
Drive Value
Global regulations driving sustainability; EU and U.S. states leading
Regulations increasing supply chain engagement on scope 3 emissions
Harmonization of sustainability reporting standards with IFRS™ S1 and S2
AI’s paradox: Balancing increased emissions with climate innovation
Create Value
Protecting value in commercial real estate requires managing climate and biodiversity risks that can threaten asset stability and financial performance. The trends in this section focus on evaluating climate risks, implementing adaptation strategies, and addressing the growing financial implications of biodiversity loss to safeguard long-term asset value and community well-being.
1. Mitigating financial risk through sustainability
Sustainability initiatives are becoming increasingly vital for mitigating financial risks in real estate, especially as climate-related natural disasters increase in both frequency and severity. Lenders are now factoring climate risks into loan terms, leading to higher capitalization and equity rates and lower property values. Insurers, burdened by escalating claims, have raised premiums — up 7.6% annually in the U.S. commercial market) — or withdrawn coverage entirely in high-risk regions. [1] [2]
Lack of insurance leaves properties vulnerable, as exemplified by the January 2025 Palisades Fire in Los Angeles. Just months before the fire, State Farm™ withdrew 1,600 policies in the Pacific Palisades neighborhood due to wildfire risk, forcing many homeowners onto California’s expensive Fair Access to Insurance Requirements (FAIR) Plan.[3] AccuWeather™ estimates the total damages and economic losses from the 2025 Southern California wildfires could reach $250–275 billion. If these projections hold, the wildfires could surpass Hurricane Katrina — the most expensive natural disaster in U.S. history at $200 billion — and set a new record.[4]
According to a December 2024 U.S. Senate Budget Committee report, rising insurance premiums and non-renewals linked to natural disasters could have far-reaching consequences for systemic financial stability.
According to a December 2024 U.S. Senate Budget Committee report, rising insurance premiums and non-renewals linked to natural disasters could have far-reaching consequences for systemic financial stability. Drawing parallels to the 2008 financial crisis, the report highlights how widespread devaluation of U.S. properties exposed to climate-related natural disasters could destabilize financial markets and disrupt global economies.[5]
To counter these risks, CRE owners are adopting proactive strategies to safeguard their portfolios and maintain market stability, as outlined in a 2024 Urban Land Institute-Heitman report, Insurance on the Rise: Climate Risk and Real Estate Investment Decisions:[1]
Climate Risk Assessments: CRE owners are evaluating properties for climate risks, guiding investments in resilience or divestment from high-risk assets.
Leveraging Climate Data: Advanced tools are informing property acquisition and disposition decisions, identifying areas with lower climate risks for long-term success.
Optimizing Insurance: Owners are diversifying coverage with multiple policies and parametric insurance, which pays out based on predefined event triggers (e.g., wind speed, earthquake magnitude), ensuring faster and more predictable financial recovery after climate events.
Diversifying Portfolios: CRE owners invest in varied locations and property types to minimize the impact of any single disaster.
Owners are diversifying coverage with multiple policies and parametric insurance, which pays out based on predefined event triggers (e.g., wind speed, earthquake magnitude), ensuring faster and more predictable financial recovery after climate events.
Residential real estate is also adapting to the financial risks associated with extreme weather and natural disasters. U.S. residential real estate app Zillow™ now includes detailed climate risk insights, including flood, wildfire, wind, heat, and air quality, in property listings alongside tailored insurance recommendations. With Zillow noting that over 80% of buyers are factoring climate risks into their decisions, tools such as this are becoming essential for due diligence and helping homeowners safeguard their personal wealth.[6]
Beyond the physical risks of natural disasters, real estate companies are also navigating transition risks tied to the shift to a low-carbon economy. In the United States, local building performance standards are driving owners to decarbonize through strategies like deep energy retrofits, reducing risk of asset stranding while adding value and attracting investors (see trend #9).[7]
2. Adapting to a changing climate: crucial for health and asset protection
Even after owners have optimized their portfolios — avoiding high-risk acquisitions and selling off vulnerable assets — making properties more resilient to escalating climate impacts remains urgent. As global average temperatures continue to hit record highs, extreme weather events are intensifying,[8] making adaptation critical to protect both communities and operational continuity. This is especially pressing in the United States, where population shifts to climate-vulnerable regions like the South and West are putting more people and assets at risk of flooding, wildfires, and extreme heat.[9]
Resilient building design and proactive maintenance are essential for protecting assets, supply chains, and communities from escalating climate risks. Strategies such as wildfire-resistant materials, flood-resistant foundations, and structural reinforcements help reduce physical damage, while regular site maintenance — including roof and drainage upkeep, HVAC system optimization, and envelope inspections — helps ensure buildings remain functional during extreme weather. These measures not only safeguard property value but also protect occupant health by improving indoor air quality, reducing exposure to extreme temperatures, and maintaining safe building conditions.[10]
Strategies such as wildfire-resistant materials, flood-resistant foundations, and structural reinforcements help reduce physical damage, while regular site maintenance — including roof and drainage upkeep, HVAC system optimization, and envelope inspections — helps ensure buildings remain functional during extreme weather.
However, despite resilient building design at the building level, as Hurricane Helene in 2024 revealed, these measures are insufficient when community-scale infrastructure — such as roads and utilities — fails. Record-breaking rainfall fueled by climate change overwhelmed North Carolina’s Appalachian region, causing flash floods and landslides that killed more than 100 people, damaged 73,700 homes, and crippled essential services in communities already burdened by higher rates of poverty and health issues.[11] [12] [13]
Florida’s Hunters Point — a LEED-certified Net Zero Energy community — demonstrates the success of proactive, community-scale adaptation. Designed with flood-resistant structures, solar energy systems, and battery storage, the development remained operational and largely unscathed during Hurricanes Helene and Milton, even as surrounding areas suffered extensive damage.
By contrast, Florida’s Hunters Point — a LEED-certified Net Zero Energy community — demonstrates the success of proactive, community-scale adaptation. Designed with flood-resistant structures, solar energy systems, and battery storage, the development remained operational and largely unscathed during Hurricanes Helene and Milton, even as surrounding areas suffered extensive damage.[14] While the upfront costs of such resilience measures are significant — homes in Hunters Point are priced between $1.4 and $1.9 million — these investments ultimately pay off. Based on 2023 data from CDP, companies report a payback of $2 to $19 for every dollar spent on adaptation, underscoring the long-term financial and social value of resilient design.[15]
3. States, businesses, and global leaders stepping up to fill climate leadership gaps left by U.S. federal climate rollbacks
As the Trump administration rolls back key federal climate policies — including withdrawing from the Paris Agreement, halting offshore wind development, pausing disbursement of funds from the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act, and loosening emissions regulations — states, businesses, and global coalitions are taking action to sustain progress.[16] In response to the wave of environmental Executive Orders, 24 U.S. states reaffirmed their commitment to the Paris Agreement and pledged to collectively reduce greenhouse gas emissions in line with its goals.[17] Furthermore, cities like New York, Los Angeles, and Chicago continue to lead on climate action, strengthening building performance standards, electrification mandates, and renewable energy targets.
The We Are Still In coalition, now known as America Is All In, has emerged as a major force in sustaining U.S. climate momentum. Representing over 5,000 leaders, including mayors, businesses, faith groups, and universities, the initiative is working to uphold U.S. climate goals at the state and local levels. This coalition of leaders represents three-quarters of the U.S. GDP and is actively advancing clean energy development, green job initiatives, and emissions reduction strategies in the absence of federal leadership.[18] Beyond co-leading America Is All In, Michael Bloomberg, through Bloomberg Philanthropies, has pledged to cover the U.S. financial commitment to the Paris Agreement.[19]
Despite federal rollbacks, businesses are sustaining climate momentum, with over 10,000 companies now committed to science-based emissions reductions through The Science Based Targets initiative — a 29% increase in the past year.[20] Even major U.S. oil companies, including ExxonMobil® and Chevron®, have opposed the Trump administration’s withdrawal from the Paris Agreement, warning that it creates regulatory uncertainty and weakens U.S. influence in global energy transition policies, creating a competitive disadvantage.[21]
Even major U.S. oil companies, including ExxonMobil and Chevron, have opposed the Trump administration’s withdrawal from the Paris Agreement, warning that it creates regulatory uncertainty and weakens U.S. influence in global energy transition policies, creating a competitive disadvantage.
Globally, clean-energy investments are accelerating to support climate targets, reinforcing momentum beyond U.S. federal policy. China set new records in 2024, expanding solar capacity by 45% and wind by 18%,[22a] while the EU's rapid renewable growth has driven fossil-fuel power generation to its lowest level 40 years.[22b] Likewise, India remains on track to surpass its 500GW renewable energy target by 2030, underscoring a global trend toward embracing a low-carbon economy.[23]
See our post-election article to learn more about the key business drivers for sustainable real estate in 2025.
4. Aligning biodiversity and climate strategies to protect financial stability
Biodiversity loss and ecosystem collapse rank among the top global economic risks over the next decade, second only to extreme weather events, according to the 2025 World Economic Forum Global Risks Report (see figure below).[24] As more than half of global GDP moderately or highly depends on nature, the economic impacts of biodiversity decline are becoming increasingly evident.[25] Industries such as real estate and construction are particularly vulnerable, as biodiversity risks can disrupt operations and erode long-term asset value.
Deforestation is a key driver of biodiversity loss and poses significant risks to global supply chains, especially for companies reliant on natural resources such as timber. Impacts from climate change, including wildfires and pests, intensify these pressures. According to the World Wildlife Fund®, these climate-driven factors could lead to a reduction in the available wood supply of up to 35% by 2050. This reduction in supply could affect the availability and cost of timber, a critical material in construction.[26]
The 2024 United Nations Environment Programme Finance Initiative Climate Risk Landscape Report underscores the necessity of aligning climate action with nature restoration. This interconnected approach is essential, as it recognizes the vital relationships between climate, ecosystems, and human well-being. To effectively address these challenges, integrated solutions are needed that tackle biodiversity and climate risks together.
The 2024 United Nations Environment Programme Finance Initiative Climate Risk Landscape Report underscores the necessity of aligning climate action with nature restoration. This interconnected approach is essential, as it recognizes the vital relationships between climate, ecosystems, and human well-being. To effectively address these challenges, integrated solutions are needed that tackle biodiversity and climate risks together. [27]
Nature-based solutions and green infrastructure in urban design, such as green roofs, rain gardens, and urban rewilding, support biodiversity, decarbonization, and resilience simultaneously. These features provide habitats for native species, sequester carbon, and mitigate the urban heat-island effect. Research shows that green roofs can reduce building energy use by up to 15%. Additionally, green infrastructure helps manage stormwater on-site, reducing pollution and lowering demand for potable water, which benefits local biodiversity both upstream and downstream.[28] As a result, nature-based solutions are emerging as valuable investment opportunities.[29]
Aligning climate strategies with biodiversity goals also helps companies meet regulatory demands and improve reporting on nature-related risks. The Corporate Sustainability Reporting Directive (CSRD), which provides an extensive framework for climate and sustainability reporting and requires large companies operating in the EU to disclose their climate-related impacts, risks, and opportunities, mandates the disclosure of a company’s impacts and dependencies on biodiversity and ecosystems, closely aligning with the voluntary Taskforce on Nature-related Financial Disclosures.[30] The European Commission’s interoperability guidance further integrates CSRD with the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards.[31] As the IFRS Foundation expands its focus on biodiversity, ecosystems, and ecosystem services, reporting frameworks are becoming more aligned, simplifying compliance while addressing emerging regulatory requirements and investor expectations to disclose both climate and biodiversity risks.[32]
As the IFRS Foundation expands its focus on biodiversity, ecosystems, and ecosystem services, reporting frameworks are becoming more aligned, simplifying compliance while addressing emerging regulatory requirements and investor expectations to disclose both climate and biodiversity risks.
Although they still represent only a small portion of the overall climate fund market, assets in open-ended biodiversity funds and ETFs have more than doubled over the last three years.[33] As a result, nature-based solutions are emerging as valuable investment opportunities, delivering both environmental benefits and financial returns.
To drive value, companies must align their sustainability efforts with evolving market demands, investor expectations, and regulatory shifts. The trends in this section emphasize how real estate companies can leverage sustainability to attract investment, meet tenant demands, and maintain competitiveness in a rapidly changing global landscape.
5. Global regulations driving sustainability; EU and U.S. states leading
As sustainability regulations tighten globally, corporate real estate strategies are increasingly shaped by compliance demands. The EU continues to lead with robust sustainability disclosure and greenwashing regulations, such as the CSRD, EU Taxonomy, and Sustainable Finance Disclosure Regulation (SFDR). Coming in 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) will tax imports based on their carbon footprint, impacting building materials like steel and concrete.[34] Similarly, Asia-Pacific nations are rapidly advancing IFRS-aligned regulations, with China mandating annual sustainability disclosures for large companies starting in 2026.[35] [36]
For U.S. companies operating internationally, these regulations add new compliance obligations. The CSRD applies to non-EU companies with significant European revenue, requiring them to disclose both sustainability impacts and risks (i.e., double materiality) alongside their European counterparts.[37] Meanwhile, China’s disclosure mandate is set to impact U.S. companies listed on Chinese stock exchanges.
While much of the world moves toward stricter sustainability regulations, U.S. companies now face a fragmented policy landscape as the federal government shifts away from climate action and toward policies aimed at expanding the U.S. fossil fuel industry (see trend #8). Despite federal rollbacks, state and local governments in the United States are stepping up to lead on national climate action (see trend #3), particularly in the buildings sector. Four states and 13 cities have passed building performance standards while California and 30 cities are actively developing similar policies. As of early 2024, these standards covered about 25% of U.S. buildings, according to JLL.[38]
Despite federal rollbacks, state and local governments in the United States are stepping up to lead on national climate action, particularly in the buildings sector. Four states and 13 cities have passed building performance standards while California and 30 cities are actively developing similar policies.
California's groundbreaking 2023 climate laws further raise the bar, requiring both public and private companies operating in the state to disclose comprehensive emissions data — including scope 1, 2, and 3 emissions (SB 253) — and material climate risks for investors (SB 261) by 2026. Recognizing compliance challenges, the California Air Resources Board announced in December 2024 that it will waive penalties for incomplete SB 253 reports in 2026 if companies show good-faith efforts. A public consultation runs through March 2025 to refine reporting guidelines.[39]
6. Regulations increasing supply chain engagement on scope 3 emissions
Supply chain engagement is a natural outcome of the increase in sustainability disclosure regulations, many of which require companies to report data across their supply chains, including the California’s Climate Corporate Data Accountability Act (SB 253), the EU’s CSRD and Corporate Sustainability Due Diligence Directive, and the global IFRS Sustainability Disclosure Standards. Beyond regulations, investors are also pushing for greater supply chain transparency. For example, GRESB®, the investor-driven sustainability benchmark for real estate, is updating its 2025 standards to include new criteria on embodied carbon, increasing disclosure on emissions from building materials and construction processes.[40]
GRESB, the investor-driven sustainability benchmark for real estate, is updating its 2025 standards to include new criteria on embodied carbon, requiring more disclosure on emissions from building materials and construction processes.
For real estate portfolios, scope 3 emissions from the supply chain are increasingly critical to track and report, driving companies to invest heavily in supplier engagement. In 2023, global commercial real estate services provider CBRE® launched campaigns targeting the 7,500 suppliers responsible for 90% of its supply chain emissions, tailoring its approach to meet the diverse needs of both multinationals and small, local businesses. The program included supplier forums, Q&A sessions, and a free emissions tracking platform, enabling nearly 40% of engaged suppliers to provide emissions data, with over 100 calculating their emissions for the first time.[41]
Schneider Electric®, named best Global Sustainable Supply Chain Organization in 2021 at the Global Sustainable Supply Chain Summit, similarly emphasizes the importance of collaboration and meeting suppliers where they are in their decarbonization journey.[42] [43] To help suppliers align with climate goals, the company recommends engaging suppliers through partnerships, providing customized action plans along with technical and financial assistance, and leveraging digital tools to track and manage emissions effectively.[44]
While compliance has driven companies to collect and disclose value-chain data, the most forward-thinking firms are leveraging supply-chain transparency to unlock business value. Beyond complying with regulations like the EU's CBAM and California’s SB 253, this transparency enables companies to identify cost-saving opportunities, improve operational efficiency, and mitigate risks in their supply chains. By collaborating with suppliers and adopting advanced data tools, businesses can align sustainability efforts with financial performance, driving resilience and competitive advantage.[45]
By collaborating with suppliers and adopting advanced data tools, businesses can align sustainability efforts with financial performance, driving resilience and competitive advantage.
7. Harmonization of sustainability reporting standards with IFRS S1 and S2
While many sustainability reporting frameworks remain in use today, the push for a more standardized global system has gained momentum since the introduction of the IFRS Sustainability Disclosure Standards, including IFRS S1 (General Requirements) and IFRS S2 (Climate-Related Disclosures), which were published in 2023. Developed by the International Sustainability Standards Board (ISSB®) under IFRS, these standards serve as the global framework for sustainability financial reporting, with over 1,000 companies already referencing them in their reports.[46]
With the IFRS Foundation assuming responsibility for climate-related financial disclosures in 2024, companies that previously reported under the Task Force on Climate-related Financial Disclosures (TCFD) are now expected to align with IFRS. IFRS S2 builds on TCFD by introducing additional disclosures on climate-related risks and opportunities, sector-specific metrics (including 18 for real estate), and scope 3 emissions disclosures. By consolidating frameworks like TCFD, the Sustainability Accounting Standards Board, and Integrated Reporting, IFRS aims to simplify reporting for companies and improve the comparability of sustainability information for investors.
Designed for global adoption, the IFRS Sustainability Disclosure Standards have quickly gained traction, with at least 30 jurisdictions — representing 57% of global GDP — actively working toward implementation. Among them, Brazil, the UK, Canada, Australia, China, Singapore, and Japan are advancing their adoption.
Designed for global adoption, the IFRS Sustainability Disclosure Standards have quickly gained traction, with at least 30 jurisdictions — representing 57% of global GDP — actively working toward implementation. Among them, Brazil, the UK, Canada, Australia, China, Singapore, and Japan are advancing their adoption.[47] As more jurisdictions align with these standards, capital markets are increasingly integrating them into investment decisions and stewardship principles, as seen in BlackRock’s® 2025 proxy voting guidelines.[48]
While the IFRS Sustainability Disclosure Standards enhance financial reporting consistency, greater harmonization is needed around sustainability definitions, particularly for “net zero” buildings. The EU and UK have introduced national standards, but companies still navigate fragmented regulations and varying criteria.[49] [50] Certifications like LEED® Zero and Zero Carbon® offer frameworks, but without a globally recognized standard, alignment remains inconsistent. A unified definition could accelerate emissions reductions, simplify compliance, and provide investors with a clearer benchmark for assessing corporate climate performance and transition risk.
8. AI’s paradox: Balancing increased emissions with climate innovation
AI is driving rapid change across industries, playing an increasingly vital role in building decarbonization. A 2024 U.S. Department of Energy report highlights AI’s potential to accelerate clean energy efforts by improving grid planning, optimizing energy consumption, and enhancing renewable energy integration.[51] In real estate, AI is streamlining emissions reductions by analyzing vast amounts of building data to identify inefficiencies, lower costs, and create optimized decarbonization strategies. These innovations are making reducing emissions more scalable and financially viable, helping drive widespread adoption across the industry.[52]
In real estate, AI is streamlining emissions reductions by analyzing vast amounts of building data to identify inefficiencies, lower costs, and create optimized decarbonization strategies. These innovations are making reducing emissions more scalable and financially viable, helping drive widespread adoption across the industry.
One example of AI’s role in building decarbonization is the ARIA platform from BrainBox AI®, which optimizes HVAC systems by analyzing real-time data and making predictive adjustments. Used in 14,000 buildings across 20 countries, it has been shown to cut energy costs by 25% while reducing greenhouse gas emissions.[53] Recognized as a TIME® Top 100 Invention in 2024, it exemplifies how AI is making buildings smarter, more efficient, and better equipped for decarbonization.
However — while it can drive decarbonization, its massive energy demands, particularly from data centers, are straining electricity grids and driving up emissions.[54] Major technology companies reported emissions increases in recent years, with Google reporting a 48% increase in greenhouse gas emissions between 2019 and 2023, largely due to AI-driven data center energy consumption.[55] Globally, the International Energy Agency (IEA) projects that data center electricity demand will more than double by 2026.[56] Yet, the IEA also projected in 2024 that clean energy generation — including nuclear, solar, wind, and hydro — would meet all global electricity demand growth through 2026, potentially mitigating some of AI’s impact on emissions.[57]
Globally, the International Energy Agency (IEA) projects that data center electricity demand will more than double by 2026. Yet, the IEA also projected in 2024 that clean energy generation — including nuclear, solar, wind, and hydro — would meet all global electricity demand growth through 2026, potentially mitigating some of AI’s impact on emissions.
These projections, however, predate Trump’s election, and a series of executive orders have since shifted U.S. energy policy away from the previous administration’s climate-focused approach. The National Energy Emergency executive order warns of an “imminent and growing threat” due to inadequate energy for the next generation of technology, likely including AI and data centers.[58] As part of this shift, the Unleashing American Energy executive order promotes fossil fuel development while rolling back federal support for wind and solar, although it does support lower-emission energy sources like nuclear, hydropower, and geothermal.[59] Recognizing its overlap with oil and gas drilling methods, the administration has positioned geothermal as a more politically viable clean energy option, with the potential to provide 90 GW by 2050 — enough to power 900 hyperscale data centers.[60] [61] [62]
To create value through sustainability, companies must move beyond basic compliance or risk mitigation. This section highlights how organizations are driving innovation through sustainable practices, unlocking new opportunities, and positioning themselves as leaders in a competitive market. By integrating sustainability into core strategies, businesses can generate long-term value through enhanced property value, operational efficiency, cost savings, and positive environmental and social impact.
9. Investors demanding results on decarbonization targets, making strong climate strategy critical for attracting capital
Investors are intensifying their push for comprehensive decarbonization strategies as companies face mounting pressure to reduce emissions and manage climate-related risks. To address physical risks like extreme weather and transition risks tied to the global shift away from fossil fuels, investors are increasingly demanding clear, actionable transition plans. In the 2024 proxy voting season, a significant number of shareholder resolutions in North America called for such plans, reflecting heightened expectations for accountability.[63] [64] Additionally, 25% of companies reporting to CDP in 2023 included a 1.5°C-aligned transition plan — a 44% increase from 2022.[65]
The current era of corporate sustainability has seen significant progress in setting emissions reduction goals, but faster implementation is critical to avoid the economic risks of inaction. A December 2024 report from the World Economic Forum® and Boston Consulting Group® cautions that “without urgent action, global GDP could drop by up to 22% cumulatively by 2100.”[15]
To drive progress, climate-focused investors are shifting to prioritize “transition readiness” and “transition planning.” Transition funds are gaining popularity, aiming to help high-emission sectors decarbonize by setting clear targets and ensuring accountability.[33][66] According to MSCI®, companies leading in carbon emissions management outperformed laggards by up to 3.2% annually since 2013, highlighting the financial benefits of decarbonization.[67]
According to MSCI, companies leading in carbon emissions management outperformed laggards by up to 3.2% annually since 2013, highlighting the financial benefits of decarbonization.
Despite federal climate policy setbacks under the Trump administration and increased scrutiny on climate-focused coalitions like the Net Zero Asset Managers initiative (NZAM), private-sector momentum around decarbonization remains strong, fueled by market drivers and local and global regulations. While some asset managers, such as BlackRock, have recently left coalitions like NZAM, there remains a clear consensus among institutional investors around the importance of climate risk management and transition planning.[68] [69] [48]
For real estate companies, investor pressure to decarbonize is converging with growing tenant demand for low-carbon spaces. In the evolving "flight to quality" leasing markets, tenants are increasingly prioritizing energy-efficient buildings that align with corporate climate goals and reduce operating costs.[70] The 2024 Urban Land Institute® C-Change Survey, which gathered insights from over 200 real estate executives across sectors, highlights key challenges, including the high upfront costs of decarbonization and the complexity of retrofitting existing buildings to meet stricter standards. However, the survey also revealed that rising transition risks are driving a shift in capital toward retrofitting rather than divesting, illustrating the value proposition of decarbonization.[71]
10. Redefining high performance buildings: Decarbonized, resilient, regenerative, healthy, and equitable
High-performance buildings were once defined primarily by energy efficiency, with certifications like Passive House initially emphasizing insulation, airtightness, and reduced energy consumption during the 1970s energy crisis.[72] While efficiency remains essential, today’s buildings must also address climate risks, carbon emissions, biodiversity loss, social inequity, and public health challenges, while additionally safeguarding against rising operating costs, escalating insurance premiums, and long-term asset devaluation.
The 2024 Phius® Passive House standards reflect this shift by optimizing energy use to support grid decarbonization, enhancing occupant well-being through improved ventilation and thermal comfort, and strengthening resilience against extreme weather events through passive design strategies. The standard has evolved beyond rigid efficiency targets to a climate-specific, cost-effective approach, ensuring regional adaptability while maintaining high energy performance.[72]
While Phius does not focus closely on nature, regeneration is becoming central to the evolving conversation around sustainability — moving beyond simply sustaining what exists to restoring what has been lost and creating built environments that actively support ecological health. The Phipps® Conservatory Center for Sustainable Landscapes in Pittsburgh exemplifies this shift, earning certifications like SITES® Platinum and the Living Building Challenge®, which prioritize biodiversity, ecosystem restoration, and regenerative design. The facility also generates its own energy and treats all stormwater and wastewater on-site, demonstrating that buildings can be self-sustaining while supporting environmental restoration.[73]
As cities expand high-performance building principles to entire communities, ensuring equitable access to resilience, health, and decarbonization is critical. Nature-based solutions, such as Detroit’s plan to plant 75,000 trees in historically underserved neighborhoods, help mitigate extreme heat, improve air quality, and enhance public health where it’s needed most.
As cities expand high-performance building principles to entire communities, ensuring equitable access to resilience, health, and decarbonization is critical. Nature-based solutions, such as Detroit’s plan to plant 75,000 trees in historically underserved neighborhoods, help mitigate extreme heat, improve air quality, and enhance public health where it’s needed most.[74] In New Orleans, climate-resilient technologies are being integrated into affordable housing to lower energy costs and protect residents from extreme weather.[75] These efforts demonstrate how sustainable development can be designed to benefit communities most vulnerable to environmental risks while also creating long-term economic and social value.
Conclusion
As sustainability reshapes the CRE sector, companies must strategically protect, drive, and create value. Climate risks, regulatory shifts, and investor demands make sustainability essential — not just for compliance but for resilience and long-term growth.
Through sustainability, CRE firms can protect value by mitigating financial risks, strengthening climate resilience, optimizing insurance, and addressing biodiversity challenges. They can drive value by aligning with global regulations, enhancing sustainability reporting, and leveraging AI and supply chain transparency to stay competitive. They can also create value through decarbonization, regenerative design, and equitable development, unlocking new investment opportunities and positioning themselves as industry leaders.
With the new federal administration shifting policies away from climate action, CRE firms face heightened regulatory uncertainty and evolving stakeholder expectations. Yet, those that take a proactive approach—embedding sustainability into investment strategies, operations, and innovation—will be best positioned to mitigate risks, capitalize on emerging opportunities, and drive long-term positive impact.
Carli Schoenleber
SENIOR COMMUNICATIONS MANAGER (CONTENT AND ENGAGEMENT SPECIALIST)Carli is a Senior Communications Manager specializing in Content and Engagement for Verdani Partners, leading thought leadership articles and the Engagement Committee. She has a decade of experience in the sustainability field, working across diverse roles in environmental communication research, environmental planning, marketing, and wetland science. She holds a B.S. in Environmental Science, Policy, and Management from the University of Minnesota and a M.S. in Forest Ecosystems and Society from Oregon State University.
Vanessa Vlasak
ASSOCIATE ESG MANAGERVanessa is an Associate ESG Manager at Verdani Partners, supporting one of Verdani's largest clients in advancing their ESG program. She has over four years of experience in sustainable real estate and clean energy and is passionate about driving meaningful sustainability initiatives in the commercial real estate sector. Vanessa holds a B.S. in Environmental and Ocean Sciences from the University of San Diego.
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