Today’s commercial landscape is witnessing an essential evolution. Business decisions, once solely based on profitability and growth, are now also measured by their environmental, social, and governance (ESG) impact. Real estate, being a significant contributor to global carbon emissions, finds itself at the heart of this ESG evolution.

It’s impossible to ignore the environmental implications of real estate. Buildings and the building construction sector combined account for over 36% of global energy consumption and nearly 40% of total direct and indirect CO2 emissions, according to the International Energy Agency.. The call for sustainable practices in the real estate sector, therefore, is not just about corporate social responsibility or a ticking box for regulatory compliance. It’s a fundamental necessity, a prerequisite for the future health of our planet.

With this urgent need comes a tremendous opportunity. As businesses and homeowners increasingly recognize the benefits of green buildings, real estate developers find themselves operating in a market where sustainability can drive profitability. A study from the University of Cambridge supports this, revealing that green certified buildings deliver an increase in value of around 7%.

The significance of this shift has not been lost on the investment community. Investors now see ESG compliance as a parameter of a business’s long-term viability and profitability. In 2019, the United Nations reported that real estate is the sector with the highest level of ESG integration by investors, at 60%. This clear interest from investors in ESG-compliant real estate is reflective of a broader shift in the financial sector, a trend that will shape the future of the industry.

But what does this journey towards sustainability look like for real estate? One of the primary aspects is the industry’s move towards energy-efficient and net-zero carbon buildings. The World Green Building Council’s Advancing Net Zero project aims to ensure that every building produces net zero carbon emissions by 2050, with all new buildings adhering to this standard by 2030. Achieving these goals will require a significant overhaul of current building practices, the adoption of advanced technologies, and stricter adherence to green building codes.

There is more to ESG in real estate than just reducing carbon emissions. Real estate projects invariably have significant social implications. They can reshape local communities, influence urban development patterns, and have substantial effects on local economies. As such, the governance aspect of ESG—where ethical business practices, transparency, and stakeholder engagement come into play—is also of paramount importance.

The impact of climate change has also emerged as a crucial factor in real estate. With rising sea levels and increasing frequency of extreme weather events, climate resilience is now a key consideration in real estate development and investment. The Urban Land Institute indicates that real estate investors are increasingly incorporating climate risk into their investment decisions.

The momentum for sustainable real estate is not only driven by investors and regulators. There is growing demand from tenants and end users for greener buildings. CBRE’s 2020 Occupier Survey found that 82% of the tenants and end users they surveyed preferred sustainable real estate assets. These preferences are not without financial implications, either. Green-certified buildings command a rental premium of up to 20% compared to non-green buildings.

ESG in real estate is an intricate, multi-faceted challenge. It requires us to rethink how we design, construct, and operate buildings. It’s about striking a balance between the relentless march of urban development and the finite resources of our planet. It involves reshaping the real estate sector to be more inclusive, more accountable, and more sustainable.

As daunting as this challenge may seem, it represents a landmark opportunity. The ESG revolution in real estate is not just about reducing the sector’s environmental footprint. It’s about creating healthier, more inclusive, and more sustainable communities. It’s about building a future where profitability coexists with environmental stewardship, where real estate development contributes positively to social equity and sustainable living. We find ourselves at the dawn of a new era in real estate. An era in which every brick laid, every building erected, and every community built is a testament to our commitment to a sustainable future. This is the future of real estate. And as we navigate through the challenges, learn from our experiences, and continue to innovate, we take one step closer to this future, one building at a time.