ESG in 2025: Going Back to Basics to Drive Consistent, Impactful Results
Jonathan Hale, Head of ESG Consulting at Knight Frank, argues that while new ESG frameworks and guidance for real estate keep emerging, returning to core principles will give the industry the consistency needed for real impact. He highlights five themes for 2025.
First, convergence of reporting metrics. ESG indicators are currently defined and measured inconsistently, which may be holding back billions of pounds of investment. The Institutional Investors Group on Climate Change is working with the EU and others to agree common KPIs and standards.
Second, accurate data across an asset's life. Investors increasingly want real, complete data. The UK Net Zero Carbon Buildings Standard, focused on individual assets, and the more flexible SBTi Buildings Criteria for portfolios, both launched in 2024, are seen as complementary. Metrics such as EPC ratings, energy use intensity, CRREM stranding dates and decarbonisation capex all depend on reliable data, and metering verification surveys help ensure it. Hale urged the industry to respond to the Government's Energy Performance of Buildings consultation before 26 February 2025 and hopes for a commercial building passport.
Third, embodied carbon reporting. Since July 2024, embodied carbon reporting for refurbishments has been mandatory under the RICS Whole Life Carbon Assessment standard. Firms will need to budget for it, but it enables lower-carbon material choices that can support marketing. Larger landlords are expected to lead, while smaller firms may struggle with costs.
Fourth, the just transition. ESG is broadening from net zero to include social value, impact investing and nature, addressing inequality and climate justice. GRESB, covering $7 trillion of assets, is raising awareness, but social value remains hard to measure and the private sector lags public initiatives such as Section 106 agreements.
Fifth, nature. Biodiversity and land quality increasingly influence asset value. Biodiversity Net Gain rules are shaping practice beyond the UK, and the Taskforce on Nature-related Financial Disclosures is gaining traction. With the UK among the bottom 10% of countries for nature depletion, fund managers are well placed to help restore it while protecting long-term value.
Hale concludes that focusing on consistent reporting, accurate data and embodied carbon, alongside nature and social equity, will build investor confidence and embed sustainability in real estate practice.
Source: Knight Frank Newcastle, original article (24 January 2025)
