ESG for CRE? The impact of ESG on commercially leased real estate and considerations for landlords and tenants

Environmental, social and corporate governance (ESG), although not universally defined, continues to drive commercial, political and investment decisions in nearly all areas of commerce. This includes leased commercial real estate (CRE), in which property owners and occupiers may have differing ESG considerations for the same property. In the US, commercial lessors and lessees find themselves navigating domestic and international pressure with respect to ESG in a context of increasing political polarisation around ESG in business decision making. In an effort to offer a practical and politically neutral approach to ESG in CRE, this paper describes the meaning and history of ESG, explores ESG trends in CRE, and focuses on tools and concepts to help navigate materiality concerns with respect to leased CRE, whether site-specific or portfolio-wide, to support CRE professionals in allocating property owner and occupier obligations, reducing risk and maximising long-term sustainable operations at commercial properties.