Rethinking risk: Why sustainability remains a business imperative

Sustainability is now a core business imperative in commercial real estate, driven by evolving regulations, disclosure requirements, rising operating expenses and market demand. With 30 jurisdictions representing 57 per cent of global gross domestic product (GDP) implementing International Sustainability Standards Board (ISSB)-aligned climate disclosure rules, transparency is becoming the norm.1 Green building standards and energy regulations are accelerating the shift to low-carbon, high-performance assets, with 96 per cent of real estate investment trusts (REITs) now disclosing sustainability data, up from 75 per cent in 2020. Investors and tenants favour sustainable, efficient and healthy properties, leading to higher rental premiums, lower vacancy rates and stronger asset values, while rising insurance costs and weather-related events highlight the need for resilience-focused retrofits. Regardless of political shifts, sustainability remains a financial and strategic necessity, ensuring cost savings, regulatory compliance and long-term value preservation and creation for proactive real estate leaders. There is an urgency to act now to understand commercial real estate firms’ sustainability performance and to embed sustainability-related risk management into core decision-making practices. Failing to do so means firms could fall behind, further exposing them to financial, regulatory and market threats, which could include owning assets that face obsolescence. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.