Bridging the Green Premium Gap: Policy Incentives to Mainstream Climate-Resilient Retrofitting in Institutional Real Estate Portfolios

Institutional real estate portfolios face mounting pressure to decarbonize and enhance climate resilience, yet the "green premium" – the financial value premium associated with sustainable and resilient building attributes – remains insufficiently quantified and inconsistently applied across markets. This valuation gap creates a fundamental barrier to scaling climate-resilient retrofitting, as institutional investors require robust financial justification for capital expenditure decisions. This conceptual paper addresses this challenge by developing a comprehensive framework for understanding how policy incentives can bridge the green premium gap and accelerate climate-resilient retrofitting in institutional real estate portfolios. The study employs a conceptual research methodology based on systematic literature review and theoretical synthesis across real estate economics, climate finance, and public policy domains. The analysis reveals that climate-resilient retrofitting generates value through multiple channels, including enhanced asset values, reduced risk exposure, insurance cost savings, and tenant retention premiums. However, these benefits remain incompletely capitalized due to valuation methodology gaps, information asymmetries, and fragmented policy frameworks. The conceptual framework identifies five policy instruments capable of bridging the green premium gap: regulatory standards, financial incentives, risk transfer mechanisms, information disclosure requirements, and capacity-building programs. The study concludes that effective policy design must address both supply-side barriers and demand-side drivers, with coordinated action across multiple governance levels essential for mainstreaming climate-resilient retrofitting in institutional real estate. This paper contributes to emerging scholarship on climate finance and sustainable real estate by providing theoretical foundations for policy development and practical guidance for institutional investors navigating the climate transition. Keywords: Green premium; Climate resilience; Institutional real estate; Retrofitting; Policy incentives; Property valuation; Climate risk; Sustainable finance; Decarbonization