Sustainability, social responsibility, and good corporate governance—collectively referred to as ESG (environmental, social, governance)—are increasingly shaping the real estate industry. These criteria will soon play an even more significant role for many companies. This is creating new challenges, but also new opportunities in the real estate market.
Why is ESG certified?
The European Union has set ambitious climate targets, and the real estate industry has a crucial role to play in achieving them. Buildings are responsible for high CO₂ emissions in Europe. ESG criteria are therefore intended to ensure that the industry operates more sustainably.
This is precisely what the new CSRD directive is for. The Corporate Sustainability Reporting Directive (CSRD) requires companies to comprehensively document and publish their sustainability measures. The CSRD directive will be expanded in 2025. In the future, companies will have to document their ESG data in their financial statements. In the past, only capital market-oriented companies with more than 500 employees were required to do so. In the future, numerous medium-sized companies will also have to deal with the new requirements of the CSRD directive.
Overview of CSRD implementation:
From January 1, 2024, companies that are already subject to the Non-Financial Reporting Directive will be affected first. These are public-interest companies with more than 500 employees. They must therefore prepare their first report in 2025 in accordance with CRDS requirements for the 2024 financial year.
From January 1, 2025 (first report in 2026), large companies that meet two of the following three criteria will be affected:
- more than 250 employees
- more than €40 million in sales revenue
- more than €20 million in total assets.
From January 1, 2026 (first report in 2027), listed SMEs (with the exception of micro-enterprises), small and non-complex credit institutions, and group-owned insurance companies will be affected.
From January 1, 2028 (first report in 2029), non-European companies with at least €150 million in net sales in the EU and a subsidiary or branch in the EU will be affected.
What does this mean for the real estate industry?
ESG has become an essential basis for real estate valuation and will become increasingly important in the future. Companies that consistently implement ESG criteria will become more attractive to investors, tenants, and buyers. In turn, real estate that does not meet these requirements will lose value and demand. Sustainable, energy-efficient, and responsibly managed real estate is coming into focus.
Commercial real estate agents must adapt their consulting expertise to these changes. Customers expect sound advice on topics such as sustainability certificates, energy-efficient renovation, ESG-compliant investments, and sustainable leases (green leases).
Conclusion
ESG requirements have been marking a turning point in the real estate industry for years. With the introduction of the Corporate Sustainability Reporting Directive (CSRD), a preparatory measure is becoming an obligation. Commercial real estate brokers and real estate companies must adapt to these new requirements and adjust their strategies. At the same time, the consistent implementation of ESG criteria offers the opportunity to act as a pioneer in the market and remain successful in the long term.
