The Growing Influence of ESG and Climate Risks on Commercial Real Estate Values

What determines the value of your property?

Ever wondered what determines the value of your property? Location, returns, area, building, users, and increasingly Environmental, Social, and Governance (ESG) factors.

How ESG and climate risks affect commercial real estate values

ESG and climate risks are now integral factors in determining the market value of commercial real estate. Recognizing this shift, banks, major appraisal firms, and industry associations have united to develop a new sustainability section for valuing commercial real estate. This section explicitly considers ESG and climate risks, such as floods, when assessing market value.

By completing this sustainability section, appraisers can better describe a property's sustainability performance and factor its impact into market value. For instance, they assess actual energy usage to estimate CO2 emissions and energy costs, and incorporate risks like environmental disasters into market value determination. Moreover, appraisers evaluate the market value of the appraised property post-sustainability upgrades, such as achieving an A-label, including associated measures and costs.

NIBC's ESG portal: supporting your sustainability journey

At NIBC, we've launched the ESG portal for our clients. This platform guides through the reporting process of essential sustainability information, fostering understanding of sustainability efforts and how NIBC can support in the next steps of the transition journey. Simultaneously, it aids NIBC in fulfilling mandatory disclosure obligations on ESG under the EU Corporate Sustainability Reporting Directive (CSRD) in alignment with the criteria of the EU taxonomy, which identifies sustainable activities through scientifically validated contributions to climate change mitigation or adaptation.

We appreciate the valuable insights our clients have shared through our portal, emphasizing that sustainability is a shared priority!

Do you have feedback or questions on this topic? Or would you like to discuss financing for your sustainable investment plans? Feel free to reach out.

Let's collaborate for a sustainable future.