Why ESG still matters in UK real estate today

July 18, 2025

‍ESG (Environmental, Social, and Governance) considerations have matured across the UK property industry. Once treated as a checkbox, ESG is now a defining marker of resilience, value, and long-term performance.

In recent years, the ESG conversation has shifted dramatically. It’s no longer about simply meeting baseline requirements or publishing sustainability reports. Instead, ESG has become central to how real estate assets are valued, financed, and managed. Amidst political noise and economic headwinds, ESG isn’t going away, it’s becoming more embedded and more strategic.

ESG becomes a business imperative in property

The real estate sector is increasingly viewing ESG as a commercial necessity. A 2024 pan-European survey by PwC and ULI found that 90% of property professionals believe ESG issues will have the biggest impact on real estate by 2050 (PwC).

As one CEO noted in the report:

“ESG compliance is not a ‘nice-to-have’. It’s a licence to play. If investors, regulators, banks, and everyone else think it’s important, then it is.”

That sentiment is echoed across the UK market. Knight Frank’s 2025 ESG Outlook reported that companies failing to act on ESG face growing regulatory pressure, reputational risk, and declining asset value (Knight Frank).

There’s a marked shift from treating ESG as a reporting obligation to using it as a strategic business tool. In retail, for example, companies like Sainsbury’s and IKEA are turning sustainability into competitive advantage, investing in EV charging infrastructure, renewables, and circular design (Knight Frank).

This mindset is spreading across commercial property. “Green leases” and "sustainability-linked loans" that embed shared ESG targets are becoming mainstream, while real-time building performance data is helping landlords proactively manage emissions, energy, and tenant wellbeing. These initiatives don’t just reduce risk, they improve asset performance and help win tenants.

The impact on asset values

Perhaps the clearest sign of ESG’s importance is its direct influence on real estate value. According to PBC Today, some older office buildings without ESG credentials sold for less than 25% of their previous value in 2024. In contrast, “green premium” assets, those that meet high sustainability standards, have seen rents increase and demand soar.

Savills notes that only 20–23% of London office stock meets modern ESG standards, but this slice of the market is seeing the highest occupancy and pricing. Rents for top-tier sustainable offices rose 2.4% in 2024, while dated buildings saw declines (Reuters).

Mark Ridley, CEO of Savills, noted that:

“environmentally sustainable spaces have become the ‘real definer’ of demand”

in the office segment (Reuters). In other words, tenants are actively seeking out green buildings for their quality and future-proofing, and shunning those that lag on ESG.

Regulatory pressure is intensifying

New policy developments are accelerating ESG adoption across UK property. One of the most significant is the UK’s adoption of sustainability reporting aligned to the EU’s Corporate Sustainability Reporting Directive (CSRD) and the IFRS/ISSB standards.

Companies will need to publish extensive disclosures on ESG risks, emissions, and governance structures starting in 2025. The government is also mandating minimum EPC (Energy Performance Certificate) standards: all commercial leases will require an EPC of C by 2027 and B by 2030 (Market Financial Solutions). As of mid-2025, only 28% of commercial buildings meet this threshold, raising concerns about stranded assets.

The cost of retrofitting to meet these requirements is estimated at £30 billion, but the alternative may be fines, vacancies, and asset write-downs.

The wider ESG picture

The scope of ESG is also expanding. From February 2024, developers in England must meet a mandatory 10% biodiversity net gain requirement for most major projects. And public procurement rules now assign up to 20% weighting to social value, pushing real estate service providers to demonstrate tangible community and workforce benefits.

Companies are responding with more robust “S” and “G” strategies. For example, Lambert Smith Hampton reported generating £45.6 million in social value in a single year through community engagement, employment programs and local sourcing.

Meanwhile, strong governance, at both board and operational levels, is now expected. ESG committees, transparent reporting, and third-party verification are becoming the norm rather than the exception.

The ESG landscape in UK real estate has grown up. It has evolved from a branding exercise into a serious framework for risk mitigation, asset protection, and stakeholder trust. For property owners and consultants alike, the message is clear: ESG is here to stay, and those who lead, rather than follow, will be best positioned to navigate regulatory change, meet investor expectations, and unlock long-term value.