We’ve all been distracted by labels. It’s now time to look beyond them. We must focus instead on what truly matters: building resilient portfolios that deliver long-term value for investors while benefiting communities and the planet.
This means looking for value, not values. Investors in real estate should return to the fundamentals, where ESG is a tool for identifying risk, driving performance, and unlocking opportunity.
Fund managers that embed ESG in their decisions, who have a clear thesis, who empower their teams, and who collaborate will achieve both competitive advantage and enduring impact.
Challenges in ESG
Labels are useful in life; a supermarket couldn’t survive without them. But the labels attached to real estate funds can cause confusion and fragmentation: ‘ESG’, ‘Sustainable Investing’, ‘Sustainability’, ‘Responsible Investing’, ‘Impact Investing’.
If you have words like these in your job title, you’ll know the technical definitions and differences. But, for the rest of the market, these concepts are mired in ambiguity and growing scepticism.
What’s on the label is starting to eclipse what’s inside. This is unsustainable. ESG isn’t a marketing tool, it’s a framework for managing risk, unlocking value, and stewarding capital responsibly.
This means credible net-zero pathways. It means ESG data informing decisions, not just reporting. It means frameworks and standards must support clarity, not confusion. Investors have a critical role to play in shaping the next phase of ESG – one defined not by hype, but by integrity, transparency, and strategic alignment.
This is why the market needs a reset. We must stop signalling intent – we must demonstrate impact.
After all, it’s not ESG performance alone that presents challenges in establishing a clear financial link, but also other real estate factors, such as proximity to public transport or crime rates. These factors are often considered in valuations, yet they are typically not assigned a specific monetary value.
We must think longer term. We must also devote more attention to resilience planning, especially in the face of a 3°C global temperature rise, for which the industry is woefully unprepared[1].
Positive investor sentiment
Investor sentiment in the UK and Europe remains resilient. Recent surveys indicate no decline in investor interest in ESG and plans for increased ESG-related spending, even in these uncertain times[2].
The 2023 Mansion House Accord, plus subsequent agreements to direct and encourage pension funds, shows how strong the UK’s commitment to sustainable finance is.
Investors, as long-term stewards, continue looking beyond short-term political cycles. They can see sustainable, resilient investments, particularly in regions where long-term value creation aligns with their investment philosophy.
From rhetoric to results
The industry needs a reset. We must stop debating terminology. We must re-establish clarity of purpose.
It doesn’t matter if we call it ESG, sustainable investing, responsible investment, or something else entirely. What matters are the outcomes: resilient assets, long-term value, and positive impacts on people and the planet.
The reset could have three objectives:
- Value creation: Use ESG insights to drive operational efficiencies, reduce costs, and make better investment decisions.
- Value protection: Ensure assets remain resilient to regulatory changes, climate risks, and evolving market demands.
- Stewardship: Recognise the privilege and responsibility that comes with capital: – to contribute positively to communities, ecosystems, and future generations.
ESG helps to identify externalities missed by traditional financial models and to drive outcomes such as revenue growth, client retention, and market differentiation.
Senior leadership can realise these benefits if they comprehend the qualitative and quantitative value ESG brings – from capital committed with sustainability ambitions to enhanced risk management.
Leaders must also embed ESG across all functions, from acquisitions and asset management to leasing and development. No more segregation of expertise. This cultural shift requires leadership, education, technology and (internal) collaboration to make ESG more than a reporting requirement, into a driver of long-term value.
Crucially, the industry must agree how to measure investment performance and ensure that reporting facilitates- not distracts from – the investment case for sustainability.
ESG is now embedded in boardrooms and investment committees, supported by regulation and client demand. These are meaningful steps forward.
Now we require collective effort, sharing lessons, and making data accessible, so that ESG can transcend labels and compliance to accomplish long-term success that benefits everyone.
[1] https://www.unepfi.org/wordpress/wp-content/uploads/2023/03/Real-Estate-Sector-Risks-Briefing.pdf
https://www.mckinsey.com/~/media/mckinsey/industries/real%20estate/our%20insights/climate%20risk%20and%20the%20opportunity%20for%20real%20estate/climate-risk-and-the-opportunity-for-real-estate-v3.pdf
[2] INREV-Investment-Intentions-Survey-2025 report.pdf (pp 24) and emerging-trends-in-real-estate-europe-2025.pdf (pp 6)
