Measuring What Matters: Climate Metrics in Real Estate Investment Decision-Making

Measuring What Matters: Climate Metrics in Real Estate Investment Decision-Making

Buildings are responsible for a significant share of global energy use and greenhouse gas emissions. As the real estate market moves towards net zero, institutional investors are increasingly exposed to both physical climate risks and transition risks.

Physical risks include the impact of floods, storms, wildfires and extreme heat on real estate assets. Transition risks relate to stricter regulation, rising energy costs and changing market expectations as the economy decarbonizes. Both can affect asset values, income streams and the capital required to keep buildings competitive.

To manage these risks, investors need reliable and comparable climate data. In practice, however, climate data in real estate is often incomplete, inconsistent and defined differently across the market.

What investors consider most relevant

To better understand how institutional investors approach these challenges, GREEN surveyed and interviewed 30 of the largest real estate asset owners and managers globally. Together, they represent approximately EUR 1.1 trillion in real estate assets under management.

The research shows strong consensus on the climate metrics investors consider most relevant for investment decision-making. These include:

• Energy consumption and intensity: how much energy a building uses, in total and per square meter or square foot.
• GHG emissions and intensity: the greenhouse gas emissions caused by operating a building, mostly driven by its energy use, fuel use and the carbon intensity of the local electricity grid.
• Pathway alignment: a measure that compares a building’s performance with a science-based decarbonization pathway which translates global carbon budgets into property-level emissions and energy intensity targets.
• Sustainability CAPEX: the (estimated) capital needed to improve a building’s sustainability, for example through insulation, heat pumps, or solar panels.
• Physical risk assessment: an analysis of how exposed a building is to climate hazards such as flooding, storms, wildfires, and extreme heat, and what the potential financial impact of that exposure is.

From data to decision-making

The research also reveals that investors are broadly aligned on how energy and emissions data should be measured. The clear preference is for actual measured data, at individual building level, covering the whole building rather than only the areas controlled by the landlord.

This creates a clear opportunity for the industry. Since investors already broadly agree on how energy and emissions should be defined, harmonizing these definitions is a practical and actionable next step.

Pathway alignment helps translate energy and emissions data into a forward-looking view of transition risk. The CRREM framework is broadly recognized as the dominant framework, particularly among European investors.

The preferred indicator is the CRREM Misalignment Year. This shows the projected year in which a building’s carbon emissions or energy use intensity will exceed its decarbonization pathway. It provides an early warning signal and helps investors connect climate performance to investment horizons, net zero commitments and renovation budgets.

Why consistency matters

The research also shows where more work is needed. Sustainability CAPEX and physical risk assessments still show considerable variation in definitions and methodologies. Approaches to sustainability CAPEX differ, while physical risk assessments often depend on models and assumptions that are not always transparent.

Many investors would like to reflect climate factors more quantitatively in pricing, for example through exit values or risk premiums. Today, climate considerations are often included qualitatively, but the lack of consistent and reliable data prevents more systematic pricing adjustments.

The way forward

The findings show that the main barrier is not investor appetite, but data availability and comparability. Investors already recognize which climate metrics matter most. The next step is to make these metrics a common part of reporting, further harmonize definitions and improve data exchange between managers and investors.

GREEN will use this research as a foundation to support further market harmonization. The goal is not to create new standards, but to share the investor voice, highlight best practices and collaborate with standard setters, industry associations and other stakeholders.

More consistent and accessible climate data can help investors make better-informed decisions and support capital allocation in the transition to a low carbon real estate market.

Industry endorsements

Constantin Sorlescu, Director of Professional Standards and Sustainability at INREV:

“Based on the latest GREEN survey results, we are pleased to see that the climate metrics most relevant for investment decision making are recognised as the key environmental factors for investment underwriting, in line with INREV’s industry initiative. Greater collaboration across the industry remains essential to align definitions of these metrics globally, and INREV believes the ESG SDDS can provide a strong platform for this work.”

Andrea Palmer, CEO at CRREM:

“The conversation is no longer about whether climate and energy metrics belong in investment decisions. It’s now about making the data consistent and comparable enough to act on with conviction. Pathway alignment is emerging as a material part of how investors are approaching that. Where a building sits relative to its pathway today matters, but so does the trajectory. That forward looking dimension is what turns a data point into a strategic decision.”

Hugh Garnett, Senior Specialist Real Assets, IIGCC:

“Consistent and comparable climate risk data is vital for investors to make informed investment decisions, drive efficient capital allocation and ultimately de risk their portfolios and build resilience. This research provides an important foundation for the industry to work together to develop consistent definitions and methodologies, and drive uptake across the real estate sector.”

Gina Ding, Head of Public Affairs, RICS:

“We believe that trusted standards and high-quality data are fundamental to informed decision-making. As climate risks increasingly influence asset performance and investment outcomes, improving the clarity, consistency, and comparability of climate metrics is critical. This collaboration reflects our collective ambition to provide investors with the tools and information they need to assess risk more effectively and build confidence in the transition to a low-carbon and climate-resilient future.”

Rutger van der Lubbe, Managing Director Global Real Estate, APG Asset Management:

“As a long term investor, we can only price climate risks properly if the underlying data is reliable and comparable. This research shows the industry already substantially agrees on which metrics matter. The next step is to harmonize definitions and improve access to data, enabling investors to systematically incorporate these metrics in their investment decisions. GREEN plays an important role in this work, by uniting investors and working with standard setters to drive this harmonization forward.”

Mikkel Bülow Lehnsby, Co founder and Executive Chairman, Urban Partners:

“Our conviction was always clear: a low carbon real estate market will only emerge if investors can actually measure and compare the climate performance of buildings. This report shows how far that thinking has come: the world’s largest real estate investors now agree on which metrics to measure. What remains is to unlock the data, and that is where GREEN’s work continues, because once the market can price the transition, capital will flow to the buildings and cities of the future.”