2025 was a confusing year for ESG: the global green economy is the second fastest growing economic sector; renewable power sources overtook coal as the world’s leading source of electricity. But alongside this, questions arose:
- Is ESG still a corporate priority?
- Should we even use the term “ESG”?
- Will it be full steam ahead for 2026?
In the face of political headwinds, the “’do-say’ gap” has opened up. Coined by Bain & Company, it refers to the trend of corporations speaking less about sustainability, but doing more. ESG considerations remain of key importance but are being reframed to demonstrate value and improved investment performance. For real estate assets, this means ensuring resilience and cost efficiency, while mitigating risk. How will this be reflected in the market in 2026?
Climate resilience and risk
2025 was the UK’s warmest and sunniest year on record and the past four years make up four of the top five. H1 2025 was the most costly for natural disasters (global losses of over US$140bn). An Allianz board member warned that warming global temperatures were creating “a systemic risk that threatens the very foundation of the financial sector”. Property owners, investors and funders now have to factor in the double whammy of costs from physical risks of extreme weather events and transition risks of adapting their assets to be more resilient. Insurers and banks are giving this a lot of attention – well-advised property owners should too.
Smart buildings – analyse smarter, act smarter
For property owners, the ability to collect and analyse data is essential, providing the insights needed to make informed decisions, optimise performance and ultimately protect and grow the value of their assets. 2025 saw increased proptech adoption, landlord and tenant engagement, and incorporation of green lease provisions to support this collection and analysis with more expected, more quickly in 2026.
The plethora of ESG ratings and certifications remains confusing, but expect clarity in the coming years with the Financial Conduct Authority stepping in to regulate ESG ratings providers. While unsatisfactory in many ways, EPCs persist as the market-driving metric. Alongside the Warm Homes Plan, the government published a long-awaited but unfortunately partial response to the Reforms to the Energy Performance of Buildings consultation. While domestic EPCs will have four new metrics: fabric performance, heating system, smart readiness and energy cost, the sole carbon metric for non-domestic EPCs will remain unchanged. Private rented sector properties must achieve EPC C by 1 October 2030, achieving a fabric performance standard and then either (at landlord’s choice) a heating system or smart readiness standard. Hope remains that the government will soon provide similar clarity on minimum energy efficiency standards and EPC requirements for non-domestic property. In the meantime, the recognition that actual performance data is more useful means Energy Use Intensity is becoming the more relevant metric to assess a building’s performance. Better, more consistent data sharing and verification is required not only to be able to accurately price sustainability into asset value but also to accurately inform the best steps to take to optimise energy efficiency.
It’s electrifying!
Electrification is rapidly reshaping ESG priorities across the sector, but its impacts are more complex than they first appear. While switching from gas to electric systems is essential for long‑term decarbonisation, operational costs can rise in the short term because electricity remains significantly more expensive than gas. At the same time, many organisations are counting on the continued decarbonisation of the national grid to deliver their own emissions‑reduction targets, meaning their ESG strategies are increasingly tied to factors outside their direct control.
Adding further pressure, electricity demand is increasing rapidly (particularly with soaring AI demand and growing numbers of data centres) and grid capacity constraints are becoming a critical barrier. In many regions, new developments seeking substantial electrical loads are being delayed or shelved altogether due to limited connection availability.
As a result, electrification is not just a technical upgrade – it’s now a strategic ESG challenge that requires careful planning, early engagement with network operators and a realistic view of future energy costs. This also brings considerable opportunities for property owners, using their asset for energy generation/storage, with solar, wind and battery energy storage solutions projects all expected to increase in 2026.
ESG in 2026: From rhetoric to real value
Against a backdrop of economic and geopolitical uncertainty, ESG isn’t fading – it’s evolving. The focus is firmly on demonstrable value: stronger investment performance, smarter risk management and seizing growth opportunities. ESG is no longer a standalone initiative but a practical, integrated lever for operational and financial resilience. Property owners that embed ESG into corporate strategy, and invest in robust data systems, will be best placed to respond. Clearer expectations, from the UK Sustainability Reporting Standards to broader policy reforms, should help steer the way.
The message for 2026? ESG isn’t a tick box exercise. It’s a competitive advantage and staying agile will be essential as the landscape continues to shift.
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