Decarbonisation is Becoming a Pricing Divide

When it comes to decarbonisation, the real estate industry can be compared to a group of swimmers standing at the edge of a pool, but… the race has already begun. We (our industry) have bought the expensive kit (ESG data platforms), we have announced our participation to the press (SFDR disclosures), but many participants have not even jumped in yet.

While almost every major institutional investor now has a decarbonisation target on paper, the market is splitting in two. On one side are those still planning their dive, on the other, there are a small group who are already swimming and measuring their pace. We are past the point where more pledges help. The market wants delivery, not another promise. As new valuation standards kick in, “waiting and seeing” is no longer a neutral move, it is a strategy that may actively devalue your buildings.

Data from GRESB’s 2025 Real Estate Assessment highlights the gap between stated ambition and delivered performance. Although 81.5% of entities report having ESG policies in place, global like-for-like GHG reduction in 2025 was just -0.23%.

The sector is decarbonising at approximately one-twelfth of the required speed. This is not a disclosure issue. It is a delivery issue.

The Decarbonisation team at EVORA has also reviewed our own data. EVORA manages data across more than 13,000 assets totalling 1.6 billion sq. ft of real estate. Our analysis of 2024/25 versus 2023/24 performance shows an 8% year-on-year reduction in carbon intensity across the portfolio.

While the direction of travel is positive, a headline average obscures what matters: across EVORA’s data set, there is no consistency of reduction across individual assets. That is the real measure of progress – and it is where the delivery gap becomes visible.

As the Network for Greening the Financial System (NGFS) has warned, delayed transition increases both economic disruption and asset repricing risk. The Bank of England’s Climate Biennial Exploratory Scenario similarly concluded that late action leads to materially higher credit and market losses. Capital markets are now absorbing this message.

The implications for real estate are material:

• Regulatory thresholds are hardening (MEES, EPBD Recast).
• Brown discounts are appearing in live transactions.
• Climate Value-at-Risk remains materially underpriced.
• Grid decarbonisation commitments versus delivery lags.

We are entering a bifurcated market where assets with credible decarbonisation pathways will retain liquidity and pricing power, while assets relying on “paper alignment” may face yield expansion, NOI erosion, or regulatory lockout.

However, this same delivery gap creates opportunity.

Owners and operators who integrate energy intensity reduction into underwriting, asset management, and strategy can generate Resilient Yield – structurally lower operating volatility, regulatory insulation, and preserved exit liquidity.

In addition, fund and asset managers who progress decarbonisation and are able to demonstrate results will benefit from access to more capital. In the fund management world access to capital is a proxy for value. EVORA asserts that demonstrable decarbonisation progress will therefore increase the value of fund and asset management businesses who take the lead.

In our latest whitepaper “The Delivery Gap” we uncover:

• Why decarbonisation progress is stalling despite widespread targets.
• How the gap is translating into valuation risk.
• The capital upside of execution.
• What the industry must now do to move from disclosure to delivery.

The race is no longer about announcing ambition. It is about defending asset value.

Download your copy of “The Delivery Gap” to learn more.