Mounting investor pressure No longer a ‘tick box exercise’ for marketing, ESG is now a critical factor for global investors, placing vital focus on an asset’s impact and sustainability. Investors and credit committees expect more, putting pressure on institutions, funds and property companies, and driving an increase in market competition. Net zero The UK Government’s plans to achieve net zero emissions by 2050 herald a major change to business as usual for the real estate sector. They’re expected to be delivered through the planning system and via significant changes to the legal and regulatory landscape. Businesses will need to consider how to address new requirements and embrace new technologies in a manner that drives genuine change and meaningful value. Building obsolescence As ESG shapes and influences real estate valuation, there’ll be increasing awareness of ‘transition risk’ as it falls on non-compliant buildings that fail to meet investor and occupier demands and expectations. These may well deplete in value, reflecting the CapEx required to increase their sustainability or energy performance rating. Minimum energy efficiency standards (MEES) for rented property One meaningful regulatory impact already in place is MEES. The ratings provided by Energy Performance Certificates have been vital for new lets for a number of years now, but by 1 April 2023, commercial properties with substandard ratings (currently an E rating) cannot continue to be let. The Energy White Paper published in December 2020 confirmed the government’s intention to raise this minimum energy efficiency bar toan EPC rating of ‘B’ by 2030. Challenges in the sector 36 Real Estate Investment 2022