Understanding your ESG risks: How to navigate the growing need for sustainable real estate and construction

With goals to achieve net zero carbon emissions pledged by nations across the globe, sustainability is becoming an increasingly important focus for the real estate and construction sectors. Our lawyers at Bird & Bird are seeing growing demand from businesses for assistance in guiding them to become more environmentally compliant, such as negotiating sustainability provisions in real estate contracts and leases.

As of now, the real estate and construction industries are undergoing major upheaval as environmental, social, and governance (ESG) factors become mandatory considerations for businesses. More recently, ESG reporting and action has shifted from voluntary to mandatory with new regulations such as the Corporate Sustainability Reporting Directive (CSRD) which came into force in 2023.

While the CSRD directly impacts large EU companies, its ripple effects will reach companies worldwide. All stakeholders will need to satisfy their own regulatory requirements, and this will inevitably require the production of comprehensive ESG data and analysis.

Real estate and construction companies must act now to understand their ESG risks and get ready before further enforcements are put into force. This preparation goes beyond checking boxes and requires integrating ESG into their core business strategy and operations. Sustainable construction practices and building design, green leases, and efficient methods of data capture are all mechanisms that businesses can implement to strengthen their ESG position.

How can we help?

Our real estate and construction lawyers have extensive experience helping businesses to include sustainability measures in areas such as environmental management plans, data sharing and metering, waste disposal plans, and formulating mutual sustainability goals between landlords and tenants. We also advise on inserting appropriate clauses in leases and other agreements to accommodate future changes in sustainability regulations. Our team is regularly:

  • Advising landlords on sustainability clauses for leases prohibiting tenants from alterations negatively impacting the building's energy efficiency.
  • Negotiating "green lease" provisions for tenants leasing, including meeting sustainability targets.
  • Assisting property owners in incorporating sustainability policies into leases and hotel management agreements across their real estate portfolio.
  • Advising hotel owners and operators on inserting mutual cooperation clauses into contracts to achieve environmental goals in building operations and maintenance.
  • Revising building contracts to include robust sustainability requirements for construction projects.
  • Working with the Energy & Environment Alliance to facilitate discussions between hotel stakeholders on ESG impacts for the hotel industry.

We also recently hosted a webinar alongside a panel of industry experts exploring the impact of the new ESG regulations on the hotel industry, which can be viewed here.

With growing demand for sustainable real estate and construction, Bird & Bird is poised to help you navigate this emerging area and ensure your assets remain attractive in an increasingly sustainability-focused market.

Find out more about our International Real Estate team

It was great to meet you at MIPIM! If you would like to find out more about our international team, take a look at our webpage here, or get in touch with one of our team-members listed below - we’d be delighted to speak with you.

Fernando Gutierrez

Antonella Ceschi

Conchita Sainz

Elie Kaufman

Jürgen Schlinkmann

Jonathan Baker

Peter Nicholson

James Salford

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