The ESG (Environmental, Social, and Governance) landscape in the property and construction sector is evolving rapidly, bringing both significant risks and compelling opportunities.
Regulatory change, investor scrutiny, and tenant expectations are converging to make sustainability and good governance central to long-term value creation. Certification standards, such as BREEAM, Passivhaus, and EPCs, are now the baseline, not a differentiator, with compliance being critical for competitiveness, access to capital, and reputation. Emerging standards like the Future Homes and Buildings Standard, mandatory biodiversity net gain, and increasing climate resilience requirements are raising the stakes further.
For developers, owners, and contractors, having a defined approach to managing ESG issues in your business is no longer optional. It is essential to protect assets, attract investment, meet compliance obligations, and maintain a licence to operate.
The issues shaping the next decade
While carbon has rightly dominated ESG priorities, the landscape is broadening. The following four themes are now driving the sector’s risk profile and growth potential:
Net Zero & Embodied Carbon
The industry is moving beyond operational efficiency alone. Delivering net zero carbon buildings means tackling not just energy performance in use — supported by measures like EPCs (Energy Performance Certificates) and MEES (Minimum Energy Efficiency Standards) — but also addressing the significant embodied carbon in materials and construction processes. Stakeholders are increasingly expecting full lifecycle carbon assessments and low-carbon design to be aligned with pathways such as the Science-Based Targets Initiative (SBTi) and the UK’s legally binding climate targets. Meeting the EPC Grade C minimum for rented properties by 2030, and moving towards net zero, will require strategic investment and clear roadmaps.
Nature-Positive & Climate Resilience
As climate risks intensify, buildings must be designed for resilience to flooding, overheating, and water scarcity. At the same time, biodiversity is no longer a peripheral concern. Regulatory mandates for biodiversity net gain and growing investor expectations for nature-positive development mean projects must protect and enhance natural habitats, integrate green infrastructure, and demonstrate adaptability to extreme weather.
Circularity & Energy Transformation
Circular economy principles — reducing waste, designing for disassembly, and using recycled or low-impact materials — are becoming expected practice. Meanwhile, the energy systems that power buildings are undergoing fundamental change. The shift to electrification, on-site renewables, battery storage, and smart grid integration is critical to reducing operational costs, cutting emissions, and aligning with evolving building standards.
Community Impact & Skills
Social impact is increasingly under scrutiny. Affordable housing, placemaking, and meaningful engagement with local communities are vital for planning approvals, winning public contracts, and maintaining trust. Alongside this, the sector faces a significant skills gap. Building a diverse, fairly treated, and well-trained workforce — across both direct employees and supply chains — will be essential to delivering at scale.
Stakeholders and Investors: Rising Expectations
Investors, lenders, and tenants alike are factoring ESG credentials into decisions. A clear, credible ESG strategy reduces risk and cost of capital, while poor performance can lead to stranded assets, higher borrowing costs, or reduced liquidity. Green loans, sustainability-linked finance, and higher rental yields are already rewarding ESG leaders.
For example, a recent hospitality sector report by the Energy and Environment Alliance highlighted how investors and operators are now prioritising ESG performance. The study warned of significant refinancing challenges — and the risk of “stranded” assets — if sustainability improvements are not delivered. These pressures are spreading across all property classes, making proactive ESG action a strategic imperative.
Turning risk into opportunity
Addressing ESG issues proactively is about much more than managing compliance risk. Forward-thinking businesses are already:
- Attracting ESG-aligned capital on better terms.
- Building trusted, resilient brands.
- Creating differentiation in an increasingly competitive market.
- Unlocking value for owners, occupiers, and investors alike.
Building resilience for the future
The next decade will separate businesses that thrive from those that fall behind. Those that embrace ESG now will not only protect themselves from emerging risks but also unlock competitive and financial advantages.
We work with property and construction businesses to help them navigate this complex ESG landscape, turning challenges into opportunities. Whether it’s defining a clear net zero pathway, embedding biodiversity and climate resilience, enhancing governance, or strengthening social value and skills, BHP’s associates can guide you through the transition.
Book a call today to discuss your ESG strategy.
Read more in our dedicated brochure.
