The real ROI of ESG: What industry leaders are actually seeing

If you've been in the sustainable real estate space for more than a minute, you've probably felt the whiplash. One day, ESG is the future of commercial real estate. The next, it's being written out of legislation in certain states. So what's actually going on?

At IMN's recent ESG and Decarbonizing Real Estate Forum, we gathered some of the sharpest minds in the industry to cut through the noise. What emerged wasn't just another conversation about net-zero pledges or LEED certifications, it was an honest reckoning with where we are, where we're going, and why getting there is taking longer than anyone expected.

The vocabulary problem we're not talking about enough

Here's something that might surprise you: one of the biggest barriers to progress in sustainable real estate isn't technology or capital—it's language.

Kelly Worden from the International WELL Building Institute made a point that resonated throughout the room: we've overcomplicated everything. "I have tried to move on from the term 'health' for literally as soon as the rest of the industry was starting to use it," she admitted. Why? Because when we talk about "health" or get bogged down in ESG terminology, we lose sight of what we're actually discussing: people and performance.

Think about it. What makes a location valuable? It's the things that benefit the people using that space. When we strip away the jargon and focus on traditional real estate value drivers—tenant attraction, NOI, asset preservation—suddenly sustainability isn't a separate conversation. It's just good business.

As Rhiannon Jacobsen from USGBC put it, "High performance is super hip again." And she's right. We're cycling back to fundamentals: operating assets well, reducing costs, and competing effectively for tenants and capital.

Value creation: It's not just about the "E" anymore

The conversation around value creation has matured significantly. At Harrison Street Asset Management, they're not just looking at environmental performance—they're quantifying social value and researching how specific ESG projects combine to drive NOI.

"We've really started with what kind of good data do we have and how can that drive how we're thinking about value creation," explained Ellie Bidwell from Harrison Street. But here's what's interesting: they're also pushing back on the double standard. Why do sustainability projects need to prove exact ROI down to the cent when other capital improvements—like lobby renovations or ice cream carts—get approved without the same scrutiny?

Devin Saylor from IDS Real Estate Group added another critical dimension: value preservation. "In some cases, value preservation is almost more important than value creation," he noted. With rising energy costs, tightening regulations, and increasing physical climate risk, the question isn't just "How do we add value?" but "How do we protect the value we have?"

The four forces actually driving change

Edward Allen from Measurabl spent the first quarter of this year doing something smart: asking the market what actually matters. Across 90 meetings in 23 cities and 9 countries, four fundamental drivers emerged:

• Cost of capital – Up nearly 200 basis points for commercial real estate maturing this year
• Energy prices – Representing 20% of operating expenses and climbing with global instability
• Climate risk – Showing up in insurance premiums, which have increased almost 90% in the last 5-6 years
• Regulation – Despite federal uncertainty, 75 of the largest global cities have building performance standards

Notice what's not on that list? Virtue signaling. These are hard financial realities that affect exit values, valuations, and returns. As Devin put it, "Republicans are all about economics. No one wants to pay more for insurance or energy costs."

The healthy buildings paradox

Perhaps nowhere is the gap between opportunity and adoption more puzzling than in healthy buildings. Ryan Schwabenbauer from St. John Properties framed it perfectly: "I've become convinced these strategies could have a financial impact that's 10 to 100 times greater than the resource efficiencies I'm going after now... I'm estimating a multi-trillion dollar opportunity."

So why hasn't the market responded faster?

Alexandra Militana from JLL pointed to a timing issue: "Wellness rarely is getting funded without being attached to something else. We're seeing energy efficiency measures become more funded than wellness because energy costs are so significant and rising."

But there's also a split incentive problem. The benefits of healthy buildings accrue primarily to occupiers—improved productivity, reduced absenteeism, better cognitive performance. Yet owners are the ones making the capital investments. The good news? This is changing. Post-pandemic, with flight-to-quality trends and vacancy risks, investors increasingly understand they need to focus on tenant experience.

Mike Goetz from HOK made a compelling case for neurodiversity in design: "We have been designing for the average person doing the average thing in the average space, but how do we expect individuals to perform better than average when we're not building spaces that help for that?" When you design for the extreme, you benefit the mean—just like ADA compliance helps everyone, not just wheelchair users.

The surprises (and not-so-surprises)

When we asked panelists what surprised them most about the current state of the industry, the answers were revealing:

Rhiannon Jacobsen was shocked by anti-net zero legislation: "I understand there's pushback, there are questions... but the idea that you can be unilaterally anti-net zero is wild to me." One state is actively pursuing this, with 4-5 more on deck.

Edward Allen noted the pullback isn't just American: "Even in Europe, we're starting to see a lot of pullback from decarbonization pledges, from net zero commitments."

Devin Saylor was surprised by how long everything is taking: "We've been talking about it for a really, really long time." Though he sees positive trends—insurance companies looking at asset-level performance rather than categorical exclusions, which could eventually influence appraisals.

Ellie Bidwell pointed to the natural growing pains of a young industry but questioned the double standard: "Should we be so held accountable towards proving out the value creation when that's not always true when other projects are pursued?"

What's actually working

Despite the challenges, there are bright spots:

Data and technology are finally catching up. AI is helping break down the silos that have plagued real estate for decades, allowing sustainability, asset management, and leasing teams to work from the same information.

Investor pressure is becoming more sophisticated. Rather than simple checklists (Do you have SBTI? Check. Net zero goal? Check.), investors are engaging in bilateral diligence, co-defining ESG priorities with fund managers based on what's actually material to specific portfolios.

Business case focus is depoliticizing the conversation. When you frame sustainability around insurance costs, energy expenses, regulatory compliance, and tenant competition, it becomes harder to dismiss as ideology.

Pilot programs are validating approaches before broad deployment. Smart operators are testing solutions on specific asset classes, measuring results honestly (even when they don't work), and then scaling what proves effective.

The path forward: Pragmatic, not perfect

So where does this leave us? The panelists offered a surprisingly unified perspective: focus on what's tactical and pragmatic now, rather than distant goals that feel abstract.

As Ellie noted about net zero targets: "It's so far in the future that it's not tactical and pragmatic towards the now. I think it's a warranted pushback towards resetting how we're defining what we're doing now."

This doesn't mean abandoning long-term goals. It means building credible pathways with measurable milestones. It means speaking the language of traditional real estate value. It means acknowledging that "this too shall pass"—the political headwinds, the terminology debates, the market volatility—while continuing to do the work.

Because here's the thing: the fundamentals haven't changed. Buildings that cost less to operate, attract better tenants, command higher rents, face lower regulatory risk, and maintain their value in changing climate conditions will outperform. That's not ESG ideology. That's real estate.

Continue the conversation

The discussions in Dana Point made one thing clear: the most valuable insights come from practitioners honestly sharing what's working, what's not, and what they're still figuring out.

The future of real estate isn't just green—it's smart, strategic, and increasingly sophisticated. Join us to be part of the conversations shaping what comes next.

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