Why ESG as a term may be out, but the action is not

Signals versus noise

The corporate environment has changed, with companies moving away from publicising ESG and sustainability pledges. A few high-profile companies have even left alliances. However, like much of the current situation, the reality is more nuanced. For many corporations, sustainability actions may even be accelerating. They’re just doing it quietly. This reflects a growing recognition of ESG’s origins, as well as the political backdrop; it isn’t about “doing good” or “being green”, but about sustaining long-term profitability, resilience, and business continuity.

A new report from Bain & Company underscores this and coins a new term: the do-say gap. The study, which analysed 35,000 statements made by 150 leading companies’ CEOs in 2018, 2022 and 2024, found that “CEOs might speak less about sustainability, but what they lack in words, they make up in action, a phenomenon we call the ‘do-say’ gap.” 

They are not the only ones drawing this conclusion. The most recent Capgemini research (including a survey of 2,146 senior executives across 13 countries) found that 82% plan to increase environmental sustainability investments over the next 12 to 18 months (up from 74% in 2024), with 92% not revising net zero timelines. The remaining 8% are shifting only by one to two years, citing Scope three challenges as reasons to delay.

The rationale is overwhelmingly commercial. Two-thirds cite business value, such as profitability, operational savings, and risk resilience as the primary motivation, and nearly half report a positive return on their sustainability spend to date. The value chain is a central pillar, with the Bain research (which also included a survey of more than 750 B2B companies) highlighting that half already buy more from their more sustainable suppliers with nearly 70% planning to accelerate this over the next three years. A quarter are already switching suppliers that fell short on sustainability and that is expected to grow.

Companies need resilience and adaptability. According to Capgemini’s survey, 86% of respondents have experienced climate-driven disruptions to their supply chains, 78% have faced production issues, and 73% have been affected by raw material shortages. On the real estate side, 29% experienced physical damage or loss to infrastructure, and 7% incurred insurance and liability costs. These are not negligible findings, and we have previously discussed insurance and potential systemic implications. Bain puts it nicely: “Accelerate what works. Anticipate what’s coming. Build strength and flexibility.” While the ESG acronym may fall out of fashion in corporate language, it will continue to play a pivotal role in business planning, strategy and operations to ensure resilient businesses. 

What does this mean for real estate?

As a result, occupiers and investors now view asset-level sustainability as a contributor to value, risk mitigation, and business continuity. Even if they don’t explicitly mention it, sustainability is embedded in real estate drivers, such as cost efficiency, as we discussed previously. This is unlikely to change, especially when linked to business metrics. 

Energy Use Intensity (EUI) exemplifies the shift towards measurable, operational outcomes with financial implications. In this new blog  , we explore EUI and explain why it is becoming the go-to metric for performance, as well as how to improve it and the potential benefits. One thing is clear: data availability and inconsistencies in measurement remain a barrier to accurate evaluation and pricing of ESG risks. Real estate sits within the broader context in this regard, with the Capgemini report noting that inadequate data and measurement systems (cited by 81%) and operational silos (79%) are among the largest barriers to sustainability efforts.

Addressing the issues. Industry leaders such as the Institutional Investors Group on Climate Change (IIGCC) are driving the development of new standards, including the Aligning Real Estate Sustainability Indicators (ARESI) White Paper to unify data approaches. However, tenant data coverage remains a consistent hurdle. Examining a sample of UK REITs’ reporting, the coverage of tenant energy data – required for Scope three reporting – ranges from approximately a quarter to 90%. Building trust, sharing data, and operationalising what is measured, not just for compliance but for management, are essential next steps.

Proactive asset and property management teams deliver efficiency gains and improved EPC ratings through incremental operational improvements as well as staged capital investment to support electrification (explored here). By way of example, for a 100,000 sq ft office, reducing energy intensity from the REEB average ‘typical practice’ (TP – 50th percentile) to ‘good practice’ (GP – 25th percentile) equates to about £61,000 savings per year for an all-electric building to around £95,000 for a mixed-fuel. If a building transitions from a TP mixed-fuel profile to a GP all-electric profile, the total annual saving could reach £114,000, using ONS prices for a medium business. While the greatest benefit comes from both efficiency gains and switching to an all-electric energy system, demonstrating the need for a holistic approach, there are still sizeable savings from optimisation alone, reaching a ‘good practice’ standard. 

Yes, there are nuances. Each asset must have a tailored approach to implementing measures, as highlighted by Knight Frank experts  . However, there is a clear imperative to integrating resilience and sustainability into real estate, not as an add-on, but as an active, value-driving or preserving strategy.

Stat of the month: $2.7 trillion

The CEO of property and casualty insurance at reinsurer Swiss Re stated: “We are starting to reach the limits of traditional insurance,” a stark warning as the estimated gap between the value of American homes and what insurance would pay to replace them could be as high as $2.7 trillion. This is just one slice of the market in one country, but it highlights the broader trend in the need for property assets to be resilient to physical climate changes. 

What else I am reading

The Lib Dems unveiled a new paper ‘For People, For Planet’ which highlights the need to maintain momentum and policies regarding the UK Modern Industrial Strategy and targets of 95% low-carbon grid electricity by 2030. They also note “address the cost-of-living crisis and accelerate decarbonisation of heating and transport by lowering electricity costs and offering support to all households through improved grants and stamp duty rebates. New water efficiency standards proposed, the EV affordability gap narrows, potential for 5% VAT to be removed on domestic energy bills in the budget, as Ofgem announces plans for suppliers to offer lower standing charges to enable household choice, EU adopts the Extender Producer Responsibility where producers who make textiles available in the EU will have to cover the costs of their collection, sorting and recycling, within 30 months of the directive’s entry into force (March 2028) which will implications for the retail and logistics sector (as discussed previously), and finally Claire Williams on fleet EV incentive extension and potential impacts from de minimus changes.