I
n the face of mounting pressures from regulators, investors, and tenants, the commercial real estate sector can no longer afford to sideline sustainability. The industry demands strategic leadership that prioritizes Environmental, Social, and Governance (ESG) initiatives. Heather Hall, a fractional CFO and founder of Sapphire CFO Solutions, believes the next generation of financial leaders in real estate must be deeply fluent in ESG.

    Hall argues that understanding ESG is no longer optional; it's essential for driving enterprise value in real estate. From cost savings and higher rents to lower financing costs and better brand positioning, sustainable real estate is high-value real estate. Historically, ESG initiatives were voluntary or market-driven, but major cities like New York and Los Angeles are now implementing energy benchmarking and emission caps.

    Institutional investors are demanding ESG disclosures at a much higher rate, with a 40% increase in ESG reporting among the top 100 public REITs in North America over the past few years. Hall cites examples of successful retrofitting projects, such as the Empire State Building, which led to a 40% reduction in energy usage and over $4 million in annual savings.

    The value shift requires a new kind of financial leader who understands ESG metrics, frameworks, and platforms. Hall emphasizes that modern CFOs must go beyond spreadsheets and leverage tools like GRESB, green building certifications, and sustainability-linked loans to drive ESG performance.

    Hall's work with Third Economy and VIAlab has also highlighted the risks of greenwashing and the necessity of measurable, verifiable ESG performance. She advocates for embedding ESG in performance forecasting, strategic modeling, and value creation, rather than treating it as an afterthought.

    As investor scrutiny rises, shifting regulations take hold, and financial upside becomes clear, ESG fluency is becoming a competitive edge in real estate. Green-certified assets carry up to 21% higher market value, occupancy rates are higher, tenant turnover is lower, and access to capital is easier and cheaper. Hall predicts increased competition in the ESG tech space, with smaller startups offering tailored platforms for real estate that will raise the bar for everyone.

    The benefits of ESG are undeniable: reduced borrowing costs, improved margins, and better valuations. As Hall sees it, ESG has become inseparable from enterprise value, and real estate firms that fail to adapt will lose out to more forward-thinking competitors.