Sustainability in Construction (ESG)

Sustainability in construction refers to the comprehensive consideration of environmental, social, and economic factors in the planning, construction, operation, and demolition of buildings-collectively known as ESG (Environmental, Social, Governance). ESG is rapidly gaining importance in the real estate sector: Institutional investors are required by the EU Taxonomy and Disclosure Regulation to document the sustainability performance of their properties. Private individuals are increasingly feeling the impact through stricter energy standards, higher requirements for access to financing, and growing buyer preferences for energy-efficient properties.

The Three ESG Dimensions in Real Estate

Environmental: Energy efficiency, CO₂ emissions, resource consumption (water, building materials), avoidance of pollutants, biodiversity on the property. Specifically: What is the building’s energy performance certificate? What type of heating system does it have? Are there solar panels, rainwater harvesting, or green spaces?

Social: Accessibility (barrier-free design), health and comfort of occupants, protection against noise and pollutants, affordable housing, tenant mix, and neighborhood development. This dimension is becoming increasingly important in the valuation of residential real estate, as social cohesion and tenant satisfaction are recognized as value drivers.

Governance: Transparency of the owner or manager, compliance with regulatory requirements, anti-corruption standards, fair tenant relations. Less relevant for private owners, but a key reporting criterion for institutional real estate investors.

ESG Certifications and Standards

In the German market, DGNB (German Sustainable Building Council), LEED, and BREEAM are the most widely used certification systems. A DGNB certification evaluates over 40 criteria across the categories of ecology, economy, social impact, technology, processes, and location, and awards ratings ranging from bronze to platinum. Certified buildings command a premium in the market compared to non-certified properties; institutional buyers increasingly require sustainability certifications as a minimum standard.

For private real estate, certification is still rare but is gaining relevance. Anyone wishing to certify a property must expect costs ranging from 20,000 to over 100,000 euros, depending on the building’s size and the certification system. For smaller properties, it is instead worthwhile to make targeted investments in measurable energy efficiency improvements that are documented in the energy performance certificate.

Stranded Assets: The Sustainability Risk for Owners

A central concept in the ESG discussion is “stranded assets”-properties that lose value or become unsaleable due to a lack of sustainability. Buildings with poor energy performance (classes E, F, G) are particularly at risk in this context: Stricter EU regulations (the EPBD Directive on building energy efficiency) could introduce rental bans or renovation requirements for energy-inefficient buildings in the future.

Anyone buying a property today should factor this risk into their calculations: A house with oil heating and energy class F may require significant investments in ten years or cause rental problems. The costs of energy retrofitting should be factored into the purchase price offer as a deduction.

Energy Retrofit as an ESG Measure

For existing property owners, energy retrofitting is the most direct way to improve the ESG quality of their property. Insulation measures for the roof, facade, and basement, the replacement of outdated heating systems, and the installation of solar panels or heat pumps noticeably improve the energy efficiency rating and thus reduce ongoing operating costs. Government funding through the Federal Funding for Efficient Buildings (BEG) makes many measures economically attractive: Grants of up to 20 percent of eligible costs, as well as additional bonuses for particularly efficient individual measures, are available.

Important for landlords: After announcing the modernization, renovation costs can be partially passed on to the rent (Section 559 of the German Civil Code [BGB], up to a maximum of 8 percent of the costs incurred per year). However, a cap applies: The rent may not increase by more than 3 euros per square meter per month over a six-year period due to the modernization surcharge. This rule protects tenants from disproportionate rent increases-but at the same time limits the landlord’s economic benefit from the renovation investment.

Practical Tip for Property Owners in Nuremberg and Franconia

In Nuremberg and the metropolitan region, we are seeing that commercial properties lacking sustainability features are becoming increasingly difficult to rent and sell-large corporate tenants demand ESG-compliant office space for their own corporate ESG reporting. In the residential sector, a building’s energy efficiency rating is already a key selling point today: buildings with energy efficiency class A or B command significantly higher prices compared to class E or lower.

We advise owners on how energy retrofits and sensible modernization can improve the market value of their property. In doing so, we focus not only on the current market but also on foreseeable regulatory developments over the next five to ten years-because those who invest in sustainability today will be better positioned tomorrow.

Frequently Asked Questions

What does ESG specifically mean for private property owners?

For private individuals, ESG is primarily felt in terms of energy efficiency: the building energy performance certificate is becoming more important, renovation requirements under EU directives (EPBD) are being tightened, and banks are offering more favorable terms for sustainable properties (green mortgages). Those who invest in renovation now secure the long-term value of their property.

Does my house need to be certified to market it as “sustainable”?

No, certification is not mandatory. Meaningful energy performance certificates (A or A+), documentation of building materials used, and installed building services can convey a strong marketing message even without formal certification. For large commercial properties, however, certification is increasingly becoming a market requirement.

Which EU regulations affect property owners in terms of ESG?

The EU Energy Performance of Buildings Directive (EPBD), the EU Taxonomy Regulation for sustainable investments, the Sustainable Finance Disclosure Regulation (SFDR) for financial products, and national implementing laws (GEG in Germany) create a comprehensive regulatory framework that increasingly affects owners through rising energy standards and renovation obligations.

How much does DGNB certification cost, and is it worth it for private properties?

Depending on the building’s size and complexity, DGNB certification costs between 20,000 and over 100,000 euros. For single-family homes and small multi-family buildings, the expense is usually not economically justified. It makes more sense here to invest in a good energy performance certificate (energy demand certificate) and documented renovation measures, which offer concrete advantages when selling or renting.

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