Environmental factors are becoming an increasingly important consideration in real estate underwriting, influencing pricing, investment decisions, and business plans. At the end of last year, INREV published the Phase 2 paper, ‘Integrating environmental considerations in real estate underwriting: Assessing impacts on value and returns’. This new infographic highlights key insights, summarising how environmental factors were tested for a limited number of assets using a standard Discounted Cash Flow (DCF) methodology and the broader implications for investment decisions:
- Energy efficiency showed the clearest effects on payback from the tested environmental factors.
- Changes in asset value reflected a mix of environmental assumptions and wider market dynamics, making it difficult to isolate the impact of environmental interventions.
- Gaps in ESG data and limitations in assumptions around yield movements and Opex savings were key constraints, while separating environmental Capex proved challenging.
- Five principles emerged for practical underwriting: engaging valuers on environmental factors, estimating sustainability-linked Capex and payback, defining scenarios, prioritising ESG interventions, and increasing transparency of assumptions.
- Strengthening collaboration between investors, managers and valuers can support consistent definitions, better data collection, and improved transparency.
The infographic provides a clear, visual summary of how environmental considerations can be structured into underwriting, helping the industry move toward more transparent and evidence-based investment decisions.
View the infographic below or on our dedicated page to this topic.
Environmental considerations in underwriting
Published on 16 Dec 2025