Most buildings outlive the people who finance them. That simple truth should shape how we think about commercial mortgages, not as short-term transactions, but as a long-term responsibility. This is why ESG is becoming more vital, not only to comply with growing government oversight but to ensure enduring sustainability across the board. It’s not just about ticking the boxes or branding. When it comes to ESG in the Property Industry, we’re not witnessing a passing trend; we’re seeing a real-time transition.
I see the market splitting into two, on the one side, neglected buildings, that are outdated, inefficient, and falling apart. These properties require more capital, attract the wrong tenants, and decline in value. On the other side are buildings being brought up to modern standards? Upgrades like smarter systems and long-lasting infrastructure. These are the properties that hold their value. As lenders, we have a choice, we can continue to finance the status quo or support improvement.
Offering sustainable finance for sustainable buildings is the way forward. And this means lending terms of up to five years, ESG-linked pricing at exit and real incentives based on what’s delivered, not labels or lip service. Tracking performance and measuring impact are equally as important, and the more you improve your building, the better your pricing can get.
Improving ESG standards shouldn’t be treated as a marketing play but as a structural shift. The real estate and finance sectors are under pressure from investors, regulators and tenants to deliver better performance environmentally. Transparency and real social impact are factors which are no longer negotiable, and that pressure isn’t going away. Those who don’t adapt will fall behind.
Within a deal, ESG needs to be integrated into the process. Properties with poor energy ratings or weak social infrastructure are becoming harder to finance, insure and sell. Short-term yields may look attractive, but the long-term risks are growing. Meanwhile, assets that meet or exceed ESG standards are proving more resilient and attractive to tenants, buyers, and capital markets.
Of course, there is a balance to strike. ESG isn’t about making the right noise, it’s about the results. That’s why supporting borrowers who commit to real change and prove it through action is essential. Integrating is also just good business. Energy-efficient buildings tend to attract higher rental value and smart systems reduce energy use and maintenance costs, improving profitability while supporting sustainability. Properties built for long-term resilience, with ‘futureproofing’ in mind, are easier to sell. Lending commercial mortgages with a sustainable mindset isn’t just ethical, it’s working smarter from an economic perspective.
As the industry evolves, lenders need to evolve with it, we can’t rely on outdated valuation models or ignore the risks tied to poor ESG performance. The buildings we finance today will shape the communities in the future. That’s why ESG is integral to how we lend at TAB. It’s not a side consideration, but central to the future.
The built environment is changing, and commercial mortgages need to change with it. ESG isn’t a barrier to financial performance, it can be used instead as a foundation. We’re not here to follow, we’re here to lead.
Duncan Kreeger, CEO of TAB