The conversation around ESG criteria in real estate has undergone a marked shift in recent years. What was once considered a value-add has become a central component of investment strategies. A growing awareness of climate risks, increasing regulatory pressure, and the demand for reliable data, are fundamentally transforming the market.

Reliable ESG assessments depend on robust data – but that remains a sticking point. „Our biggest challenge wasn’t verification – it was the total lack of comparable ESG data“, says Volker Stix, Managing Director at Catella Investment Management.

But using the French ESG proptech company Deepki platform, Catella was able to build a structured and reliable data foundation. Deepki CEO Vincent Bryant explains that his firm analyses ESG data for real estate assets worth over 4 trillion euros: „Manual data entry leads to an error rate of up to 10% – and we want to avoid that," he says. Automated data collection, AI-powered quality assurance, and ISAE 3000 Type II certification, aim to bring ESG metrics up to par with financial reporting standards.

Despite growing ESG demands, the EU still lacks unified regulatory standards. „A standardised European energy certificate would be ideal – but we’re currently investing in 15 countries with different requirements“, explains Stix. While this diversity doesn’t bring the process to a halt, it demands adaptability: „It’s not so much a conflict between regulation and practice as it is a set of contradictions we have to manage.“

According to Bryant from Deepki, ESG platform solutions help bridge these gaps by standardising and centralising data from various sources. The information is visually prepared for both asset and portfolio levels, creating a consistent decision-making basis for investors.

The debate around so-called stranded assets illustrates how ESG criteria are no longer just about ethics – they also represent financial risks. Properties that fail to meet energy-efficiency or emissions standards could face severe devaluation. „The race towards decarbonisation has begun – some are already sprinting, others are still at the starting line“, notes Bryant.

„Stranded assets represent not only a climate risk, but also a social one. High energy consumption leads to higher utility costs – and that threatens affordability“, adds Stix. A Deepki survey found that 94% of market participants see financial risks in underperforming properties, and over half expect that at least 30% of their portfolios may be affected.

Catella has already incorporated this insight into its investment process. The firm uses the „Climate Value at Risk“ metric – calculated with Deepki and MSCI data – as a key steering tool. ESG criteria are now directly integrated into risk assessments and performance analyses.

Another sign of the shift is the growing integration of ESG into finance departments at major companies. „ESG will merge with finance – carbon management will become a core part of financial strategy“, Bryant predicts. ESG teams in many firms already report directly to CFOs – a trend he expects to continue.

Catella is responding as well. The „KCD-Catella Nachhaltigkeit Immobilien Deutschland“ fund combines environmental and social criteria with traditional investment indicators. Tools like the CRREM indicator (Carbon Risk Real Estate Monitor) help identify and manage emissions-related risks.

Overall, the real estate sector is seeing a steady professionalisation of ESG management. Regulatory demands, investor expectations, and technological tools are fundamentally reshaping how investment decisions are made – and ESG data is becoming an indispensable part of portfolio strategy.