Sustainability and ESG in Commercial Real Estate: What It Means for Owners

ESG stands for environmental, social and governance. For a building owner, the environmental part is the one that shows up in the numbers: how much energy the building uses, what that energy emits, and what it will cost to bring the building up to the standard that tenants, lenders and governments increasingly expect. The social and governance parts cover things like accessibility, health and safety, and how the owner reports and manages all of this.

This article is for owners and investors in office, retail, hotel and apartment buildings who want a practical view of sustainability: what drives it, which certifications and tools exist, what the rules require in Canada and the U.S., and what the evidence says about value. It explains how things work; it is not legal, tax or investment advice.

Why buildings are in the spotlight

Buildings are one of the largest sources of greenhouse gas emissions in Canada. Natural Resources Canada puts the sector at around 13% of the country’s direct emissions in 2022, rising to 18% once the emissions from generating the electricity buildings use are counted. More than 96% of buildings’ operating emissions come from space and water heating.[1]

Governments have set targets that reach into the building stock. Canada’s legislated goal is a 40–45% cut below 2005 levels by 2030 and net zero by 2050.[1] Nova Scotia’s Environmental Goals and Climate Change Reduction Act, introduced in October 2021, set a provincial target of at least 53% below 2005 levels by 2030 and net zero by 2050.[2] Targets like these do not directly bind a private building owner, but they shape building codes, utility programs and the incentives available for upgrades.

The scale of building emissions and targets

Share of Canada’s emissions from buildings, including electricity[1]13% of direct emissions

18%

Of buildings’ operating emissions from space and water heating[1]

>96%

Nova Scotia’s 2030 reduction target below 2005 levels[2]

53%

Disclosure rules: where things stand

Most of the pressure on private owners comes through capital rather than direct regulation. The rules for public companies and lenders have moved in different directions over the past two years.

• Canada, voluntary standards. The Canadian Sustainability Standards Board published its first two standards, CSDS 1 (general sustainability disclosures) and CSDS 2 (climate), in December 2024. They apply on a voluntary basis to reporting periods beginning on or after January 1, 2025; provincial regulators decide whether to make them mandatory.[3]
• Canada, securities regulators. In April 2025 the Canadian Securities Administrators paused work on a mandatory climate disclosure rule for listed companies, citing developments in the U.S. and globally.[4]
• U.S. SEC. On March 27, 2025 the SEC voted to end its defense in court of the climate disclosure rules it had adopted in 2024.[5]
• Canadian banks and insurers. OSFI Guideline B-15 expects federally regulated financial institutions to build climate-related risks into their risk management and to make climate disclosures, phased in for fiscal periods ending on or after October 1, 2024, 2025 and 2026.[6]

The last point matters most to private owners. A bank that must measure the climate risk in its loan book will ask more questions about a building’s energy use, fuel type and exposure to flooding or storms, even where no rule applies to the borrower directly.

What the evidence says about value

Claims that green buildings are worth a fixed percentage more are common and rarely sourced. The most widely cited peer-reviewed evidence is older and more modest. Eichholtz, Kok and Quigley matched about 10,000 U.S. office buildings, comparing ENERGY STAR- and LEED-rated buildings with nearby unrated ones. They found rents roughly 3% higher per square foot for rated buildings, effective rents (allowing for occupancy) more than 6% higher, and sale prices about 16% higher. The premium was larger for buildings that actually used less energy: in their estimates, each dollar of annual energy savings from better thermal efficiency added roughly 18 dollars to the value of an ENERGY STAR-certified building. The authors also found some value in the label itself, beyond the energy savings.[7]

Two cautions. The study covers U.S. offices in the late 2000s, so it says little directly about a Halifax apartment building or hotel today. And a premium in a study is an average across many buildings; it is not a promise for any one property. The more reliable benefit is the simplest one: a building that uses less energy has lower operating costs, and the owner keeps the savings on any costs not passed through to tenants.

What upgrades cost varies too much by building to quote a useful average. Because almost all operating emissions come from heating,[1] the largest decisions for an older building are usually the heating system and the envelope (windows, insulation and air sealing), often timed to coincide with equipment that is due for replacement anyway. Doing the work when a boiler or roof reaches the end of its life means paying only the extra cost of the efficient option, not the full cost.

Measuring and certifying a building

Owners usually start by measuring, then decide whether a certification is worth the cost.

Common tools and certifications for commercial buildings in Canada

Tool	What it does	Typical use
ENERGY STAR Portfolio Manager	Free online benchmarking; 1–100 score for eligible building types. A score of 75 or more can qualify for ENERGY STAR certification.	Any owner tracking energy and water use; run in Canada by NRCan
LEED	Points-based rating: Certified (40–49 points), Silver (50–59), Gold (60–79), Platinum (80+)	New construction, major renovations, and operations of existing buildings
BOMA BEST	Certification and management tools for the operation of existing buildings	Existing office, retail and multi-unit buildings
Zero Carbon Building (CAGBC)	Design standard for new buildings or retrofits; performance standard verified annually	Owners targeting zero-carbon operations

ENERGY STAR Portfolio Manager is the cheapest first step: it is free, and it lets an owner set a baseline, compare a building with others of its type and track the effect of upgrades.[8] LEED is run by the U.S. Green Building Council and awards levels by points.[9] The Canada Green Building Council’s Zero Carbon Building standards cover both design and verified performance,[10] and BOMA BEST focuses on existing buildings.[11]

Green leases

A green lease is a commercial lease with clauses that align the landlord’s and tenant’s interests on energy and environmental performance. Quebec’s real estate brokerage regulator notes that these leases are gradually gaining popularity in Canada. Typical clauses cover maintaining a certification such as LEED or BOMA BEST, operating systems to agreed standards, sharing energy data and on-site renewable energy.[12]

Data sharing is the clause owners most often need. In a net lease the tenant often pays the utilities directly, so the owner cannot benchmark the building or report on it without the tenant’s consumption data. A clause that specifies which utilities, what data and how often avoids that problem.[12] Cost recovery is the other point to settle: if the owner pays for an upgrade that lowers the tenant’s bills, the lease should say whether and how part of that cost can be recovered.

Where an owner can start

A practical sequence for an existing building

1. Benchmark

   Enter the building’s utility data into ENERGY STAR Portfolio Manager to get a baseline and, for eligible types, a score.

2. Commission an energy audit

   An engineer identifies which measures pay back and in what order: controls and lighting first, then heating, ventilation and the envelope.

3. Check incentives before buying

   In Nova Scotia, Efficiency Nova Scotia’s Business Energy Rebates cover up to 50% of product costs, or offer interest-free financing for up to 24 months; pre-approval is needed for larger rebates.

4. Line up the lease

   Add data-sharing and cost-recovery clauses at renewal or when signing new tenants.

5. Talk to the lender early

   Some energy improvements can improve loan terms. See our guide to green financing for hotel and apartment projects.

6. Decide on certification

   Certify when tenants, buyers or lenders in your market will pay for it. Measured performance matters more than the plaque.

The Efficiency Nova Scotia figures above are from the program’s own page; it also notes that new-construction lighting projects stopped being accepted from June 15, 2025.[13] For financing options, including CMHC MLI Select energy points and property-assessed clean energy (PACE) programs, see our article on green financing.

Sources

1. The Canada Green Buildings Strategy: Transforming Canada’s buildings sector for a net-zero and resilient future — Natural Resources Canada, Modified January 21, 2026. Checked 2026-10-12.
2. Legislation to Address Climate Crisis, Guide Province to Cleaner, Sustainable Future — Government of Nova Scotia, October 27, 2021. Checked 2026-10-12.
3. CSSB sustainability reporting (summary of CSDS 1 and CSDS 2) — KPMG Canada. Checked 2026-10-12.
4. Disclosure Interrupted: CSA Pauses Climate and Diversity Disclosure Rules (law-firm summary of the CSA announcement) — Davies Ward Phillips & Vineberg, April 28, 2025. Checked 2026-10-12.
5. SEC Votes to End Defense of Climate Disclosure Rules (Press Release 2025-58) — U.S. Securities and Exchange Commission, March 27, 2025. Checked 2026-10-12.
6. Climate Risk Management (Guideline B-15) — Office of the Superintendent of Financial Institutions, March 7, 2025. Checked 2026-10-12.
7. Doing Well by Doing Good? Green Office Buildings (CSEM Working Paper 192, forthcoming in the American Economic Review) — Eichholtz, Kok and Quigley, University of California Energy Institute, August 2009. Checked 2026-10-12.
8. Energy benchmarking with ENERGY STAR Portfolio Manager — Natural Resources Canada. Checked 2026-10-12.
9. LEED rating system — U.S. Green Building Council. Checked 2026-10-12.
10. Zero Carbon Building Standard Certification — Canada Green Building Council. Checked 2026-10-12.
11. BOMA BEST Building Certification: Sustainable & Smart — BOMA Canada. Checked 2026-10-12.
12. Green leases: principles and applications — OACIQ (Organisme d’autoréglementation du courtage immobilier du Québec). Checked 2026-10-12.
13. Business Energy Rebates Program — Efficiency Nova Scotia. Checked 2026-10-12.