Key points
- The financing landscape has shifted. Institutions must now disclose the emissions inside their portfolios. Buildings without a robust sustainability data trail are becoming harder to hold and harder to exit.
- Insurability is already repricing risk in parts of the market. Carbon alone is not a sufficient measure, and the UK’s VAT structure actively subsidises the higher-carbon option.
- The projects being designed and financed right now will either be ahead of this — or catching up to it.
The buildings being financed today will either prove their value in 2040, or they won’t
The question that matters most about any building is not whether it performs well today. It is whether it will still be performing, financeable, and insurable in fifteen years.
That is a harder question than it sounds and the construction and real assets sectors are not yet answering it with sufficient urgency.
The financing landscape has already shifted. Under the UK’s new Sustainability Reporting Standards, financial institutions are now required to disclose financed emissions, that is the carbon attributable to the loans and investments they hold. The final UK standards clarify that institutions must measure and disclose emissions attributed to their loans and investments in investee companies and counterparties.
For institutional investors, that creates a direct line between the sustainability credentials of the assets they finance and their own reporting obligations. Buildings that cannot provide robust, auditable sustainability data are becoming harder to hold, harder to report on, and harder to exit.
This is not a future risk. It is a present one, and it is arriving faster than most project teams have adapted to.
Insurability is the most honest signal we have
There is a metric that cuts through much of the complexity in this conversation: can the building still be insured in 2040, and if so, at what cost.
Insurers do not engage in aspiration. They price risk, and when risk becomes unquantifiable or too great, they withdraw. The dynamic is structural, not cyclical.
For the UK, ff the government fails to meet its climate adaptation targets, as many as 3 million homes could become effectively worthless within 30 years – uninsurable, unmortgageable, and falling in value. The Bank of England has warned that the 1% of properties most likely to flood could lose 20% of their value in the most pessimistic climate scenarios, and research from Bayes Business School suggests that homes at flood risk are already sold at 8% lower prices, with the highest-risk properties facing discounts of up to 32%.
When insurance becomes unavailable or unaffordable, finance follows. When finance follows, value collapses. That is the chain of consequence that should be front of mind for every developer, lender, and institutional investor working in real assets right now.
Carbon is the metric the world agreed on. It is also the one most easily gamed.
Carbon has become the dominant measure of building sustainability because finance understands it – it’s one number, one direction, tradeable. That legibility made it useful. It also made it a target, and when a measure becomes a target, it stops being a reliable indicator.
The more fundamental problem is boundary decisions. A building’s operational carbon, that is, energy used in use, is only part of the picture. The carbon embedded in the materials used to construct it, and the emissions associated with demolition and end of life, can dwarf the operational figure.
And there are effectively financial incentives in place in the UK promoting new build projects over retrofit and refurbishment. New builds are zero-rated for VAT, while most refurbishments and retrofits are still subject to the standard rate of 20%. At a policy level, this is a direct subsidy for a higher-carbon outcome, dressed up as fiscal neutrality.
What else should be counted?
- Water – how much a building uses, and whether it gives any back – is increasingly material as river basin stress intensifies across the UK and Europe.
- Biodiversity net gain is now a legal requirement in England, though the quality of measurement varies considerably in practice.
- Indoor air quality and thermal comfort connect directly to health outcomes, productivity, and legal exposure.
- And critically: what did the building produce in carbon when it was completed, not what was modelled at planning stage.
On the social side:
- Living wages paid through the supply chain
- Local employment ratios, and skills transfer are increasingly demanded by public funders and impact investors. They are also significantly harder to offset or manipulate than a carbon figure.
The honest position is that no single framework yet pulls carbon, nature, water, and social value together in a way that the whole of the finance market can act on consistently. That framework is being built, by bodies including the Green Finance Institute, the British Standards Institution, and through international disclosure standards. The window to influence what gets measured, and how, remains open. It will not remain open indefinitely.
The data gap is becoming a liability
For institutional investors with twenty to thirty year time horizons, the absence of robust sustainability data across a portfolio is no longer a reporting inconvenience.
UK regulators are advancing the rollout of robust disclosure standards to improve the quality, consistency, and usefulness of corporate information. In this way, climate and industrial policy is becoming more closely integrated to enable a more strategic approach to real economy decarbonisation. Investors who cannot demonstrate the sustainability credentials of their assets will face increasing pressure from their own regulators, their own counterparties, and an insurance market that is already repricing exposure.
The practical implication for anyone developing, designing, or financing buildings right now: if a clear sustainability data trail is not being built from project inception through to completion, the problem is not deferred, it is stored, and it belongs to whoever holds the asset when the reckoning arrives.
The shift from sustainable to regenerative is partly a design question. It is mostly a finance question. Buildings that leave their sites better than they found them are not just more sustainable. They are better positioned to remain insurable, financeable, and attractive to long-term capital in a world that will look quite different to today.
That is the investment case for regeneration. And it is where the most important work in real asset finance is happening right now.
This piece draws on thinking I developed for a panel discussion at UK Construction Week on 14 May 2025, where I joined Dee Korab and Matt Bullivant for a session on impact measurement, investor-aligned data, and the evidence base for regenerative construction, expertly moderated by Sam Turner.
Keyah advises commercial real estate and residential-at-scale leadership teams on climate risk, insurability, and portfolio financial exposure. If this research reflects conversations you are having internally, or ones you know your board should be having, book a call.