7 impactful trends to future-proof your ESG strategy

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In 2025, developers, investors, and organisations are narrowing their focus to ensure they meet key ESG milestones. As new regulatory requirements come into play and stricter greenwashing penalties are imposed, the real estate and construction industries need to rely on data-driven insights and tailored expertise to help them ensure compliance, make strategic decisions, and prioritise their investments.

As we move into Q2, here are seven trends that we see shaping the industry this year and beyond—and how you can incorporate them into your ESG strategy.

Executive summary

In an increasingly complex regulatory landscape, data transparency is more crucial than ever. Building solid data practices and centralising data in one platform will empower clients to take strategic action faster, ensure compliance, protect against greenwashing, and build investor confidence.
With various deadlines rapidly approaching, clients are simplifying their ESG strategies to focus on delivering measurable value. Prioritising goals to address short-term requirements while working towards long-term ESG objectives is key to maximising your resources and getting the best return on investment.
Recent climate events have highlighted the need to invest in physical resilience while optimising supply chains remains essential to both decarbonisation goals and maintaining business continuity.

1. Prioritising and simplifying ESG goals for maximum ROI

For many clients, ESG can feel overwhelming. Between the evolving regulatory landscape, inflation, reduced budgets, and investor requirements, it can be hard to know what to focus on to drive the greatest impact.

Clients are increasingly fatigued by ESG goals that are overly ambitious, misaligned with their current resources, or simply financially unfeasible. Instead, this year will bring a renewed focus on simplified, actionable strategies that deliver tangible, immediate results—while also setting you up for long-term success.

To do this, consultants and organisations need to work closely together to rationalise their ESG objectives through gap analysis, ensuring every goal adds measurable value. Prioritising the top material and achievable goals enables you to allocate your resources more effectively into coherent action plans. This includes preparing assets for near-term regulations while maintaining a pathway for long-term ESG compliance, ensuring you’re striking the right balance between short-term and long-term value.

As we approach key climate deadlines, this approach is crucial to ensure you meet investor (and regulatory) expectations without overextending resources, allowing you to get the greatest return on investment.

Learn how to create a focused, impactful ESG strategy→

2. Understanding and aligning with evolving regulations

In 2025, investors and developers need to navigate a complex framework of regulations, legislation, and directives that are having a marked impact on real estate. Understanding, aligning with, and reporting on these legislations and regulations is proving to be a major hurdle for many clients, highlighting an underlying need for greater data collection and transparency.

To ensure compliance, protect against risk, and protect their assets’ value, clients need to be aware of their responsibilities under a range of applicable legislation, including:

Corporate Sustainability Reporting Directive (CSRD)
Corporate Sustainability Due Diligence Directive (CSDDD)
Carbon Border Adjustment Mechanism (CBAM)
SFDR 2.0 2025/2026
Energy Performance of Buildings Directive (EPBD)

Sustainability Disclosure Requirements (SDR)
ISSB IFRS 2 in 2025 in the UK, ASSB
UK Green Taxonomy
Minimum Energy Efficiency Standards (MEES)
FCA ESG Naming & Marketing Rules

Internationally

International Carbon Reduction and Offset Alliance (ICROA), VCM – SRCF

However, without the right guidance and robust, centralised data, many of these clients are wasting time and resources on diagnosing problems instead of taking strategic action. In fact, a 2024 study from IBM revealed that spending on sustainability reporting exceeds spending on sustainability innovation by 43%, representing a huge improvement opportunity.

There are two major takeaways from this. Firstly, data transparency has never been more important. Data reporting challenges are still a major issue, and as IBM’s research shows, they come at a cost. If you’re not already using a built-for-purpose platform, like Obi, to centralise, manage, and control your ESG data, now is the time to start. Using the right tool doesn’t just help you to simplify reporting and ensure compliance; it also lets you slice your data to surface the right information, to the right people, at the right time, for better decision-making.

Secondly, working with experts is a powerful way to bridge the knowledge gap and overcome common adoption hurdles as you adapt to these new regulations. Engaging a consultancy helps you to clearly understand reporting requirements, technical screening criteria, and the regulatory landscape across different EU member states, providing you with tailored strategies to ensure compliance.

3. Investing in physical resilience

In the wake of recent global climate catastrophes, including widespread flooding, wildfires, and extreme heatwaves, as well as broader geopolitical and economic events, investors and developers are prioritising resilience as part of their ESG strategies. This includes both physical resilience (that is, the asset’s resilience against physical climate risks) as well as business resilience in the face of supply chain disruptions.

Climate Vulnerability Risk Assessments (CVRAs), which are now crucial for compliance with EU Taxonomy, are being utilised to assess exposure to hazards like flooding, heat stress, and drought. These assessments help investors align with regulatory requirements while identifying opportunities to enhance asset resilience.

Simultaneously, Value at Risk (VaR) models are being deployed to estimate the financial implications of these risks under various climate scenarios, aligning with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). Investments in resilience—such as flood defences, heat-tolerant materials, and adaptive landscaping—are essential not just for mitigating immediate risks but also for maintaining asset value long-term.

As these disasters highlight the tangible costs of inaction, insurers and investors are increasingly favouring assets with robust climate adaptation strategies, further embedding resilience into ESG frameworks and financial decision-making.

4. Optimising supply chains

Value chains are under increasing scrutiny—and there’s a significant opportunity for clients to optimise their procurement strategies for business resilience while also tackling Scope 3 emissions.

For many clients, Scope 3 emissions represent the largest decarbonisation challenge, accounting for up to 90% of corporate carbon footprints. One way to address this is by designing ‘power to influence’ strategies that integrate sustainability into procurement frameworks and supplier engagement.

Another approach is ‘insetting’. In contrast to offsetting, which compensates for emissions elsewhere, insetting involves reducing emissions within the value chain. By focusing on abatement projects, such as sourcing better materials for construction partners or implementing efficiency measures for owner-lessors of buildings, you can directly decarbonise your value chain. This approach is in line with the new SBTi guidance on offsetting, which emphasises that direct decarbonisation is the main priority and using carbon credits should be a last resort.

By making sustainable supplier choices, embedding emissions reduction targets into value chains, and using ‘insetting’, you can proactively address risk while simultaneously reducing your indirect environmental impacts.

5. Fighting greenwashing with data

The crackdown on greenwashing is accelerating. In 2024, Invesco advisors were fined $17.5 million for misleading ESG claims, and while the overall number of greenwashing cases is falling, the number of high-severity cases rose by 30%.

Regulatory scrutiny under SFDR Articles 8 and 9 has led to the reclassification of numerous funds, with clients urgently reviewing ESG disclosures to ensure defensibility. Misaligned or overstated sustainability claims pose significant reputational and financial risks, once again prompting a shift toward more transparent reporting.

In addition to potential fines, recent EY research found that greenwashing continues to be an issue for investors, with 85% saying that greenwashing is a greater problem now compared with five years ago.

Supporting your ESG claims with clear data is key to protecting against these risks—and gaining investor confidence.

6. Using carbon pricing to enact good behaviours

Internal carbon pricing (ICP) is an approach that assigns a monetary value to carbon emissions, which businesses can use to drive decision-making, promote climate-aligned investment, and anticipate regulatory risks. By imposing a price on carbon, organisations are financially incentivised to transform their operations and become more sustainable—or pay the price.

There are three main approaches to internal carbon pricing:

Shadow pricing – This method applies a hypothetical carbon cost to investment and development decisions, helping to identify stranded asset risks and assess future carbon liabilities. It ensures that carbon-intensive assets are correctly priced in financial models but does not create a direct financial impact on operations.
Carbon fees – A direct fee is imposed on emissions, with funds reinvested into decarbonisation initiatives. This approach creates a clear financial incentive for assets and tenants to reduce emissions, making carbon an explicit cost of business operations.
Implicit pricing – This reflects the cost of decarbonisation measures required to meet sustainability targets, such as energy efficiency retrofits or renewable energy procurement. It’s calculated based on the marginal cost of abatement strategies rather than a pre-set carbon fee.

As a strategic tool, ICP translates your carbon usage into clear financial terms that help everyone in the organisation to make more informed, sustainable decisions across the entire supply chain.

7. Biodiversity becomes a must-have

Biodiversity is evolving from a ‘nice-to-have’ to an essential factor for investors, developers, and organisations.

There’s been a marked change in attitudes towards nature and biodiversity: while previously it was seen as a raw material to be used, now we understand it as capital that should be stewarded due to its necessity to human wellbeing and the economy. This shift has been characterised by increased adoption of nature-based solutions and greening in assets, as well as the incorporation of biodiversity-related targets and goals in business strategy.

Push factors like the acknowledgement that nature is intricately intertwined with human wellbeing, coupled with top-down implementation of regulations in response to recognition that biodiversity loss is reaching a tipping point which may be irreversible, has led to a rise in demand for biodiversity in the built environment from regulatory bodies, investors, and tenants alike.

Increased adoption of disclosure frameworks like Taskforce on Nature-related Financial Disclosures (TNFD), which pushes organisations to quantify and disclose their impacts on nature, ensures alignment with investor priorities, while CSRD ESRS E4 pushes organisations to consider their embodied ecological impact.

We’re also seeing a rise in regulations that mandate nature-positive action (such as the EU Nature Restoration Law and Biodiversity Net Gain in England), which will further lead to biodiversity becoming a crucial metric for risk management and value creation in the ESG landscape.

Rather than being a problem to navigate, biodiversity now presents an opportunity for innovative solutions to address multiple problems at once, such as climate resilience issues like urban heat island effect, air pollution and flood risk, while also providing a green amenity space to be enjoyed by local communities.

As a result, the construction and real estate industry’s relationship to nature and biodiversity is being transformed from something that was left to ecologists and conservations to deal with to a core investment factor incorporated into planning, regulation, and business decisions at a local level.

Conclusion

To get—and stay—ahead in 2025 and beyond, organisations need to simplify their operations and prioritise investment in areas where they can have the most impact. By focusing on short-term goals as part of your long-term strategy, you can get the most from your resources while ensuring your assets remain attractive to investors.

But to prioritise efficiently, you need comprehensive data and a deep understanding of the legislative landscape (or guidance from experts who do). Those who can leverage their data to make strategic decisions will find themselves at a major advantage, empowering them to act quickly, stay competitive, and future-proof their assets—and their business.

Want to learn how Catalyst can help you stay ahead of the trends? Get in touch.