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Expectations for new buildings – from amenities to environmental footprint – have increased significantly in recent years, reports global property consultant JLL. Sustainability continues to move up the corporate priority list and investors are rethinking value, making the threat of a “brown discount” more real than ever.

Based on a new report by JLL, “Return on Sustainability: How the ‘value of green’ conversation is growing up,” highlights the urgency for investors to move beyond the conversation around the “value of green” to instead focus on the long-term return on sustainability. The paper explores a step-change at play around what qualifies a best-in-class building.

“The bar is being raised on what it means to be green,” explained JLL’s Global Head of Sustainability Services and ESG, Guy Grainger. “Now that the business case for sustainability is undeniable, the time has come to evolve the valuation conversation.”

There is a strong financial incentive to go green

While investors initially doubted the value of certifications like LEED and BREEAM, evidence now shows that green certifications result in a rent premium of 6% and a sales premium of 7.6%. These so-called “green premiums” are proving materially significant, however, there is another facet to consider. JLL’s research shows that buildings that don’t evolve to meet sustainability standards will suffer financially – resulting in a “brown discount.”

The definition of green is evolving

New dimensions are quickly emerging to influence the value conversation. Climate risk and resilience, carbon emissions and occupant health are increasingly contributing to conversations around what it means to be “best-in-class” in the built environment.