This report examines the importance placed on environmental sustainability in the decision-making process of UK fund managers when making property investments. It also investigates if green premia for sustainable buildings exist, and the compatibility of environmental sustainable and financial objectives.

Research approach

The literature review looks at whether energy/green ratings such as BREEAM and LEED generate green premia with respect to both rental income and capital return, and compares the position in the UK with that of the US, Australia and other countries. The review also considers if values being paid for sustainably rated buildings are greater than the pure financial (cost-saving) gains.

The empirical part of the study follows two stages.  The first stage focuses on fund managers’ preferences of different property characteristics at the asset acquisition stage and how high BREEAM is ranked against the other seven characteristics, which include location, tenant creditworthiness and rent review clauses. Direct comparisons are made with the results of a previous study conducted a decade ago to shed light on changes in industry regarding environmental sustainability over the last ten years.

These results form the basis for the focus group discussions conducted in the second stage to explore in-depth, the drivers for the adoption and implementation of environmental sustainability strategies, as well as barriers to change.  In this part of the study the sample is widened to include fund managers, sustainability strategists and asset managers. Among the topics discussed are sustainability within investment objectives, the pricing of sustainability within valuations, non-financial drivers, the commercial viability of environmental sustainability and the effectiveness of energy performance certificates.


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