Knight Frank: more global investors opt for ESG strategies

Global institutional investors are increasingly leveraging ESG strategies to create and preserve long-term value and retrofitting assets is the preferred approach, according to the second edition of Knight Frank’s ESG Property Investor Survey, which has just been published.

“Our 2025 survey reveals that ESG considerations remain firmly in investment and operational strategies,” said Flora Harley, head of ESG research, Knight Frank. “Driven by the prospect of enhanced returns, as well as net zero and disclosure requirements, ESG due diligence is embedded in investment decisions and informing action, and this is unlikely to waver.”

Enhanced returns are cited by 63% of the investors surveyed as a driver for ESG implementation. The emphasis on financial performance follows a time of economic constraint and scrutiny of ESG as a business imperative, adding pertinence to the industry’s continued commitment.

Knight Frank’s initial ESG Property Investor Survey, undertaken in June 2023, focused on ESG and property investments in the UK and Europe, while this second edition has a more global scope. This updated survey gathered responses from 40 investors, representing assets under management totalling at least £140 billion.

 Like the initial survey, this latest edition highlights internal net-zero commitments as a strong force behind ESG investment, with nearly 70% of respondents citing them as a key motivator. While disclosures play a role in transparency, ESG policies and commitments shape procurement and investor expectations in response to growing demand for sustainable practices, making net-zero policies essential to stay competitive. 

Beyond returns, efficiency remains key, with 30% targeting zero emissions and 27% nearly-zero when undertaking retrofits. With frameworks like the EPBD mandating 60% emissions cut by 2030, aligning strategies with these evolving standards can create competitive advantages. Not surprisingly, therefore, the survey found that more than three-quarters of investors assess minimum capex requirements before acquisition to meet sustainability regulations, rising to 80% for institutions and 94% for those with mainland European assets.

Retrofitting leads as the primary ESG-related investment approach, with 76% of respondents seeking to upgrade existing assets—rising to 80% among APAC investors – to drive higher returns as well as to reduce obsolescence risk. Almost two-thirds, 62%, are looking to actively acquire ‘poor-ESG’ assets to upgrade. Financial incentives are a clear motivation for retrofits, with investors targeting higher rental and exit values.

“Awareness of the risk of inaction is also growing,” said Harley. “Extreme weather events are starting to impact both capital and operational expenditure – 28% of respondents reported higher capex due to weather-related damage such as wind, rain, and heat, while 34% noted increased opex from rising insurance premiums and energy costs. The recognition of these trends and risks is critical for real estate investors when positioning assets and to ensure liquidity and more favourable valuations.”