Sustainable commercial real estate: a strategic imperative for the Crown Dependencies
Read time: roughly 6 mins | Date of posting: 06/11/2025
Chinyelu Oranefo, Managing Director, Sustainability Advisory, Real Estate & Housing, Lloyds Corporate & Institutional and Nigel Cheesley, Director of Sustainability, Crown Dependencies, Lloyds International outline the compelling case for sustainable commercial real estate.
Commercial real estate (CRE) is central to the Crown Dependencies’ funds industry. In Jersey, for instance, real estate makes up over 13% of the overall funds sector.[i] Crucially, almost 56% of Jersey 275 funds are focused on UK property, where the sustainability agenda is prominent.[ii] Sustainability remains a key priority across CRE and so given this exposure, sustainability ought to already be a material consideration for investors and managers.
“Overlooking sustainability can lead to poor investment choices, such as acquiring less efficient real estate, which can result in difficulties securing tenants, lower rents, and ultimately, poorer returns on investment,” says Chinyelu Oranefo, Managing Director, Sustainability Advisory, Real Estate & Housing at Lloyds.
Conversely, by integrating sustainability into real estate decision making, market participants can enhance portfolio performance, make sure of long-term resilience and even gain a competitive edge.
[i] [ii] Jersey Funds for UK Real Estate Investment
The benefits of sustainable investment
Making sustainability a core determinant of investment decisions has multiple potential benefits for real estate companies and asset managers, including:
- Lower operating costs: Energy-efficient buildings reduce running expenses.
- Improved tenant satisfaction: Sustainable spaces foster tenant well-being and increase productivity; features such as air quality and natural light are increasingly important, especially among younger employees.
- ESG alignment: Sustainable buildings help both investors and tenants meet their Scope 3 greenhouse gas emissions targets.
Importantly, sustainability benefits can drive tangible portfolio performance and increase returns.
A CBRE IM analysis of over 1,200 European real estate assets found that properties with poor Energy Performance Certificate (EPC) ratings underperformed, lagging by 18.2% in the UK.[iii]
Similarly, a JLL UK Investor Survey reported that almost seven-in-10 investors suffered declines in value for assets with poor energy performance, low EPC ratings, or high physical climate risk.[iv] Unsurprisingly, three-quarters of respondents now factor sustainability into investment decisions and more than a third have reduced or withheld bids due to sustainability considerations.[v]
‘Brown discounts’ for less sustainable assets and ‘green premiums’ for properties with the highest sustainability performance are now a market feature, driving rapid change, with nearly 40% of the UK’s 2025 office pipeline targeting net zero carbon.[vi]
[iii] The Economic Case for Sustainability
[iv] [v] [vi] Sustainability remains a key driver for European real estate investors
The Crown Dependencies landscape
- The Crown Dependencies are all Paris Agreement signatories and have developed their own transition plans.
- Jersey and Guernsey benefit from importing low-carbon electricity from France, supporting progress toward their 2030 climate targets.
- The Isle of Man has introduced strong measures, including a ban on fossil fuel boilers in new builds and requirements for new homes to meet SAP 93 (equivalent to EPC A), transitioning to SAP 97.
Disclosure as a sustainability catalyst
Reporting obligations are another driver of sustainability, with almost 20%, circa £78 billion, of Jersey’s fund sector falling in ESG-orientated regulated funds, with this figure expected to grow to £123 billion by 2026.[vii]
The rules apply where funds are sold – often UK and European clients – and need strong integrity, the avoidance of greenwashing, and credible labelling.
“Since the UK’s Sustainable Disclosure Requirements (SDR) are newer, Crown Dependency funds now align more closely with EU standards,” says Nigel Cheesley, Director of Sustainability, Crown Dependencies, Lloyds International. “But, funds serving a broad investor base may ultimately need to report under both regimes.”
Building credibility and resilience
Credible Transition Plans (CTPs) are emerging as a core tool for net zero planning, linking long-term targets to investment decisions and guiding capital allocation. A government consultation contemplates making them mandatory for FTSE 100 firms. [viii]
Creating a CTP is complex, requiring robust data, strategic alignment, expertise, and investment. Increasingly, CTPs also integrate Just Transition and nature priorities.
Just Transition, although not mandated, addresses how asset owners can engage with supply chains, workers, managers, and local communities to deliver their decarbonisation plans in an inclusive manner that reduces potential negative impacts. Such engagement has been shown to enhance both property resilience and value.
Nature is already partly regulated: new developments in England and Wales must deliver a 10% biodiversity net gain, and some clients go further to boost resilience against risks like flooding and heat stress. Embedding these considerations builds credibility, resilience, and long-term value.
Creating a more sustainable future
Sustainability is now an established driver of CRE value and resilience.
Asset managers can act by assessing portfolios through a sustainability lens, setting strategies once baselines are understood, addressing underperforming assets, and leveraging sustainability to avoid economic stranding risks, reduce brown discounts and, wherever possible, capture green premiums.
Corporate occupiers can future-proof workplaces by aligning real estate with net zero and employee well-being, helping to boost productivity, and stay ahead of regulation.
As market participants navigate this transition, the right support is essential. Lloyds is a leading real estate lender, combining market insight with leadership in sustainable finance, supported by over 40 in-house specialists in climate strategy, credible transition planning, sustainability advisory and debt structuring, and sustainable finance.
Since 2022, we have provided over £26.5 billion of sustainable finance for businesses, including several landmark innovations: the Real Estate Transition Linked Loan, launched in September 2025, is the next chapter in this story.
For investors and occupiers in the Crown Dependencies, Lloyds International is a trusted partner in building portfolios that are not only compliant and resilient, but also positioned for long-term growth and in a more sustainable future.
Accelerating the transition
To facilitate the transition, Lloyds has drawn on its sustainability and real estate expertise to create the Real Estate Transition Linked Loan (RETLL). The first-of-its-kind product front-runs the Loan Market Association's transition lending guidance.
Designed as a simpler alternative to Sustainability-Linked Loans (SLLs), the RETLL aligns with science-based carbon reduction pathways and uses a single key performance indicator focused on energy or carbon.
Unlike traditional SLLs, the discount applies from day one if clients commit to the pathway, with annual reviews to ensure alignment.
All lending is subject to status.