Real Estate’s Sustainability Efforts Thrive Without Washington

Commercial real estate operators have been forced to reconsider their sustainability strategies as policy changes and rising energy costs impact the industry. The double impact of policy withdrawal and soaring energy costs are prompting a redefinition of sustainability from an environmental to a financial perspective.

Over the last decade, the business case for sustainable buildings was constructed on two pillars: economic benefits and policy support. Buildings that prioritized energy efficiency were less expensive to run, attracting rent premiums and institutional capital with Environmental Social Governance (ESG) performance criteria. Policy support came in the form of federal incentives, reporting requirements, and voluntary programs. However, the swift withdrawal of policy support has compelled the industry to refocus the sustainability conversation purely on the arithmetic of operating costs.

Federal Retreat

The federal government’s rapid retreat from sustainable building policies has had far-reaching implications. The Trump administration’s FY2026 budget proposal eliminated EnergyStar funding, and the EPA’s Office of Atmospheric Protection, which managed EnergyStar, faced elimination. Although Congress restored funding and primary management of EnergyStar was transferred to the Department of Energy, the program now operates in diminished and uncertain circumstances. The potential loss of EnergyStar, a benchmarking standard used by nearly 25% of all commercial building floorspace in the U.S., has prompted major real estate operators to reconfigure their measurement and verification infrastructure.

Additionally, the SEC’s climate disclosure rules, which mandated public companies to report material climate-related risks and greenhouse gas emissions, are now being entirely rescinded. “What has been obvious for a while is that the Federal position on environmental regulations is softening,” said Cass McFadden, Global Head of Sustainability at Cortland. However, she added, this doesn’t eliminate the need for the industry to measure and report building performance. In the absence of a shared federal standard, the industry has been forced to build or buy the infrastructure to do it independently.

Investor Landscape

The investor landscape has also become more complex. ESG mandates have remained part of the investment criteria for some institutional investors, sovereign wealth funds, and pension funds, but the changing cultural and political climate has created a more fragmented landscape. “We understand that there is diversity in the appetite for sustainability,” McFadden said. “Some investors have a clear mandate but others are less driven by it. Even those are still interested in the cost savings.” This interest in operational efficiency, even without ESG framing, has remained constant.

As a result, property companies are being prompted to reassess their priorities. “What is the true demand from investors, what is going to create value, and what is accretive to the portfolio?” asked McFadden. “That has put an enhanced focus on baseline metrics of costs of operations and getting a bit away from the ESG component.” This refocus on the bottom line may lead to more sustainable investments as they are driven by economic rationale rather than policy incentives.

Energy Costs

Rising energy costs have added urgency to this shift. U.S. electricity prices rose 11.5% in 2025 and are expected to surge by up to 40% by 2030 compared to 2025 levels. The primary driver is the explosive growth of AI-powered data centers. The total combined energy demand of U.S. data centers is projected to nearly double between 2025 and 2028. As a result, energy is becoming one of the fastest-growing line items in a real estate portfolio’s operating budget, intensifying the need for better sources and locked-in prices. The choice to upgrade for energy efficiency is, therefore, increasingly a financial decision.

New Rigor

This shift is instigating increased diligence in the evaluation and selection of energy efficiency vendors and solutions. Real estate operators are demanding proof from vendors that their solutions will deliver the projected savings before they commit capital. Pilot programs, payback period analysis, and a diminished tolerance for unmet savings projections are all evidence of this shift.

Proactive operators are also rethinking their energy procurement strategies. Multi-year procurement contracts offer budget predictability in a volatile pricing environment and serve as a hedge against future rate increases. McFadden revealed that Cortland works with an energy broker to identify the most favorable procurement opportunities across markets, a practice that is becoming more common among larger multifamily operators as energy cost management rises in priority.

Engaging Regulatory Bodies

The withdrawal of federal policy support has not simplified the energy landscape. Rather, it has shifted the focus of the most consequential decisions to state regulators, utility commissions, and local planning bodies. These bodies are juggling grid capacity constraints, data center interconnection requests, and residential affordability concerns. McFadden stressed the need for the real estate industry to engage more effectively with utilities and regulatory bodies to influence the cost environment they operate in. “Real estate will need to more effectively engage the utilities and regulatory bodies so they can understand what we are thinking about when it comes to rates,” she said. In the face of a rapidly changing energy market and absent federal policy support, this local and regional engagement has become crucial for protecting industry interests.