From 30 April 2026, ESG checks are a must in commercial property valuations. That means I can no longer treat energy, climate risk, lease clauses, or building performance as side notes. They can affect rent, yield, value, costs, and future capex.

If I want a clean valuation process, I need to check 12 things in order:

the instruction and purpose of the valuation
the asset facts, records, and missing data
lease terms and MEES / EPC position
energy use, plant, and building systems
carbon exposure and retrofit cost
flood, overheating, and site risk
insurance cost and resilience issues
water use, materials, and waste
health, comfort, and occupier appeal
certifications and local market evidence
whether each point affects value, risk, or both
how all of this is shown in the Red Book report

Here’s the simple version: only adjust value when market evidence supports it. If the proof is weak, I should treat the issue as a risk note instead of forcing a pricing change.

Area	What I’m checking	Why it matters
Legal baseline	EPC, MEES, leases, records	Can affect lettability and compliance
Building performance	Energy use, HVAC, lighting, fabric	Can affect running costs and capex
Climate risk	Flood, overheating, insurance	Can affect income and sale appeal
Occupier demand	Wellbeing, access, facilities	Can affect rent and voids
Market proof	Rents, yields, incentives, sales	Shows whether buyers and tenants price it in
Reporting	Assumptions, gaps, evidence trail	Needed for a RICS-compliant report

If I keep the process this simple, I can separate facts from claims and link each ESG issue to value, risk, or neither.

12-Step ESG Sustainability Checklist for Commercial Property Valuations

Why ESG & sustainability matters in commercial property valuation

Steps 1 to 3: confirm the instruction, property details and legal baseline

Start with the core valuation checks: the instruction, the asset facts and the legal position. Get this baseline right before you move into energy, carbon and climate risk.

Step 1: record the asset type, use and valuation purpose

Confirm the asset type, current and permitted use, floor area, tenure, occupancy profile and valuation purpose. These points shape how you weigh sustainability risk. A city-centre office, for example, won’t carry the same risk profile as a warehouse or a retail unit, so each issue needs to be weighed against the asset type and the local market.

Record any assumptions, special assumptions and data gaps in the terms of engagement. That way, the scope is clear from the start.

Once the instruction is nailed down, check it against the paper trail.

Step 2: review compliance documents and property records

Before inspection, gather the key documents: EPCs, including expiry dates; asbestos and fire safety records where relevant; operation and maintenance manuals; service charge data; utility logs; planning history; building control records; occupational leases; and any previous survey or valuation reports.

Document Category	Specific Records to Check	Valuation Impact
Energy & Carbon	EPCs, MEES compliance, utility data	Lettability and brown discounts
Legal & Tenure	Occupational leases, green lease clauses, data-sharing mandates	Operational cost transparency, exit yields
Physical Risk	Flood maps, climate risk assessments, resilience reports	Marketability, insurance risk, capital expenditure
Operational	Service charge data, utility logs, O&M manuals	Accuracy of net income assumptions

Missing or out-of-date documents create valuation risk. Any gaps need to be flagged in the terms of engagement and then carried through to the final report^[2]. Treat client-supplied data with professional scepticism and, where you can, verify it on your own.

Then move to the next check: do the leases or statutory rules impose binding limits?

Review leases for green clauses, with close attention to data-sharing duties^[1]. Check MEES compliance, the EPC rating and expiry date, and any pending statutory changes that could bite during the holding period^[1]. Also note repair liabilities, fit-out duties and any other legal constraints that could affect value.

Steps 4 to 7: assess energy, carbon and physical climate risk

Once the legal side is sorted, the next job is simple: see how the building performs day to day.

Step 4: check EPC rating, energy use and building systems

Start with the EPC. Then go a step further and compare it with actual energy use and how the building systems are working in practice.

Look at actual energy consumption and emissions data. Check the age and condition of the HVAC plant, lighting, insulation and glazing. If the site has on-site renewables, record them separately where they change income or running costs.

This matters because building services affect value in a very direct way. Efficient systems can help support stronger rental bids. Old or underperforming plant usually points to near-term capital expenditure.

Step 5: identify carbon and retrofit exposure

Assess the building’s retrofit exposure, the likely retrofit cost, and when that cost may land during the holding period. If there’s already a carbon reduction plan, record it and test the assumptions behind it.

For more involved cost estimates, it makes sense to get input from a chartered quantity surveyor or building services engineer instead of leaning on broad assumptions ^[1]^[3]. Then rank the main risks and opportunities.

Properties without structured ESG data are finding life harder in the market. Buyers, lenders and occupiers want more than broad claims. They want records they can check.

Step 6: assess flood, overheating and site environmental risk

Check the asset’s flood zone status using Environment Agency flood maps. Note any local mitigation measures too, such as raised thresholds or better drainage.

Overheating risk matters just as much, especially where higher temperatures affect occupier comfort and long-term usability ^[3]. Also look at contamination, soil and air pollution, and any other site-specific issues where the location or site history suggests a problem ^[3].

These issues don’t just sit in a report. If they’re ignored, they can turn into major capital expenditure or legal liability.

Where physical risk is present, test whether it is already pushing up insurance costs or running costs.

Step 7: note insurance and building resilience impacts

Record whether any physical climate risks are already increasing premiums, excesses or business interruption costs. High insurance costs cut net income and can put off institutional buyers.

For each risk, note its likely effect on income, costs and marketability.

What to check	Why it matters to value	Evidence to record
EPC rating and future upgrade risk	Upgrade requirements increase capital expenditure and can restrict lettability ^[1].	EPC certificate, expiry date and trajectory towards future upgrade thresholds ^[1]^[4]
Actual energy consumption	Lower operational costs can support higher rental bids and tenant retention ^[1]^[4].	Metered data, utility bills and building management system reports ^[4]
HVAC, lighting and building services	Efficient systems reduce service charges and can be priced into rent ^[3].	Age and condition of plant, maintenance records and efficiency ratings ^[3]
Carbon emissions and retrofit CapEx	High carbon exposure increases transition risk and can deter institutional investors ^[1]^[3].	Carbon footprint assessments, carbon reduction plans and specialist cost estimates ^[3]^[4]
Flood exposure	Influences insurance availability, tenant retention and business interruption risk ^[3].	Environment Agency flood maps and details of local mitigation measures ^[1]
Overheating and climate resilience	Affects occupier comfort, productivity and long-term building usability ^[3]^[4].	Temperature and humidity records, HVAC efficiency records ^[4]
Insurance premiums and excesses	Elevated costs reduce net income and can deter institutional buyers ^[3].	Current insurance schedule, claims history and business interruption exposure ^[3]

Next, turn these operational and climate risks into evidence on water, materials and occupier appeal.

Steps 8 to 10: review water, materials, occupier wellbeing and market evidence

Now shift from energy and climate risk to the things that shape day-to-day costs and tenant demand.

Step 8: examine water efficiency, materials and waste performance

Start with water use. Compare metered consumption against relevant benchmarks, and note any water-saving fittings in place. This matters because water performance can feed straight into service charges and occupier running costs. In turn, that can affect rental appeal and lifecycle capital expenditure.

For materials, keep the focus on durability. Look at the finishes and the building fabric and ask a simple question: how well will they hold up, and when will they need replacing? If the materials are poor, refurbishment cycles tend to shorten and lifecycle costs can climb.

Step 9: inspect health, wellbeing and occupier appeal

Walk the building as an occupier would, not as a brochure would present it. Record the quality of natural light, whether windows open, how ventilation is controlled, whether thermal conditions stay consistent, and whether noise levels and internal air quality are satisfactory. Accessibility should also be checked, along with cycle storage and shower facilities.

Stick to what is there. Do not rely on marketing material.

Step 10: verify certifications and compare market evidence

Treat certification as supporting evidence, not proof of value. The key question is whether the local market has priced that credential into rent, incentives, voids or yields ^[1].

When you review comparables, split hard transactional evidence from general market commentary. An achieved rent on a certified building in a comparable submarket is evidence. A broker's view that green buildings command a premium is context. The table below sets out the main checks for each factor.

Factor	What to check	The valuation test
Water efficiency	Water-saving fittings, consumption data, benchmark comparison	Does it reduce service charges or support occupancy in a way the market has priced?
Materials and durability	Finish quality, maintenance records, refurbishment timing	Does it affect lifecycle costs, capex timing or obsolescence risk?
Wellbeing features	Daylight, ventilation, air quality, noise, cycle storage and shower facilities	Are they reflected in achieved rents, lower incentives or tighter yields in comparable evidence?
Certifications	BREEAM, LEED, WELL - currency and relevance to asset type	Is the certification linked to actual transactional pricing in the relevant local market?
Comparable evidence	Rents, incentives, void periods, yields, sale prices	Do sustainability features demonstrably explain any pricing difference?

Apply professional scepticism throughout. If the evidence supports an adjustment - whether that is a green premium or a brown discount for poor credentials - record the reasoning clearly and tie it to specific comparable transactions, not broad ESG sentiment ^[1].

Use these findings in the next step to separate measurable value impact from background ESG context.

Steps 11 to 12: translate findings into valuation and reporting

Step 11: decide whether each issue affects value, risk or both

Once you’ve gathered the findings above, sort each issue into one of three buckets: value, risk, or neither. Then go a step further and decide whether it changes value, risk, or both.

The key test is simple: would the market price this in? If the answer is yes, and you have market evidence to back it up, an adjustment may make sense. If the evidence is thin, don’t force a figure. Add it as a risk comment instead.

A simple RAG rating can help flag material issues at a glance.

How findings affect value

Factor	Positive value driver	Value risk
Energy & EPC	EPC A or B rating; high-efficiency HVAC; onsite renewables	Non-compliance with MEES; high carbon exposure
Physical resilience	Local flood mitigation measures; robust building fabric	Flood Zone 2 or 3 location; overheating vulnerability
Occupier appeal	WELL or BREEAM certification; strong daylight and air quality	Poor indoor environment; limited amenities; weak tenant alignment
Legal & governance	Green lease clauses; transparent energy and water data sharing	Opaque service charges; no sustainability obligations in leases
Market factors	Institutional investor demand; lower exit yields; rental premiums	Brown discounts; limited liquidity; high future capex requirements

Where capex is needed, use costs from a chartered quantity surveyor and make any model limits clear.

Step 12: present a clear evidence trail in the valuation report

After classifying each issue, set out the evidence trail in the report. Record sustainability evidence in VPS 1, VPS 4 and VPS 6. The report should show, in plain terms, how each material finding shaped the final opinion.

State:

what was checked
what evidence was used
what assumptions were made
how each material finding affected value

If you applied a brown discount for a non-compliant EPC, say so and cite the comparable transactions that support it. If a BREEAM certification was noted but local market evidence did not confirm a pricing premium, record that as well.

Conclusion: key sustainability checklist points to remember

Work through the checklist in order. Start with the instruction and legal baseline. Then verify energy performance and climate risks, review water, materials and occupier factors, and test every finding against market evidence. Only make valuation adjustments when they are backed by transactional data and can be explained clearly in the report.

As Jon Lemen, Partner at Property Elite, put it:

"This moves the requirement from being a 'nice to have' to a mandatory requirement in all commercial property valuations." ^[1]

FAQs

When do ESG checks become mandatory?

ESG factors will become mandatory in all commercial property valuations from 30 April 2026.

This change follows the fourth edition of the RICS global professional standard, which sets out a framework for including ESG and sustainability in valuation advice.

Survey Merchant can help by connecting property owners and buyers with impartial surveyors who work to current industry standards.

What ESG issues affect a valuation?

ESG factors can change commercial property values by affecting rental growth, capital expenditure and risk.

Valuers look at physical risks such as flooding, overheating and energy vulnerability. They also assess transition risks linked to the shift to a low-carbon economy.

That means the review goes beyond the building’s location and rent roll. It also covers energy use, carbon output, water, waste and social factors such as indoor air quality.

If a property has weak ESG credentials, or fails to meet standards such as MEES, it can face a brown discount. On the flip side, green features may help support rental premiums.

When should sustainability affect value?

Sustainability should affect a property's value when it has a material impact and the market is already pricing it in. In plain terms, valuers should account for it when it changes what a willing buyer and seller would agree. That might show up through higher rents, lower vacancy rates, or green lease clauses.

Changes may also be needed when comparable evidence points to sustainability-related features, or when physical and transition risks alter the property's risk profile or its future capital and running costs.

Checklist for Assessing Sustainability in Property Valuations