Sustainable Real Estate investing: Aligning with climate goals

The FTSE EPRA Nareit Green Index Series helps investors align real estate indices with climate goals without sacrificing performance. Using Measurabl’s asset level data, the indices target companies with low energy consumption, reduced carbon emissions, and higher levels of green building certifications across global developed markets. This insight will look at how these indices work, what makes them unique, and why it’s a compelling option for climate-conscious investors; as well as delving into enhancements coming this September that will further improve their global reach.

• Reliable data through measurabl: The index uses the largest asset-level dataset, improving ESG accuracy and transparency in real estate.
• Global certification coverage: Expansion to Green Star and CASBEE ensures stronger APAC representation for green building performance.
• Performance with purpose: The Green Low Carbon Target Index delivers competitive returns while meeting energy, emissions, and green certification targets.

The Real estate sector is one of the largest contributors to climate change. Globally, buildings are responsible for nearly 38% of emissions, split between those embodied in their construction and those from their operations. The decarbonisation of this sector at the heart of the climate transition challenge comes with significant opportunities for investors seeking solutions that combine strong financial performance with environmental impact. 

One of the biggest challenges to investors in this space is data quality. Research conducted by FTSE Russell last year across 40 of the largest companies in the EPRA Nareit Developed universe highlighted the key challenges companies face currently in sustainability reporting. This was evident especially in relation to nascent scope 3 reporting categories, where only a third of companies were publishing comparable data. 

This is why FTSE has partnered with Measurabl. Measurabl’s Listed Real Estate Data Model leverages the 970 customers, representing 15bn sqf real assets, measuring managing and reporting using their data systems. This represents the largest asset level database on the market. Using this dataset, Measurabl’s machine learning model can generate accurate and comparable energy consumption and emissions data for buildings worldwide, allowing for a thorough data coverage on the FTSE EPRA Nareit Developed Index universe. 

The indices then overlay two construction approaches utilising this Data:

• Fixed tilt methodology (used in Green and Green Focus Indices): Adjusts company weights based on energy usage and green certification scores, offering transparent outcomes at the constituent level.
• Target exposure methodology (used in Green Target and Green Low Carbon Target Indices): Applied at an index level to guarantee certain uplifts in green certification, carbon emissions and energy usage, while maintaining sector neutrality. 

The energy consumption and carbon emissions data are chosen as good representation of companies’ current climate performance versus their peers, whilst the green certificates give an indication of climate performance and future climate outcomes. 

One of the most visible ways to measure environmental performance is through green certifications. Green certifications confirm compliance with ESG performance standard, leading to greater energy efficiency, lower operating cost, and enhanced marketability.

The FTSE EPRA Nareit Green Index Series currently source data from the world’s leading certification schemes:

• LEED (Leadership in Energy and Environmental Design): Originating in the U.S, LEED is one of the most widely recognised green building standards globally.
• BREEAM (Building Research Establishment Environmental Assessment Method): Developed in the UK, BREEAM is Europe’s most established certification system.

Between these two schemes there are millions of assets certified worldwide. However, being based in Europe and North America they have higher presence in these regions. Going forward from September 2025, Measurabl will now include Green Star and CASBEE certifications to improve representation in the APAC region:

• CASBEE:  A certification system tailored to Japanese building codes and climate conditions. It evaluates buildings based on energy efficiency, resource use, and environmental impact.
• Green Star:  Widely used across Australia and New Zealand, Green Star assesses buildings on a broad range of sustainability criteria, including emissions, materials, and innovation.

By incorporating CASBEE and Green Star, the index series now captures a more complete picture of sustainability in regions where LEED and BREEAM are less common. This means investors get better data coverage, more accurate insights, and greater confidence that the companies in the index are truly leading on sustainability.

The FTSE EPRA Nareit Developed Green Low Carbon Target Index provides a good representation of performance across FTSE’s EPRA Nareit Green indices, targeting index level uplifts across all three metrics discussed. Over the past three years, the index has delivered competitive total returns, placing it in the middle range of performance across the flagship indices.

Periods of macroeconomic volatility have affected real estate markets globally, with more volatile indices such as the FTSE Nareit Mortgage REITs Index seeing sharper swings as a result, both positive and negative.

What sets the Green Low Carbon Index apart is its ability to offers stable growth while maintaining a clear focus on sustainability. Whilst these short-term outcomes are in-line with the broader index, the long-term business case for sustainable real estate is clear. With global targets and regional ordinances around the climate transition increasing year-on-year, and demand far outstripping supply for sustainable real estate in many urban centres.

As the real estate sector faces growing pressure to decarbonise, tools like this index offer a practical way forward. Whether you're just starting to explore sustainable investing or looking to strengthen your climate strategy, this index provides a clear, credible path to making a real impact.