Green Leases (Part 2)

Gabriella Borda

The property sector will play a central role in the journey toward a decarbonised economy and will also be particularly affected by the rapidly evolving legal and regulatory frameworks aimed to improve building standards. There is also a greater emphasis on the industry on meeting improving ESG criteria, expected to bring along innovative drafting solutions to improve and modernise leases, with the objective to move towards a new standard for institutionally acceptable sustainable leases.

resulting in a more subtle outcome. Areas of focus when designing such propositions include credit conditions and risk, as the latter is particularly important to understand and prioritise issues with greater potential, identifying feasible solutions leading to a sustainable system, and convincing important stakeholders to support the concept.

A relationship-driven approach to ease communication is very important to stimulate attention toward these propositions and sustainable products. A request to lease green buildings is rarely a binary decision. A lot will depend on the product being leased, market conditions, and the achievable sustainability aims, as well as on the way of engaging with stakeholders.

The financial services have a moral imperative to help finance sustainable projects and may also support their stakeholders with the crafting of sustainable lease propositions. For the finance provider, it is valuable to have local knowledge and awareness of sustainability opportunities. There must also be a culture to embrace the collaboration concept, as the art of crafting these products successfully needs to be supported by various resources driven by a collaborative approach, informed by a wide-ranging approach to market intelligence, ultimately

For a truly sustainable lease product, the legal understanding of the landlord and tenant relationship will need to be fundamentally reframed from a traditional expectation of passive land ownership to proactive management and collaboration. There is a preposition towards potential cost sharing for sustainability/environmental works. It is a case of moving away from the traditional landlord/tenant relationship towards a more balanced cost-benefit approach.

Financial services providers can help bridge the gap between the traditional towards the sustainable way by providing clients who embark on such endeavours with financial products that are more advantageous, thereby improving their sustainability position, and strengthening their claims towards corporate social responsibility.