05
S U S T A I N A B I L I T Y W I L L P L A Y A G R E A T E R
R O L E I N S H A P I N G P O R T F O L I O S
Around the world, financial institutions,
investors, and regulating bodies are putting
significant pressure on organizations to set
sustainability goals, disclose sustainability
metrics, and follow through on
sustainability claims. While much of
sustainability reporting is qualitative, not
quantitative, investors see healthy
sustainability reports as a key indicator of a
potential investment's risk.
In the US, the SEC ruled in 2024 that all
public companies will need to disclose
Scope 1 and 2 emissions, as well as other
sustainability information. The IFRS's
International Sustainability Standards
Board (ISSB) standards came into effect in
2024 as well. And the European Union's
Corporate Sustainability Reporting
Directive (CSRD) was in force in 2023.
Companies that take measures to lessen
their environmental impact, improve
operational resilience, and promote healthy
social and governance practices represent
lower financial risk. These companies
mitigate the impact of climate-related
disasters and guard themselves against
costly penalties and lawsuits.
But what does all this have to do with
leases?
6 Predictions for Lease Accounting and Administration: Prediction #5
Copyright © 2025 Tango. All rights reserved.
8
Most organizations are now being forced
to seriously evaluate the sustainability of
their operations, whether sustainability is a
corporate value or not. They're having to
consider ways to make their workplaces,
facilities, and portfolios more sustainable,
to appeal to investors, ensure compliance
with regulators, and even satisfy
employees or their target market. And that
means optimizing energy consumption and
seeking more efficient, resilient
infrastructure. Organizations may relocate
their operations to more moderate
climates. Or place greater emphasis on a
potential building's efficiency. Perhaps
negotiate for leasehold improvements or
allowances to retrofit the building with
more efficient systems.
Green leasing is here to stay, especially
between parties that embrace the full value
of sustainable leasing practices. Energy
costs, as an example, are a substantial
component of leases so reducing overall
consumption of energy benefits both the
environmental and financial impact of a
lease.
With stricter sustainability regulations taking effect and more organizations reporting
on sustainability metrics, sustainability will need to be part of the conversation as
companies negotiate leases and select locations in the coming year.
