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Sharpening up: Owners are inserting more detailed sustainability clauses into their leases; but how effective are so-called green leases, and how can they be improved?
- June 1, 2024: Vol. 36, Number 6

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Sharpening up: Owners are inserting more detailed sustainability clauses into their leases; but how effective are so-called green leases, and how can they be improved?

by Marek Handzel

Green leases — rental contracts containing extra clauses related to the environmental performance of a building — are on the rise in Europe.

And for good reason. As Boreal IM’s COO Olivia Ralston says, three main converging factors are leading to an increased focus on both landlords and tenants holding themselves accountable when it comes to meeting decarbonization targets.

Firstly, regulation across Europe is steering asset owners to provide leases that at the very minimum require occupiers to share energy usage data. Secondly, underlying real estate investors and managers are setting up clearer net-zero carbon emission pathways, which rely on transparency and an ability to upgrade buildings in a timely fashion. And thirdly, tenants themselves are having to account for their impact on the environment due to other regulatory measures.

“Generally speaking, the regulation around ESG and energy efficiency is most advanced in Europe,” says Ralston. “And

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