Guest view: Could Energy Star’s end improve global sustainability standards?

Sustainability in real estate is at an inflection point. Today’s reality of interlocking global climate regulation, sophisticated investor scrutiny, portfolio-scale op/capex decision-making, and the fundamentally international nature of the real estate industry, is far more complex than it was a quarter century ago. 

This complexity reflects a world where energy, carbon, and the environment are no longer solely business considerations, but also political ones.

We’re seeing this dynamic unfold on both sides of the Atlantic. In the US, the federal government is proposing budget cuts to environmental programmes, including defunding Energy Star and, within that, Energy Star Portfolio Manager (ESPM) - a critical tool that has underpinned building-level energy benchmarking in North America for over 20 years.

ESPM supports more than 330,000 buildings representing 35bn sqft in North America. It enables performance benchmarking through a “1–100” scoring system and supports building certifications that distinguish energy-efficient buildings from the pack.

Taxpayer-funded and offered at no cost to users, returns on this program have been extraordinary: The EPA estimates every $1 (€0.86) invested in ESPM yields $350 in energy savings - an extraordinary return on investment by any measure.

But perhaps ESPM’s greatest contribution has been proving the power of standardised, scalable building performance measurement, and that is precisely where the opportunity remains: Energy Star is a blueprint for a global standard for data management and benchmarking.

While ESPM is a North American-centric tool, its foundational capabilities, namely standardised metrics, centralised benchmarking, and performance tracking, directly align with the core goals of Europe’s evolving sustainability frameworks, particularly under the Energy Performance of Buildings Directive. Yet recently, the EU released its Omnibus bill “simplifying” sustainability regulation.

The practical impact is dramatically reduced scope and therefore impact. Electoral politics has swung in favour of national governments that will de-prioritise sustainability, notably Germany and France, which were previously among the most ardent and influential national champions of sustainability.

The events listed above, and those unknown but certain to be looming, are not isolated. They are symptoms of a system of legacy policies, assessments, technologies and business models that remain vulnerable to political and regulatory change.

That is no way to run a business today, let alone operate the system of tomorrow.

That’s why the proposed dismantling of ESPM is globally significant. Its vulnerability is a cautionary tale about over-reliance on publicly-funded infrastructure and legacy models. In that same way, it’s also a catalyst to design something better – something more than a stopgap.

It demands a durable, forward-looking system that meets the needs of investors, regulators, real estate owners, occupiers, lenders and more.

A globally consistent, market-led model

To meet this standard, benchmarking infrastructure must evolve. Measurabl has listened to our customers on these issues for 13 years, including many of the world’s largest real estate owners and investors representing over $3trn in assets under management.

We can distill their view and ours into five clear criteria for what comes next from ESPM, of what is necessary from any successor: industry-led; innovation-forward; globally referenceable; agnostic and open to all; and built on a sustainable, apolitical business model.

Supporting North American regulations is not enough. Capital is global. Nor is a benchmark derived from a small survey conducted every few years. In the age of AI and data science, we should have transactional-grade metrics delivered near real-time.

Energy and greenhouse gas intensity, and climate risk exposure are financial inputs increasingly applied across underwriting, valuation, and leasing decisions. These datapoints must flow easily from one decision maker to another, and to the systems that assist them.

The infrastructure need not be taxpayer-funded nor exposed to political influence and ideology. It should be by industry, for industry. Real estate is the world’s largest asset class and its largest source of carbon emissions. Therefore resourcing should be commensurate with this scale and potential impact and be globally interoperable.

And crucially, it must be governed by and for the industry itself, while embracing public-private partnerships to accelerate scale and adoption.

A new path forward

We are taking any potential discontinuation of ESPM seriously and are ready to support the industry no matter what transpires. Importantly, sustainability progress isn’t happening because of policy alone. It’s accelerating because the market demands it.

This moment - triggered by a US policy proposal - could very well lead to the emergence of a global data management system and benchmark that supports a superior business case and outcomes. The potential end of ESPM forces deeper questions around what should come next, why, and on what terms.

Those are healthy questions to ask at any time. But, today, they’re also critical to start answering - particularly on a global scale.

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