Navigating Change: Finding High-ROI Opportunities in Decarbonization

The conversation around global decarbonization is undoubtedly shifting—but not in the way many expected. Over the past few weeks, the world’s largest investor climate coalition, the Net Zero Asset Managers Initiative (NZAM), suspended its activities, removing net-zero targets and obligations for its members. This decision, driven in part by rising anti-sustainability sentiment in the U.S., signals a growing divide in how corporations and financial institutions approach decarbonization and are likely to opt for short-term risk aversion over long-term resilience.

At first glance, this may seem like a setback. In reality, it’s an inflection point. The underlying economics of decarbonization remain stronger than ever—efficient buildings continue to hold greater asset value, reduce operational costs, and provide insulation against regulatory and market volatility. 

The question is no longer if the industry will decarbonize but who will take advantage of the high-ROI opportunities emerging right now as others falter. Corporations that act strategically will gain a competitive advantage, emerging with modernized and resilient assets, while those who delay will face steeper implementation costs in the future. 

Understanding the Economic Reality of Decarbonization

It’s important to understand that the growing pushback from corporations and policymakers isn't a rejection of sustainability itself but rather a reaction to the increasing regulatory, governance, and cost burden on businesses. Unfortunately for those who would wish for a ‘simpler time’, this resistance doesn’t change the fundamental trajectory of our economies. Climate change isn’t waiting, and neither are the risks it imposes or the economic pressures tied to the value destruction it represents.  Whatever their political leaning, fundamentally, investors have to be smart about future conditions, and future conditions have never been clearer. 

The financial risks of inaction are accelerating. Cities across the U.S. and Canada are rolling out building performance standards (BPS), turning carbon emissions into a direct line item on an asset’s financials. These policies introduce escalating penalties for high-emission properties, cutting into net operating income (NOI) and, ultimately, property values. On top of city-level measures, and since the 2024 US election,  five U.S. states—California, New Jersey, New York, Colorado, and Illinois—have doubled down on legislation aimed at embedding Scope 1, 2, and 3 emissions reporting into state law, further amplifying financial pressure for building owners. 

The push for stricter climate disclosures at the state level signals that evolving regulations will continue to reshape investment risk for a significant portion of the US economy. While some corporations may be pulling back from voluntary commitments in response to federal changes, the market is still moving toward greater accountability, transparency, and cost exposure for carbon-heavy assets. 

At the same time, it’s important to recognize that the transition to low-carbon infrastructure is already well underway. Much of what needs to happen is subsidized or built into natural capital cycles. HVAC systems, lighting, and building envelopes all have replacement lifecycles—upgrading them strategically is often a marginal cost increase, not an overwhelming expenditure. The real financial risk isn’t in making these investments—it’s in delaying them until they become urgent, expensive, and unavoidable. The portfolios that recognize this reality today will be the ones securing short-term returns and establishing a more sustainable future.

High-ROI Opportunities in Decarbonization

The challenge for today’s asset managers is determining which decarbonization efforts have the strongest return on investment. With mounting financial pressure and regulatory uncertainty, the key lies in identifying points of leverage—moments where decarbonization aligns with existing investment decisions to reduce financial impacts and maximize value. 

1. Identifying the Most Impactful Investments

Decarbonization strategies should focus on timing and impact. The highest ROI opportunities emerge during transition points when efficiency improvements can be integrated without disrupting financial performance.

• Acquisition: Investors evaluating new assets should factor in decarbonization potential. Outdated infrastructure may appear like a potential liability, but in the right market, targeted upgrades can turn a property into a higher-yield, lower-cost asset with stronger long-term returns.
• Asset Sales: Buyers are increasingly factoring carbon performance into valuation models as well. Upgrading properties before listing can create a pricing premium and reduce risk perception.
• Tenant Turnover: A vacant space is ideal for efficiency upgrades—no disruption, no pushback from tenants. And since green-certified buildings demand a 7-11% rent premium, these upgrades are a direct path to higher rents and stronger lease terms.
• Capital Expenditure Cycles: Every building system will need replacing—it’s just a matter of when. Upgrading to high-efficiency systems during planned CapEx cycles reduces the need for expensive retrofits later and future-proofs the asset.

2. Aligning Decarbonization with Financial Incentives

Every decarbonization investment needs to justify itself financially to secure internal buy-in. Asset managers have to demonstrate how energy efficiency upgrades cut operating costs, attract better financing terms and premium tenants, and reduce exposure to future regulations.

But numbers alone don’t get projects approved—they need to fit within the broader investment strategy. Upgrades should align with planned capital expenditures, tax incentives, and regulatory risk management. Companies that approach decarbonization as a financial decision instead of just a compliance exercise better position their portfolios for stronger long-term ROI.

3. Understanding Portfolio-Wide Exposure and Opportunity

Not every building in a portfolio carries the same decarbonization risks and opportunities. Owners should closely examine high-density urban markets where BPS drives up costs for inefficient properties, or opportunities to entice corporate tenants actively seeking low-carbon spaces. Additionally, some assets are low-hanging fruit—primed for cost-effective retrofits—while others will require major capital investment. 

The real challenge isn’t just identifying which buildings to upgrade, but when and how to do it for maximum financial impact. Utilizing asset-level data to prioritize high-value projects and sequence improvements allows companies to make intelligent investments that drive measurable returns.

The Smart Path Forward: A Pragmatic Approach to Decarbonization

To put it simply: waiting isn’t a strategy—it’s a liability. The financial and regulatory pressures around decarbonization aren’t static. Every year, the aperture widens as new policies take effect, financing incentives shift, and the cost of inaction compounds. The portfolios that succeed aren’t the ones reacting in crisis mode—they’re the ones building a phased, data-driven strategy that evolves with, and even stays ahead of, the market.

For asset managers, the most pragmatic approach is understanding where the opportunities exist today, which investments will make economic sense in the short term, and how to structure improvements without disrupting portfolio economics. Instead of chasing compliance, this is more about controlling the timeline and not being forced into expensive, last-minute decisions.

The reality is that decarbonization is inevitable. Either companies budget for it now, tackling projects in phases, or they absorb the skyrocketing costs of delaying until the transition is no longer optional. The strongest portfolios are already making their moves—not because they have to, but because it’s a competitive advantage.

Decarbonization as Strategy: Leveraging Change for Portfolio Growth

Decarbonization is no longer a sustainability play—it’s a financial one. While environmental policy and regulations will swing across party lines indefinitely, delaying action will only amplify future costs and risks and substantial financial pressure on corporations that prioritize short-term convenience over long-term strategy. Proactive and intentional decarbonization efforts have the ability to transform these potential liabilities into competitive assets.

Audette helps commercial real estate portfolios cut through the complexity of decarbonization. Using AI and physics-based modeling, Audette delivers budget-ready, asset-level transition plans without the time and cost of traditional energy audits. Companies gain a clear picture of portfolio-wide exposure, project feasibility, and cost-effective pathways, ensuring capital is deployed where it makes the greatest impact. The right data turns decarbonization from an obligation into an opportunity for smarter capital deployment and higher ROI.