In real estate, sustainability efforts traditionally focus on operational energy because it impacts operating costs and potentially rent levels.
Until recently, few expected embodied carbon, the emissions from construction, to enter the conversation.
Yet early signals suggest that it may soon become an important factor.
This trend has begun in markets such as the Nordics, where embodied carbon is already regulated, and it points the way for other markets as EU and national regulations evolve.
Prospective institutional buyers have started asking for embodied carbon data alongside traditional sustainability metrics such as energy efficiency.
As Annachiara Torciano, Head of ESG and Communications at Slättö, a Nordic real estate investor, observes:
“In real estate transactions, it is common to look at energy efficiency of buildings. I think in the future embodied carbon may well be one more aspect looked at in transactions for newly built assets.”
Why investors are starting to act to reduce embodied carbon
Investors are beginning to set limits on embodied carbon in projects.
They do this for several reasons:
- Embodied carbon is showing up more prominently in climate accounting and targets.
As measurement improves, embodied carbon is emerging as a notable share of real estate companies’ total emissions footprints. It is also incorporated into the climate targets of institutionally backed companies in the Nordics.
- Regulations are expanding.
Denmark, France, and Sweden already require embodied carbon declarations or limits for new buildings.
At the EU level, the updated Energy Performance of Buildings Directive (EPBD) will require member states to introduce carbon limits for construction by 2030 at the latest. The EU Taxonomy already requires life-cycle assessment for the construction of new buildings.
- Industry standards now include embodied carbon.
Leading environmental certifications increasingly include embodied carbon limits. The Science Based Targets initiative (SBTi) now expects real estate companies to incorporate embodied carbon into climate targets. The consequence is clear: the definition of a “sustainable asset” is quietly expanding.
- Solutions for lower CO₂ in construction are emerging — many of which can be cost‑neutral.
A few years ago, low‑carbon construction materials were limited in availability and came with a price premium. That is changing. Across the Swedish market, CO₂ intensity of concrete has already decreased 10–15% between 2020 and 2024, according to research from RISE. Similar developments are underway in steel, with recycled options increasingly accessible.
As Annachiara Torciano at Slättö puts it:
“An investor should aim for as low embodied carbon as possible, as cost efficiently as possible.”
Key solutions include material‑efficient structural design; optimized concrete composition by substituting high‑CO₂ Portland cement with alternative cementitious materials; and using the right concrete in the right place, avoiding unnecessarily high concrete classes.
Savings from optimised structures and right‑sized concrete often offset any additional cost from low‑carbon materials. Early planning is crucial.
Availability and relative costs of solutions are dynamic, not static. As low‑carbon materials and techniques scale up, competition will increase across the value chain and solutions will approach cost parity.
How to get started
Here are practical steps to begin integrating embodied carbon into decision‑making while keeping cost‑effectiveness in mind.
- Gather knowledge about embodied carbon levels in your markets and segments.
Public data is available, particularly from countries with carbon‑footprint requirements. Your past and current projects are also important sources of information; LCA tools can be used to measure embodied carbon. Asking peers and construction companies to share information about low‑CO₂ projects is another valuable source.
- Introduce carbon criteria in construction tenders and procurement.
Tender criteria can include a maximum embodied carbon limit for the project or a requirement to estimate embodied carbon as part of tender submissions to enable comparison. Criteria in tenders are essential because without them, it is impossible or very costly to reduce embodied carbon.
- Conduct early‑phase carbon assessments.
Feasibility studies during the concept and design phase help identify material‑efficiency opportunities and evaluate alternatives. These assessments inform development decisions.
- Set targets according to a science‑aligned standard.
Targets help set the overall direction for future projects. If they are science‑aligned, they will likely be in sync with the rest of the industry, as investors and companies increasingly set climate targets based on international standards such as the Science Based Targets initiative or the Net Zero Investment Framework.
As Annachiara Torciano notes:
“We have already seen questions about embodied carbon in some transactions.” Having a credible approach prepares investors for these conversations.
What to expect as a result
Considering embodied carbon in project development brings several advantages:
- Regulatory preparedness
Denmark, France, and Sweden are already regulating embodied carbon, and EU‑wide limits are approaching. Early adoption reduces the risk that projects appearing green today may no longer be considered so once built.
- Clearer dialogue with institutional buyers
Transparent data increases confidence, particularly among investors with their own climate commitments.
- Contribution to emissions reductions
As one of the few areas where new construction can reduce emissions today, embodied carbon offers tangible progress.
- Potentially improved liquidity
Although embodied carbon is only beginning to emerge as a sustainability factor in new projects, newly built assets with stronger sustainability profiles can attract broader interest at exit.
One to watch: the emergence of a common rating
Despite progress in standards and regulation, embodied carbon still lacks a common reference system.
Energy ratings are well understood; embodied carbon data are not.
This leaves investors and contractors developing their own interpretations.
As Annachiara Torciano puts it:
“We have energy ratings, where is the embodied‑carbon rating? Now, every investor is doing this work themselves. What we really need is a common reference: an A, B, C scale for embodied carbon.”
The absence of such a system is slowing progress. As regulation matures, a standardised rating is likely to emerge — and investors who understand how to navigate it will be better positioned.
Conclusion
Embodied carbon is no longer a niche technical issue. It is becoming part of corporate climate reporting, part of regulatory frameworks, and increasingly part of buyer expectations.
Solutions exist; many of them are cost‑neutral, and the pace of innovation is accelerating.
For investors with development pipelines, the question is not whether embodied carbon will matter, but how quickly.
Those who integrate it now — with clear procedures, early assessments, and targeted procurement — will be better positioned to future‑proof assets and manage emerging expectations.
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This article is part of Concrete Action Towards Net Zero: The Industry Dialogue — a collaborative series by Ecometrix and BDO Sverige.
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