The Real Estate Industry Is Finally Accounting for Carbon Hidden in Buildings

• Scope it out: New standards are finally accounting for embodied carbon in buildings as the government scraps proposed SEC regulations to do so.

• Eastern bound: KKR’s earnings report shows that American investors are investing more in Asian markers as the dollar weakens.

• Bank on it: Concerns over the balance sheets of regional banks ease on reports that Western Alliance has not found any more fraud in its loan portfolio.

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ESG & Compliance

The Real Estate Industry Is Finally Accounting for Carbon Hidden in Buildings

For years, sustainability in real estate was defined by what showed up on the utility meter. The focus was on energy use, efficiency, and whether a building could keep the lights off when no one was around. But as the race toward net-zero accelerates, attention is shifting to the hidden side of carbon—the emissions embedded in the materials themselves. Steel, glass, and concrete each carry an environmental cost long before a tenant ever moves in. These Scope 3 emissions, once an afterthought, are now the next frontier in climate accountability for the built environment.

BREEAM’s new Version 7 standards put that challenge front and center. By expanding credit categories for embodied carbon and requiring full lifecycle assessments, the update pushes developers to look beyond operations and into construction and material sourcing. “Understanding embodied carbon is really challenging but it is the only way to know if a building is operating at net zero carbon,” said Breana Wheeler, BREEAM’s U.S. Director of Operations. The new framework rewards early analysis, transparency in product data, and adaptability in design, encouraging teams to see buildings not as static structures but as material banks for future reuse.

That shift is reshaping how sustainability is valued in real estate. Buildings with lower embodied carbon risk are beginning to command higher valuations and lower insurance costs. Tenants and investors are asking for transparency, and new digital tools are making those disclosures possible. The industry’s definition of “green” is expanding from what comes out of a building to what goes into it. The story that started with counting kilowatts is moving upstream to counting tons of concrete and steel—and redefining what it means to build responsibly.

Overheard

Regional Banks Breathe Easier After Western Alliance Review

Regional bank stocks surged this week after Western Alliance Bancorp announced it had found no additional irregularities in its loan portfolio and did not anticipate further surprises. The lender had already flagged a lawsuit and reserve tied to an approximately $100 million non-performing commercial credit line, yet its statement helped calm investor nerves and sent its shares upward.

That relief, however, comes with a caveat. The backdrop of these disclosures—fraud-allegation lawsuits, concentrated real-estate loans, and sharp markdowns—echoes the turbulence in the regional banking sector during the 2023 wave of failures. For real-estate lenders, borrowers, and developers, the message is unmistakable: transaction momentum remains, but underwriting standards, collateral depth, and counterparty transparency are back under the spotlight.

If Western Alliance’s “clean bill of health” holds up, it may mark a phase where credit concerns shift from headline-driven panic to a more disciplined recalibration. But the question now is how many other banks will look under the hood and find similar clarity—and whether the market’s relief lasts long enough to support new real-estate finance flows.

KKR’s Earnings Reveal a Wave of U.S. Capital Moving to Asia

KKR’s latest earnings point to a global shift that could reshape property markets. The firm’s co-CEO, Joe Bae, said more U.S. capital is flowing to Asia as the dollar weakens, signaling that investors see stronger fundamentals and better long-term value overseas. This reversal of last year’s “strong dollar” trend has already made Asian assets cheaper in relative terms and is drawing liquidity back into markets like Japan, Singapore, and India, where industrial and data-center development is booming.

The appeal goes beyond currency. Asia’s appetite for logistics infrastructure, digital connectivity, and urban renewal continues to outpace the supply of modern space. Global investors are chasing these growth stories at a time when Western markets are still grappling with high borrowing costs and slowing rent growth. KKR’s recent allocations reflect a growing consensus that Asia’s property cycle could be at the start of a new expansion phase—especially in sectors that underpin long-term productivity like industrial land and data storage.

Still, this flow of capital could create imbalances of its own. As more Western investors crowd into Asia’s prime markets, valuations could heat up, and local developers might face higher land and financing costs. Meanwhile, less capital flowing into U.S. projects could prolong the stagnation in certain domestic sectors. Capital doesn’t just follow growth, it creates it, and Asia’s surging inflows may soon redefine where the world’s next property boom takes hold.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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