By Alexandre Le Gad, Credit and ESG Analyst, Crédit Mutuel Asset Management

Crédit Mutuel Asset Management is an asset management company within Groupe La Française, the holding company for the asset management division of Crédit Mutuel Alliance Fédérale.

Biodiversity is becoming a material issue for listed real estate companies and developers. While the topic still lags behind climate-related challenges in terms of maturity, it is rapidly gaining prominence amid tighter environmental regulation and growing pressure from investors and public authorities. The debate now extends well beyond carbon efficiency alone. A company’s ability to preserve or restore urban ecosystems is increasingly shaping the attractiveness of both real estate assets and urban areas, helping create more vibrant, mixed-use and livable environments. Such initiatives also contribute to broader societal value creation and may ultimately support asset valuations[1].

Governments in several countries are accelerating this shift through targeted regulation and policy measures. In the United Kingdom, the Biodiversity Net Gain[2] framework now requires most new real estate developments to demonstrate a minimum 10% improvement in biodiversity, pushing developers to integrate biodiversity considerations from the earliest design stages. This shift is gradually encouraging the real estate sector to prioritize urban regeneration, namely the transformation or refurbishment of existing assets and brownfield sites, as well as land de-artificialization, over so-called “greenfield” developments built from scratch. This trend is particularly visible in the office sector, where rising vacancy rates in peripheral areas over recent years have strengthened the economic rationale for refurbishment and asset repositioning strategies.

Beyond Europe, some governments are also deploying large public investment vehicles as tools for urban and environmental transformation. Saudi Arabia’s Public Investment Fund (“PIF”) is a notable example, targeting more than USD 3.8 trillion in assets under management by 2030[3]. The fund is financing several megaprojects incorporating biodiversity and climate resilience objectives, including NEOM and The Red Sea Project, developed along the Red Sea coast, with commitments to preserve 75% of its natural ecosystems and deliver a net conservation Benefit of +30% by 2040. Beyond environmental considerations, such projects also illustrate how biodiversity is increasingly being used as a tool for territorial attractiveness and differentiation in large-scale real estate and tourism developments, enhancing the image of destinations, perceived quality of life and their ability to attract investors, businesses, tourists and high-income residents.

Biodiversity and asset valuation

Large corporate tenants are placing increasing emphasis on the environmental quality of assets, access to green spaces, thermal comfort and climate resilience. As a result, buildings benefiting from environmental certifications generally continue to attract stronger leasing demand, particularly in prime markets. Several studies by Jones Lang LaSalle (JLL) and CBRE Group [4] point to the growing polarization between sustainable assets and obsolete buildings. These studies estimate that ESG-certified office buildings in Paris and London can command rental premiums of +6% and +11% respectively, while lower-performing properties face higher vacancy rates and mounting pressure linked to the so-called “brown discount”.

Biodiversity remains a less mature consideration than carbon emissions in valuation models. Current valuation premiums still primarily reflect energy performance, ESG certifications and overall asset quality. Nevertheless, biodiversity is gradually being incorporated through factors such as the quality of outdoor spaces, the reduction of urban heat islands and improvements in occupant well-being.

The limits of urban greening

However, part of today’s “renaturation” strategies remains largely cosmetic. Several recent academic studies highlight that many urban greening projects are still primarily driven by aesthetic objectives or ESG certification requirements, rather than by genuine ecological restoration. Some projects involve the removal of mature trees during construction phases, even though their climate and ecological benefits cannot be offset in the short term by new plantings. Several studies, including research cited by PubMed Central[5], estimate that mature trees can absorb up to 70 times more air pollution than young trees. Other initiatives rely on non-native species that are sometimes poorly adapted to future climate conditions, water-intensive landscaping systems or greening solutions that provide limited support to local biodiversity. Research published in Diversity (MDPI)[6] also shows that native species generally offer greater climate resilience, require less irrigation and provide stronger support for pollinators and urban ecosystems.

Excessive standardization is also becoming an increasing limitation of urban greening strategies. Studies on urban vegetation policies by Urban Nature and Biodiversity for Cities[7], as well as ResearchGate[8], show that cities and developers frequently rely on a limited range of plant species in order to reduce maintenance costs and simplify operations. This homogenization can weaken effective biodiversity while increasing vulnerability to disease outbreaks, droughts and extreme weather events. Several European cities have already recorded high mortality rates among newly planted trees during recent drought periods, particularly when species were not well adapted to local conditions. In urban planning, the so-called “10-20-30 rule” is increasingly becoming a reference framework: no more than 10% of trees from the same species, 20% from the same Genus (plant group) and 30% from the same botanical family, in order to reduce biological and climate-related risks[9].

Across projects, research on urban heat regulation shows that the cooling benefits of greening vary significantly depending on tree canopy density, tree maturity, species selection and urban configuration, with effects ranging from a fraction of a degree to several degrees during extreme heat events.

Towards a more functional approach to biodiversity

This evolution reflects a broader shift in the sustainability approach within real estate: the sector is gradually moving away from highly visible “green design” strategies towards approaches that prioritize operational efficiency, climate resilience and long-term asset optimization.

As a result, the functional ecological quality of developments is likely to become more important than the sheer quantity of green spaces or trees planted, gradually making biodiversity an additional differentiating factor in the long-term quality and performance of real estate assets.