The UNEP Global Status Report for Buildings and Construction 2025–2026 state that the construction and real estate sectors account for approximately 37% of global energy-related carbon dioxide emissions and consume nearly 50% of the world’s extracted materials.

While many investors still focus on operational energy and emissions, investors increasingly need to understand the climate, regulatory, and financial risks embedded within a building’s entire lifecycle. Whole-life carbon is a strong and increasingly important indicator of long-term investment potential.

The materials selected, procurement decisions made, and construction methods used all contribute to embodied carbon, which contributes to a building’s whole-life carbon footprint. Unlike operational emissions (such as air conditioning or lighting), embodied carbon largely takes place during construction, emphasizing the importance of early decisions in the planning process.

Why This Matters

• According to the UNEP Global Status Report, the world adds approximately 12.7 million square meters of new floor area every day, which is roughly equivalent to building a city the size of Paris every week.
• Construction decisions lead to long-term financial consequences. Much of a building’s carbon footprint is determined during design and construction, making these decisions nearly impossible to reverse later in the future.
• Whole-life carbon affects investment risk. Material selection, procurement, demolition, and other construction methods can influence future valuation, potential regulatory scrutiny, and insurance costs.
• Construction growth is outpacing sustainability progress. Although buildings are becoming more energy efficient, global construction continues to expand much faster than the industry’s transition toward low-carbon and more sustainable development.
• Investors need better ways to evaluate transition readiness. Whole-life carbon provides insight into carbon lock-in, material dependency, regulatory exposure, and long-term resilience that operational emissions alone cannot capture.
• The buildings constructed this decade will shape future investment outcomes. The UNEP Global Status Report for Buildings and Construction 2025–2026 notes that half of the buildings expected to exist in 2050 have yet to be built or renovated, meaning today’s decisions on design, materials, procurement, and construction will affect future emissions, regulatory risks, financing opportunities, and long-term asset value.

Details

One of the greatest risks investors face is carbon lock-in.

The World Resources Institute describes carbon lock-in as the process by which traditional infrastructure (typically centered around fossil-fuel systems) commits organizations to decades of future emissions because replacing those assets becomes difficult and expensive.

The OECD’s report on preventing carbon lock-in in transition finance similarly emphasizes that investments made today can expose businesses and financial institutions to future transition risks if infrastructure and construction cannot adapt to changing climate policies or market expectations.

The scale of current day construction projects makes this challenge particularly significant. According to the UNEP Global Status Report, the world adds approximately 12.7 million square meters of new floor area every day, which is roughly equivalent to building a city the size of Paris every week.

Global building floor area reached approximately 273 billion square meters in 2024, with nearly half of the buildings expected to exist in 2050 still waiting to be built or significantly renovated. The massive scale of building and construction highlights why investment decisions made during this decade are particularly important. Every project has the potential either to accelerate the transition toward lower-carbon buildings or lock in decades of future emissions and financial exposure to risks.

Additionally, construction’s environmental footprint goes well beyond the buildings themselves. Since the construction sector consumes nearly half of all extracted raw materials, investors also face growing exposure to resource availability, supply chain shocks, and volatility of material prices.

The Climate Bonds Initiative argues that a successful low-carbon transition depends not only on cleaner energy but also on more sustainable extraction and management of critical raw materials. Similarly, the Clean Energy Transition Institute highlights the importance of reducing emissions from cement, steel, aluminum, and chemical production, industries that provide the foundational materials used throughout buildings and construction.

The environmental impacts of resource extraction are also broader than carbon emissions alone. Research analyzed by The Guardian, based on findings from the International Resource Panel, reports that resource extraction is responsible for approximately half of all global greenhouse gas emissions and more than 90% of biodiversity loss and water stress. These environmental pressures translate directly into financial risks as governments (for the most part) are passing more environmental legislation and investors are placing greater emphasis on responsible sourcing.

Progress toward more sustainable solutions is being made, but it is not occurring quickly enough to match the pace of construction. According to the UNEP Global Status Report, building energy intensity has declined by approximately 8.5% over the past decade, while green building certifications have nearly tripled. However, progress has slowed since 2020, and construction growth continues to outpace the transition toward lower-carbon development.

The report also estimates that investment in building energy efficiency reached approximately $275 billion US dollars in 2024, yet annual investment must increase to about $592 billion US dollars by 2030 to remain on trajectory to achieve global net-zero targets. This growing investment gap suggests that capital is more likely to flow toward companies and projects that demonstrate credible transition strategies.

At the same time, regulatory expectations continue to evolve. According to GRESB, climate-related disclosure requirements, compliance obligations, and legal risks are becoming increasingly important considerations for real estate investors. A study on green transition risks in construction similarly concludes that construction firms will need to adapt their governance, procurement strategies, and investment decisions as sustainability expectations continue to change in an evolving legal, political, environmental, and social landscape.

Rather than just viewing whole-life carbon as a scientific sustainability measure, investors can also begin using it as an indicator of long-term preparedness and adaptability. Whole-life carbon provides insight into whether an asset can remain competitive, financeable, and resilient as regulations, markets, and stakeholder expectations continue to change.

Conclusion

Construction has always been a long-term investment, but today’s decisions carry even greater significance due to the immense current-day scale. The buildings designed and constructed over the coming decades will greatly impact future emissions, resource consumption, regulatory compliance, and financial performance for generations to come.

Whole-life carbon should therefore be factored in along with energy performance, physical climate risk, and overall demand as part of real estate evaluation and consideration. Looking beyond operational emissions allows investors to derive a more complete and accurate understanding of transition risk, material dependency, and long-term resilience. As construction continues to expand globally, organizations that incorporate whole-life carbon into investment decisions will be better positioned to allocate capital responsibly, adapt to a changing regulatory landscape, and create lasting value in a lower-carbon economy.

Image Source: Kingspan