The market may have cooled on ESG, but not on green homes. Energy performance is emerging as the new metric driving property prices and lending decisions.
Commentary from Lisa Jennings, Chief Commercial Officer for Cotality Australia. This article originally appeared in Capital Brief.
You’d be forgiven for thinking no one cares about sustainability anymore. “ESG is dead” has become the market cliché of 2025. But in housing, the data says otherwise.
Recent analysis by Cotality shows that investing in a home’s sustainability makes financial sense. Our “Watt’s it Worth” report found that adding one star (on a 1–10 scale) to a home’s energy efficiency rating adds around $10,000 in value, while installing solar panels lifts value by more than double that ($23,100).
Across Australia’s 5.5 million detached homes estimated to be below 6 stars — 7 stars being the current national construction code minimum for new homes — a one star nation-wide efficiency improvement program could add more than $50 billion in value. Bringing those homes up to NCC levels would push that figure many times higher.
Is that likely? The federal government is moving towards mandatory energy disclosure, requiring all homes to publicise their energy rating at the point of sale or rental. Market forces are already pricing energy performance into property values and regulation is catching up. This could turn an emerging trend into a force of nature.
Australia’s 2035 emissions target, aiming for up to 70% cuts from 2005 levels, locks housing into the national decarbonisation agenda. Residential buildings account for around 10% of Australia’s total footprint, so the sector cannot stay outside scrutiny for long.
Major businesses are already required to report on climate risks and opportunities, including emissions linked to the homes they build, own or lend against.
Enter the fourth pillar
For banks, this shift goes to the heart of asset quality and balance sheet strength. Property valuation has long rested on three pillars: location, land size and dwelling type. But the data shows energy performance is becoming the fourth pillar.
As energy ratings become visible and comparable, efficient homes will sell faster and at higher prices, while inefficient homes will face growing “brown discounts”.
The impact will extend beyond individual transactions. Lenders with large exposure to inefficient stock need to consider the risks as regulators place tougher requirements on housing and as those rules flow into asset values. Australia has precedent: the ACT has required disclosure for two decades and the evidence is clear. Energy ratings influence price.
It’s expected that a national rollout of energy ratings could begin within 18 months. It won’t be long before these ratings are formally incorporated into valuation models. The property industry needs to participate actively in that process rather than watch from the sidelines.
Internationally, this has become standard practice. In Europe, home energy ratings have been required for well over a decade. Many jurisdictions also impose minimum standards for rental properties. It’s not unreasonable to assume Australia will follow that path, with an early version already tabled in Victoria. The impact on lenders, owners and landlords won’t be immediate, but over time it will be significant.
Across millions of homes, these changes could reshape mortgage books, insurance pricing and portfolio risk assessments.
There’s further opportunity here too beyond compliance. Retrofitting Australia’s underperforming homes could unlock hundreds of billions in market value and create a new financial services segment.
For households, the case is straightforward: energy upgrades deliver lower bills, better comfort and higher resale prices. For the economy, the flow-on effects include construction jobs, energy savings and reduced import dependence.
Banks are already responding. “Green mortgages” and energy renovation finance offers have grown noticeably — albeit from a low base — in recent years, with preferential rates for high-performing homes and upgrade measures. Financing improvements that raise property value, cut emissions and lower default risk is sound business, not virtue signalling. These products have been niche, but as disclosure spreads, demand for products that reward efficiency will only grow.
As Al Gore reminded delegates during his recent Sydney visit, climate change isn’t a distant concern — it’s happening “yesterday, last week, this month”.
Get this right and Australia can unlock enormous value while delivering lower bills, stronger balance sheets, greater energy independence and measurable progress toward net zero. Now is the time to act.
