A new world of challenges are facing multifamily property managers. While energy costs continue to rise, frequent climate events are driving up insurance rates, and an ongoing trade war has increased the costs of construction materials. So from building new constructions to owning one to just trying to keep the lights on, costs are up across the board, and there’s greater risk to operating multifamily properties than there’s ever been.
Fortunately, multifamily buildings (MDU) operators are not defenseless against these challenging trends. ESG compliance offers them ways to reduce costs, increase revenue, and future-proof their investment for generations to come. Indeed, Environmental Social Governance (ESG) has emerged at the heart of multifamily management, and has become a requirement in the operation of commercial properties.
But what exactly is ESG and how is it impacting multifamily property management (and commercial property management, in general)? Our Guide to ESG breaks down exactly what multifamily buildings operators should expect moving forward, and explores eleven ESG best practices, and how Verdant can help you reach your ESG targets with our smart technology.
What is Environmental Social Governance?
Environmental Social Governance (ESG) is more than a corporate buzzword. It’s a business framework that reduces operating costs, attracting capital, and mitigating long-term risk. At its core, ESG is a strategy that helps multifamily property owners protect their investments in an increasingly volatile market.
In other words, ESG is about more than just implementing sustainable MDU management practices for the benefit of future generations. It’s also about improving financial performance, creating value, and accessing new market opportunities.
Environmental
The “E” in ESG refers to the environmental considerations of a business — i.e. reducing the environmental impact of a business investment. In the case of multifamily properties, this will largely entail embracing more sustainable technology and supply chain systems.
This includes renewable energy sources, high-efficiency HVAC technology, other energy management systems, and using more sustainable building materials and construction methods, and managing waste disposal and water usage.
Social
The “S” in ESG measures how a property impacts people, such as tenants, employees, contractors, suppliers and the broader community. For MDU operators, this includes inclusive hiring, fair labor practices, health and safety standards, and responsible sourcing.
Social ESG targets aren’t always easy to quantify, but they influence key financial metrics like occupancy rates, tenant satisfaction, and staff retention. Aligning operations with community well-being isn’t just good PR—it’s good business.
Governance
The “G” in ESG addresses how decisions are made — i.e. who holds power, how that power is distributed, and whether governance structures promote transparency and accountability.
For multifamily operators, this includes implementing fair and inclusive decision-making frameworks, ethical board selection practices, and clear lines of communication with investors, residents, and other stakeholders. Strong governance builds trust, lowers risk, and ensures that ESG performance can be scaled across an entire portfolio.
ESG Legislation and Regulatory Compliance in 2025
Regulatory pressure around ESG is already reshaping how multifamily properties are financed, operated, and evaluated. In 2025, ESG compliance is expected to move from voluntary disclosure to mandatory reporting across multiple jurisdictions, particularly for mid-to-large portfolios. Indeed, governments at all levels are introducing stricter standards around emissions, energy performance, and climate risk disclosures.
At the federal level, for instance, the SEC proposed new rules that would require publicly traded companies to disclose climate-related risks and carbon emissions. Meanwhile, at the state and municipal level, we’re seeing everything from benchmarking and emissions caps for large buildings and penalties for non-compliance to mandatory retrofits and incentives for early adoption of energy-efficient systems.
For MDU property managers, the implications are clear: tracking ESG performance is no longer optional. To stay competitive and compliant, operators will need to implement technologies that monitor, measure, and report on their environmental and social performance in real time.
ESG in Multifamily Buildings property management
Insofar that MDUs properties are businesses that are also community living spaces, ESG best practices are very much aligned with efficient and profitable property management outcomes. In other words, adopting sustainability practices not only has a positive impact on the community in which the MDU operates in, but also increases tenant retention and affords operators access to advantageous financing opportunities. Consequently, the MDU management industry has witnessed the rise of eleven distinct ESG trends.
1. ESG best practices drive revenue opportunities
There are clear financial incentives for multifamily property management companies to adopt ESG best practices. Not only does implementing ESG best practices open-up advantageous borrowing opportunities, but it can also attract new investors while supporting occupancy goals.
Unsurprisingly, MDU property management companies are increasingly tracking environmental data and finding new ways to reduce their energy costs by reducing their property’s carbon footprint. Whether that means installing commercial grade smart thermostats (such as Verdant’s ZX and VX Thermostats) to optimize energy consumption in both common areas and tenant units, or implementing waste management policies, achieving ESG targets are proven to bolster MDU revenue.
It’s important to note, however, that not all smart thermostats are created equal. Commercial properties such as MDUs require a commercial-grade smart thermostat solution rather than consumer-grade thermostats (such as those offered by Nest and Ecobee).
Commercial-grade smart thermostats offer a range of features over their consumer-grade counterparts, and provide multifamily property managers more control over their property’s energy consumption. These features include occupancy sensors, night occupancy mode, flexible setbacks, advanced humidity control, and energy savings reports.
Put simply, smart thermostats are low-cost infrastructure upgrades that significantly reduce energy energy costs and future-proof an investment, all while contributing to that property’s ESG compliance.
2. Environmental regulations will continue to expand
Multifamily property management companies should also expect further environmental regulations to be put in place in coming years. Consequently, prioritizing ESG targets in the present will help them prepare for what’s to come.
Accordingly, it’s crucial that MDU operators prepare to meticulously document their properties’ ESG performance and monitor their progress towards complying with sustainability policies. Without a clear environmental framework in place, multifamily property management companies can find themselves falling short of future ESG requirements and incurring the costs of having to retrofit their infrastructure on short-notice.
3. Leveraging AI and Automation in ESG
Artificial intelligence and automation are becoming critical to executing ESG strategies at scale. From predictive HVAC scheduling to real-time energy monitoring, AI-powered tools such as Verdant Plus and our thermostat manager app help MDU operators cut waste, reduce costs, and ensure compliance with evolving regulations.
These systems don’t just flag inefficiencies. They solve them before they arise.
Automated energy management systems also simplify ESG reporting. By collecting data across units and common areas, they generate auditable performance metrics without manual oversight. This allows operators to demonstrate ESG progress to investors and regulators alike — all the while reducing overhead costs, unlocking rebate eligibility, and future-proofing their portfolio against new compliance requirements.
That being said, smart thermostats, smart HVAC energy management systems are all reactive steps to net-zero targets. There are also proactive automation steps that MDU managers can take toward reaching ESG goals.
Specifically, Demand Response programs allow multifamily property managers to receive credits against their energy costs whenever they choose to reduce their consumption during peak demand times. Through a Demand Response program, commercial property managers receive alerts prior to forecast peak usage ‘events’, and unless they opt-out of that event, their various smart appliances adjust to draw less energy from the grid during that event. Multifamily property operators can not only reduce their energy consumption when it counts the most, but then sell that energy back into the grid, and apply that revenue against future energy costs.
4. Energy-conservation & net-zero carbon properties are becoming the standard
Energy conservation is at the heart of ESG best practices for multifamily properties. Over time, energy-conserving and net-zero carbon buildings will become the norm for MDUs, rather than the exception, forcing MDU operators to consider the environmental impact of their investment.
With renewable energy sources becoming more and more accessible, multifamily property management companies will be expected to further reduce their building’s energy consumption and eventually achieve net-zero carbon emissions. In the meantime, MDU operators are increasingly relying on smart energy management technology to track real-time occupancy patterns of their tenants and optimize energy consumption of both the HVAC and lighting systems.
5. Resilience Planning: ESG as a Climate Adaption Strategy
Climate resilience is a present-day operational requirement for multifamily operators. From extreme heat and wildfires to flooding and power grid strain, climate events are now a direct threat to property performance and tenant safety.
ESG frameworks help MDU operators proactively adapt through energy management, smart building systems, and material choices that withstand environmental stress.
Smart HVAC controls, backup systems, and weather-responsive automation don’t just minimize damage, they also reduce insurance risks and protect rental income. In short, ESG-led resilience planning allows operators to safeguard their assets, maintain habitability during disruptions, and ensure continuity in an increasingly unpredictable climate.
6. Environmentally friendly buildings tend to yield higher rents
Not only do ESG-compliant MDU properties typically have lower operating costs, but they also tend to yield higher rents. For instance, smart energy saving technologies are a significant draw for potential tenants.
Indeed, one study by NMHC and Kinsley Associates found that 77% of renters would pay 30$ per month more if their unit features such smart technology. It’s also worth noting that environmentally-conscious tenants are also more likely to maintain their tenancy in perpetuity when they’re aware of a property’s ESG efforts — even if it means paying a slightly higher rent.
7. Developers are turning to sustainable construction materials
More multifamily developers are prioritizing sustainable building materials as a practical path to meeting ESG targets. Traditional materials like concrete and steel come with high embodied carbon and volatile pricing, both of which increase a project’s environmental and financial risk.
Timber and other low-emission alternatives offer a cost-effective solution. Engineered wood products, for example, reduce greenhouse gas emissions during manufacturing and often cost less to source and install. As regulatory pressure mounts and carbon tracking become standard, sustainable construction materials are no longer niche, but essential for managing construction costs and future-proofing new developments.
8. Setting ESG benchmarks and data transparency
Clear benchmarks and transparent reporting are fundamental to how multifamily operators are evaluated by investors, regulators, and tenants. ESG strategies that can’t be measured or communicated offer limited value in today’s market.
To meet expectations, MDU operators must define specific ESG targets, track performance, and report progress using standardized metrics. This is typically achieved through integrated energy management systems and Building Management Systems (BMS) that automate data collection and visualization. Transparent reporting not only builds stakeholder trust, but also supports compliance, improves access to capital, and strengthens a property’s competitive position.
9. Resident Engagement in ESG Initiative
ESG goes beyond operational infrastructure and includes how residents interact with the property. Engaging tenants in sustainability efforts is a low-cost, high-impact way to boost performance and tenant retention. Programs like energy challenges, recycling initiatives, and digital dashboards help residents both see and influence the property’s environmental impact.
When residents are part of the ESG strategy, they’re more likely to support conservation goals, report inefficiencies, and renew leases. It also reinforces brand trust, particularly among younger tenants who expect transparency and shared values.
10. Affordable housing investments generate returns and support communities
Affordable housing plays a critical role in delivering measurable social impact while supporting long-term investment performance. As inflation and housing costs rise, more households are being priced out of homeownership and market-rate rentals, driving the demand for affordable housing units.
Multifamily operators who invest in affordable housing can meet ESG targets while also accessing financial incentives such as tax credits, grant funding, and favorable financing terms. Beyond compliance, these developments foster community stability, reduce vacancy risk, and enhance brand equity.
11. Health-conscious facilities are a top ESG target
Health and wellness are also core benchmarks of ESG performance in multifamily housing. By investing in clean air systems, enhanced filtration, and wellness-focused amenities like gyms or outdoor spaces, operators can directly support tenant well-being while differentiating their properties.
These upgrades go beyond common areas. Natural lighting, in-unit ventilation, sufficient living space, and responsive maintenance protocols all contribute to healthier living environments. Indeed, prioritizing health-conscious design doesn’t just meet social ESG targets. It also boosts tenant satisfaction, reduces turnover, and signals a long-term commitment to resident quality of life.
Smart Technology, ESG, and Reduced Energy Costs
Smart technology is one of the most valuable resources available to MDU operators in reaching their ESG goals. From reducing energy consumption and water waste, to tracking and reporting on their progress, smart tech is something that MDU operators can invest in and implement today toward implementing meaningful ESG strategies.
With Smart HVAC energy management technology, for instance, multifamily management companies can significantly reduce their energy consumption (and costs), while also gaining crucial insight into their carbon emissions. That insight can then be used to both achieve further reductions and communicate their progress to stakeholders and the community in quantifiable terms.
In the case of installing Verdant’s energy management system and line of smart thermostats, MDU managers can expect to recoup their investment in as little as 18 to 36 months. So not only are MDU operators able to reduce their carbon footprint while tracking and reporting on their properties energy consumption, but also achieve such significant cost savings that they can increase their profitability, and even increase the resale value of their property.
Green Financing and ESG-linked Loans for MDU Retrofits
ESG performance is now a qualifying metric for gaining access to capital. Green financing and ESG-linked loans offer multifamily operators preferred rates, longer terms, and incentive structures tied directly to sustainability outcomes. From energy-efficient retrofits to renewable energy installations, these financial products reward operators for reducing emissions, improving building performance, and documenting progress.
Retrofits that once required years to justify can now be financed with favorable terms and rapid ROI. Lenders, insurers, and institutional investors increasingly prioritize ESG-aligned assets, giving compliant properties a competitive edge. In short, ESG compliance is better for your multifamily property’s balance sheet.
Achieving ESG Goals with Verdant
As the real estate industry continues to seek more sustainable practices and outcomes, achieving ESG targets is both a priority and requirement for MDU property management companies. In addition to more sustainable construction materials and more conscientious organizational practices, smart technology offers MDU operators an immediate avenue to their ESG goals.
Whether it’s optimizing energy consumption or tracking and reporting on efforts and outcomes, smart technology is simple, straight forward, and revenue positive means for MDU operators to build more sustainable communities while bolstering their bottom line. To learn more about how Verdant’s technology can help your properties reach ESG targets, get in touch with us today.