Sustainability within
Real Estate
Risks and Opportunities for Cyprus
- 1.What is ESG?
- 2.ESG effects on financial institutions involved in real estate
- 3.Insurance & physical risk assessments
- 4.Risks and opportunities for companies in Cyprus
- 5.How SustainCy ensure your long-term success.
ESG is the inclusion of environmental and social metrics into a company's financial performance. Carbon emissions, waste generation, and labour practices all have an impact on a company's financial performance.
The two-year pause on the implementation of the CSRD creates an opportunity for companies in Cyprus to take advantage of the VSME. With careful planning and execution, companies can get ahead of the regulations and minimise their future carbon taxes at a fraction of the cost of complying with the CSRD.
As part of the EU green deal - Brussels' plan to make the economy carbon neutral by 2050, ESG has become a core focus for banks, investors, and CFOs.
Failure to comply with ESG regulations leads to penalties & fines, while compliance creates financial incentives such as tax breaks, reduced interest rate loans, and green bond eligibility.
The real estate sector is set to be heavily impacted by the introduction of ESG regulations as the EU looks to decarbonise an industry responsible for 40% of its GHG emissions. A VSME report provides companies in Cyprus with the ability to maintain their competitiveness and comply with the demands and expectations of lenders & investors, insurers, and their clients.
institutions involved in real
estate
Banks and investment funds across Europe are now required to comply with the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy. Real estate projects with strong ESG credentials have become more attractive to financiers, as they can be more easily classified within the sustainable investment categories defined by these regulations. By contrast, projects lacking ESG data increase the compliance burden and perceived risks for banks and investors, often resulting in higher financing costs or reduced access to capital.
In practice, this means that your company’s ESG performance is directly correlated to the financing terms it can secure from financial institutions.
From January 1st, 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) will take full effect, requiring companies to pay for the carbon emissions embedded in imported raw materials such as steel and aluminium. These costs are expected to drive price increases of 12–14% for key construction inputs, significantly raising the overall cost of real estate projects. In this environment, securing favourable financing terms through strong ESG performance becomes essential for developers who want to maintain competitiveness in the Cypriot market.
Private equity
In Cyprus, many high-value real estate transactions involve off-plan sales to wealthy individuals seeking EU residency or passports. While ESG may not be a decisive factor at the initial purchase, it becomes crucial at the point of resale or refinancing.
- Depressed resale values
- Longer sales cycles
- Reduced interest from institutional buyers
- Increased insurance premiums
Insurance companies in Cyprus are yet to implement advanced climate risk models into their insurance decisions, which provides companies within the real estate sector a two-year advantage to utilise data that insurance companies do not yet have.
Physical risk models combine sophisticated algorithms with satellite data, atmospheric conditions, and records of past hazard events. By utilising more than 75 years of data on rainfall, storms, and river flooding in Cyprus, these models generate detailed physical risk ratings for every asset in the country.
By contrast, current models used by most insurance companies rely heavily on historical loss data and do not fully account for variations in atmospheric conditions or future carbon emission scenarios. This creates a critical blind spot in pricing risk. For every 1°C increase in air temperature, the atmosphere can hold around 7% more water vapour, amplifying the intensity of rainfall and flooding events.
For example, a property in Limassol may appear to face only moderate flood risk under traditional models, but forward-looking climate projections reveal a significant increase in extreme rainfall events by 2050. Without factoring in these dynamics, asset values and insurance costs are misjudged.
With SustainCy’s climate risk software, companies can assess the true physical risks their properties face and make informed decisions to protect asset value, reduce future insurance costs, and enhance resilience.
companies in Cyprus
From January 1st, 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) will be fully enforced. This regulation requires companies to pay for the carbon emissions embedded in imported raw materials such as steel, aluminium, and cement — all of which are heavily used in the Cypriot construction sector.
For developers, this means significant price increases, with estimates of 12–14% for steel and aluminium alone. Cyprus, being highly dependent on imported building materials, will be among the hardest-hit EU countries. These rising costs will directly affect project budgets, profitability, and ultimately, competitiveness in both domestic and international markets.
Companies can, however, use CBAM to gain a competitive advantage over their competition. With the right approach to strategic planning and supplier engagement, developers can reduce their exposure to CBAM-related costs and ensure long-term competitiveness. By incorporating sustainability considerations into procurement and aligning with transparent ESG reporting standards, companies in Cyprus can demonstrate resilience, gain investor confidence, and strengthen their market position.
long term success
What we do :
- Produce a complete VSME report through a simple 15-minute form.
- Develop and implement a tailored ESG strategy for you.
- Assess current CBAM risks and opportunities.
- Conduct a detailed Physical Risk assessment.
- Instantly improve your KPIs.
At SustainCy we seek to strengthen your competitiveness and help you navigate all future EU ESG directives.