More than a third of Swiss homes were built before 1980. Today’s energy efficiency standards had not been developed back then. As climate rules get stricter and tenants become more aware of the importance of sustainability, energy-efficient renovations and upgrades that focus on environmental, social, and governance (ESG) issues have gone from “nice to have” to “strategic necessity.”
This change is creating both challenges and opportunities for property owners and investors, especially in cities like Zurich, Geneva, Basel, and Lausanne. In these locations, the supply of housing is limited and demand for modern, efficient real estate is growing.
Retrofitting these properties with energy efficient heating systems, better insulation, and sustainable materials could cut energy use by up to 40% while lowering carbon emissions significantly. Investors are increasingly focusing on ESG upgrades because they not only improve environmental performance but also enhance property value, attract tenants, and ensure compliance with evolving Swiss regulations. With over CHF 50 billion estimated in potential renovation investment across the country, modernising old buildings is both a financial opportunity and a critical step towards a greener, more resilient built environment.
This article discusses how ESG renovations can add value in Switzerland, which upgrades have the biggest financial effect, and why sustainable retrofits are now important for both regulatory compliance and investor returns.
Why Switzerland's Old Buildings Need ESG Renovations
The poor energy efficiency of older Swiss buildings is one of their owners biggest financial risks. Many old buildings use outdated heating systems, are not well insulated, and are generally not aligned with the country’s carbon reduction goals.
An unrenovated Swiss property is not only less appealing to tenants but also more likely to have higher operating costs and put owners at risk of fines from regulators. Therefore, renovating a property is a move to protect its long-term value.
Main reasons for ESG upgrades:
Regulatory pressure.
Authorities are ramping up efforts to meet the goals of Switzerland’s 2050 climate strategy. Cantons are introducing rules about fossil fuel usage, carbon emissions, and building performance. Owners who put off upgrades run the risk of:- more taxes on energy
- fines or being forced to change systems
- less eligibility for mortgages
- asset obsolescence in some cantons
Tenant expectations.
Renters are increasingly looking for more comfortable, energy-efficient, and environmentally friendly places to live, especially in Zurich, Geneva, and Lausanne.Financial incentives and subsidies.
Federal and state programs pay for some of the costs of making homes more energy-efficient. Investors who act quickly can use these subsidies to get higher returns.Growing investor interest in ESG-compliant assets.
Institutional and private investors are increasingly aiming to design portfolios that follow ESG principles. Demand for renovated properties is going up.
How ESG Renovations Raise the Value of a Property
Upgrading a building for more energy efficiency ensures that it has a lower impact on the environment and saves money in the long run. Here’s why:
1. More Rental Interest and Fewer Empty Units
Renters pay more for properties with modern insulation, heat pump systems, triple-glazed windows, and solar panels – especially in Zurich, Basel, and Lausanne.
For tenants, these upgrades mean:
- lower energy bills
- more comfort
- a stable living environment over the long term
In cities where vacancy rates are around 1%, ESG upgrades often give landlords the edge they need to keep their occupancy rates close to 100% and lower turnover.
2. Higher Value on the Market
In terms of long-term value growth, renovated Swiss properties almost always perform better than non-renovated ones. Buyers, especially institutional buyers, are becoming less willing to buy assets that need immediate repairs.
A building that has made energy-efficient improvements is usually:
- more valuable
- easier to finance or refinance
In Zurich and Geneva, renovated multifamily buildings have sold for 10 to 25 percent more than similar buildings that haven’t been improved.
3. Lower Maintenance Costs
Unmodernized buildings cost a lot to heat, waste a lot of water, and need a lot of expensive maintenance. ESG upgrades lower the costs of ownership by, for example:
- making heat pumps more efficient
- making insulation more effective
- introducing intelligent building management systems
- integrating renewable energy
Lower operating costs lead to higher net returns, especially for special purpose vehicles (SPVs) and pooled investment structures that share rental income.
4. Long-Term Compliance
Swiss building codes are getting stricter, and owners who don’t make repairs may:
- be obliged to replace heating systems
- have long-term rental permits cancelled
- lose the ability rent out their properties altogether
Investors who act quickly avoid these risks and will be ready for the next round of regulations.
What are the highest-value ESG upgrades?
Not all renovations bring the same level of return on investment. In Switzerland’s climate-conscious market, several types of upgrades tend to have the best financial and environmental returns:
- Energy Efficiency Renovations
The most important upgrade is to switch to a heat pump system instead of an oil or gas boiler. Heat pumps significantly cut down on carbon emissions and energy costs. More cantons are requiring property owners to switch away from fossil fuels to renewable options. - Insulation of Roofs, Facades, and Basements
Better insulation can cut energy use by 20% to 40%. It also makes units more comfortable and quieter. Triple-glazed windows are a simple but powerful upgrade. New windows keep heat in better and improve tenant satisfaction. - Solar Panels and Photovoltaic Systems
Solar energy makes buildings less dependent on utilities and gives them more freedom. Many modern (or modernized) Swiss buildings now produce more energy than they require. - Smart Building Management Technology
Energy monitors, automated heating controls, and consumption analytics all make things work better and more clearly.
Buildings with green roofing and better water management last longer and receive higher sustainability ratings. They also make cities less hot and less stressful on the environment.
When multiple investors share the costs and benefits of these upgrades, through an SPV for example, the return on investment is higher.
Why Tenants Prefer Eco-friendly Housing
Tenant preferences are changing in clear and measurable ways in Zurich, Geneva, Basel, and Lausanne. Younger renters and professionals are looking for homes that use less energy for both cost and lifestyle reasons.
- cheaper heating bills
- better comfort and stability in the indoor climate
- aesthetics
- personal values (environmental awareness)
- health concerns (like better air quality)
In Switzerland’s competitive rental markets, ESG renovations often lead to shorter vacancy periods and long-term leases that remain unbroken.
How ESG renovations affect returns on investment
From an investor’s point of view, ESG retrofits affect returns in a number of ways that can be measured:
Higher Rental Yields
Higher rents can be charged for upgraded units. Tenants are willing to pay more for comfort and efficiency, especially in the central districts of Zurich, Geneva, and Lausanne.Lower Capital Expenditure Over Time
New systems like heat pumps and solar panels will lower the cost of future maintenance. Cash flow and long-term returns stay steady.Better Exit Values
Buyers who want stable, future-proof assets are drawn to renovated homes. ESG upgrades make properties easier to sell and speed up transactions.Lower Risk of Fines
Investors protect themselves from expensive compliance problems by meeting current and future energy standards.Eligibility for Subsidies
Government incentives lower the cost of upgrades. This “free money” increases the return on investment for private investors and SPVs.
City-by-City Potential for ESG Renovations
Zurich
Many of Zurich’s homes were built before 1980 and need new insulation and heating systems. The city is working hard to meet its climate goals, so ESG renovations are a top priority for keeping assets safe for the long term.
Basel
Basel’s crowded city layout makes it easy to improve solar energy and insulation. ESG upgrades are very important because of the city’s strict environmental policies.
Geneva
Geneva has a long-term housing shortage and strict environmental rules. Upgraded energy-efficient units cost more, and cantonal incentives help with sustainable retrofits.
Lausanne
Young people moving to Lausanne tend to care about sustainability. In the rental market, homes with heat pumps, solar panels, and modern insulation do very well.
ESG Renovations and Real Estate SPVs
Swiss real estate SPVs, to which platforms like CapiWell facilitate access, let investors:
- put money together
- share the costs of renovation
- spread operational risks
- own institutional-grade assets without investing institutional-level amounts of cash
- share in the capital appreciation of the underlying asset
Shares in SPVs owning ESG-upgraded buildings typically:
- achieve higher net distribution yields
- are priced at a premium on the secondary market
- involve lower risks of long-term operational problems
ESG compliance also puts SPVs in line with the new EU taxonomy standards, which makes them more appealing to future buyers and institutional co-investors.
The Rules: Why ESG Compliance Is No Longer Optional
Swiss cantons are aiming to do away with fossil fuel heating by making energy efficiency standards stricter. Non-compliance may result in:
- required upgrades (for example, when an older heating system is no longer allowed)
- limits on rent hikes
- lower long-term values
Owners of properties with modern energy systems can avoid fines and are positioned to stay compliant through 2030 and beyond.
Conclusion: The Future of Swiss Real Estate Is ESG-Compliant
Upgrading for energy efficiency is now the right thing to do not just for the environment but also investors’ bottom lines. ESG-compliant properties are:
- more appealing to renters
- more valuable in the long run
- less risky to operate and own moving forward
Switzerland has set ambitious climate goals, and the Zurich, Geneva, Basel, and Lausanne authorities all put a high priority on sustainable housing. As a result, ESG renovations are now the key to unlocking long-term value in the country’s aging housing stock – and protecting Swiss real estate portfolios over the coming decades.
