As investors increasingly focus more on ESG as a key driver of how they deploy capital, retail assets will be forced to reckon with long-term sustainability challenges. And with companies setting net zero carbon commitments as a baseline, the costs associated with offsetting and improvements will have a tangible impact on net income and valuation, according to Mark Wynne-Smith, Global CEO of Valuation Advisory, JLL. 

While "climate risk equals investment risk," companies engaged in ESG initiatives must balance reaching those goals with profitability. For retail, that may prove particularly problematic.

"Retail typically involves a physical product trading hands, leading to emissions throughout the product's lifecycle, including manufacturing, transportation, distribution and disposal," a new JLL report on the impact of ESG on retail valuation notes. "For occupiers, reducing the carbon footprint in these areas is more efficient than focusing on the brick and mortar space, yet only 83 of the 1,422 companies who have signed up to meet science-based sustainability targets are classified as retail."