Real estate investors are choosing to put their money in greener buildings, according to researchers.

Buildings and their construction account for almost 40% of carbon dioxide emissions globally, according to the United Nations Environment Program. Real estate’s high emissions have put the industry in the crosshairs of government regulations — which could be costly, said Linda-Eling Lee, global head of ESG research at MSCI, a New York City-based finance company.

“I think that real estate investing is going to really change quite dramatically over the next decade,” said Lee.

A number of big cities across the globe are imposing regulations to decrease properties’ carbon emissions. Such regulations could be costly to building owners. Investing in environmentally-friendly buildings now could be less expensive than updating non-compliant buildings in the future, according to Lee.

“You cannot change the energy efficiency of your building portfolio tomorrow. You really need to actually be on a path to decarbonize that property portfolio,” she said.

In addition to anticipating and preventing future property upgrade costs, real estate investors also consider how their properties’ emissions could increase their risk of natural disasters, she said.

“It’s the wildfires and the floods that we can see that are much more directly impacting property values and insurance costs,” said Lee.

But real estate investors still have a long way to go in choosing and constructing sustainable buildings, primarily because they lack the tools to predict climate risk in their portfolios, she said.

“I think they’re only beginning to be aware… [But] There will be a lot of improvements so that investors are going to have a better tool to be able to look at different scenarios of how this might play out and impact their portfolios,” she said.

Real estate is just one sector in which investors are starting to “green” their portfolios, she said, as stakeholders pressure companies to be more environmentally and socially responsible.

“Companies really should be taking a look at all of their stakeholders… I think that is going to be very important for investors as companies start to address many of their practices and their conduct in terms of making a more inclusive economy,” she said.

Sarah Paynter is a reporter at Yahoo Finance. Follow her on Twitter @sarahapaynter

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