Zerin Properties chief executive officer Previn Singhe.
PETALING JAYA: While the adoption of environmental, social and governance (ESG) practices in Malaysia’s real estate market is still in its nascent stages, experts are confident of its potential.
Zerin Properties chief executive officer (CEO) Previn Singhe said larger developers and institutional investors are taking ESG seriously, driven by both regulatory pressures and a growing awareness of sustainability’s importance.
“However, there is still room for improvement, especially among smaller players.
“The momentum is positive, but the pace could accelerate if incentives and education around ESG become more widespread,” he told StarBiz.
Olive Tree Property Consultants CEO Samuel Tan opined that the adoption of ESG within the local real estate market is “not balanced.”
“In general, newer developments in bigger cities tend to incorporate more ESG features to make them environmentally friendly and sustainable.”
Tan noted that the relevant authorities have been encouraging the adoption of ESG in the property sector.
“The private sector would adopt a higher standard of compliance if the returns outweigh the costs, such as attracting multinational companies (MNCs) that demand certain green certifications or target higher-end buyers who are prepared to pay for environmentally sustainable features, which normally incur higher initial capital outlay.
“Moving forth, there is still room for improvement in the adoption of ESG in the real estate sector,” he said.
Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong said key ESG benefits include the ability to better attract tenants and buyers.
“There is a growing demand for ESG-compliant assets from businesses and investors, especially MNCs.
“The adoption of ESG practices helps companies stay relevant in an evolving renewable energy market.
“Developers are following through to remain competitive and to be aligned with current expectations and trends.”
Khong also noted that meeting regulatory expectations and gaining investors who value sustainability are both critical.
“Financial institutions are also adopting green financing options with lower interest-rate offerings for green real estate products with strong ESG compliance.
“The government is giving tax breaks or green bonds to developers under the Green Investment Tax Allowance and Green Income Tax Exemption.”
In spite of the many benefits, experts concur that practising ESG principles efficiently also has its challenges.
Previn said one of the key challenges in raising awareness for ESG is overcoming the perception that sustainability practices come with higher costs.
“While there may be initial expenses, the long-term benefits in terms of cost savings, asset value appreciation and regulatory compliance far outweigh them.
“More education, clear policies and success stories are needed to illustrate how ESG enhances property value over time,” he opined.
Khong highlighted that high costs for sustainable materials and technologies can be deterrents.
“Moreover, market demand for ESG-compliant properties is good but investment grade properties are closely benchmarked to net yields and both aspects must be aligned.
“Additionally, many developers may still be concerned that buyers may not prioritise sustainability or ESG due to affordability,” he said.
Tan explained that not all ESG practices are expensive.
“Very often, a better understanding about how our building’s environment, nature and human activities interact is fundamental to creating or developing a sustainable project.”
Looking ahead, Previn said ESG adoption in the real estate market would continue to gain traction, especially as regulatory frameworks evolve, and both investors and tenants increasingly prioritise sustainability.
“The pressure will come not just from government policies, but also from global investors who demand higher ESG compliance.
“Developers who embrace ESG today are positioning themselves for long-term success.
“As awareness grows, we expect the integration of ESG into real estate to become the norm, making it a key driver of value creation in the sector.”
In view of issues such as global warming and its associated negative impact to the environment and livelihood, Tan said more people would adopt ESG practices and demand zero-carbon developments, eventually.
“To kick start ESG in a meaningful way, the authorities would need to take the lead by giving certain forms of incentives in adopting such principles.
“This helps to allay some of the heavy capital outlay, which have been deterring the adoption of ESG.”
Tan emphasised that the public sector should take the lead by ensuring all new buildings are ESG-compliant, and any refurbishment or repurposing of old buildings incorporate sustainable elements.
“This is truly walking the talk. Furthermore, it will save on maintenance costs in the long run.
“As the economies of scale build up, it will eventually be more cost effective to adopt green energy and technology in our lives.
“ESG will increasingly become a way of life and not merely a certificate or accolade for organisations to show off or ‘greenwash’ their development for marketing purposes,” Tan added.
