KUALA LUMPUR: Some 83% of Malaysian real estate investment trusts (M-REITs) expect environmental, social and governance (ESG) factors to influence future property valuations, according to the latest Knight Frank Malaysia report, entitled Climate Resilience in Action: How Malaysian REITs Are Responding to a Changing Risk Landscape.

The report was launched at Knight Frank Malaysia’s headquarters in Menara Southpoint, Mid Valley City, on Oct 27.

Based on a survey of 18 M-REITs conducted in collaboration with the Malaysian REIT Managers Association (MRMA), the report identified regulatory requirements, carbon pricing and occupier demand as key drivers of ESG adoption over the next five years. However, the findings also highlighted challenges in translating sustainability commitments into improvements across property portfolios.

Knight Frank Malaysia group managing director Keith Ooi said only 28% of surveyed M-REITs had more than 40% of their gross floor area aligned with green building standards. “While ESG is increasingly embedded in acquisition decisions, asset management strategies and long-term portfolio planning, we still see ample room to grow in terms of certification of assets,” he said.

The survey found that 78% of respondents struggled to balance decarbonisation investments with distribution-per-unit (DPU) expectations while 50% cited low tenant engagement and 33% reported difficulties obtaining reliable asset-level ESG data. Meanwhile, 56% felt that green and sustainability-linked financing offered insufficient financial incentives to support decarbonisation efforts.

“Looking ahead, there is an opportunity for financial institutions to more clearly reward measurable ESG performance which could help improve investment returns, support long-term portfolio decarbonisation and encourage wider adoption of climate resilience initiatives,” said Knight Frank Malaysia group executive chairman Sarkunan Subramaniam.

The event also featured a panel discussion entitled Balancing Climate Resilience Efforts and Returns: Can M-REITs Have Both? The session was moderated by Knight Frank Asia-Pacific ESG director Jackie Cheung.

The panellists included MRMA chairman and Sunway REIT Management Sdn Bhd chief executive officer Derek Teh Wan Wei, MRMA honorary secretary and Alpha REIT Managers Sdn Bhd chairman Datuk Stewart Labrooy, AmREIT Managers Sdn Bhd chief executive officer Chong Hong Chuon and Knight Frank Malaysia valuation and advisory executive director Justin Chee.

Also present at the launch were Bursa Malaysia corporate governance and sustainability senior vice president Michelle Tog and ESG manager Wan Hannah Sofia Wan Abdul Halim.

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