ESG seen affecting property values by 83% of surveyed M-REITs

A Knight Frank Malaysia survey found that 83% of participating Malaysian real estate investment trusts (M-REITs) foresee significant effects from environmental, social and governance (ESG) factors on future property valuations. The consultancy presented the findings in Kuala Lumpur on Oct 27.

Its 2026 M-REIT ESG Survey drew responses from 18 M-REITs and was undertaken with the Malaysian REIT Managers Association (MRMA). Respondents identified regulation, the financial effects of carbon pricing on assets, and demand from occupiers as key reasons for adopting ESG over the next five years.

Funding and distribution pressures featured among the obstacles. For 78%, a challenge was reconciling longer-term decarbonisation expenditure with short-term expectations for distribution-per-unit (DPU). Meanwhile, 56% reported that green or sustainability-linked financing offered insufficient financial incentives.

Knight Frank Malaysia ESG manager Sophia Halim said the financing responses suggested current mechanisms may not provide enough commercial encouragement for M-REITs to accelerate decarbonisation investment.

Resistance or limited participation from tenants was reported by 50%, while physical or structural constraints were also identified by 50%. Inadequate asset-level ESG data, whether in availability or quality, was an obstacle for 33%. Another 17% cited insufficient consideration of ESG by investors when making investment decisions.

On certification, Knight Frank Malaysia group managing director Keith Ooi said just 28% of M-REITs had green building standards covering over 40% of their gross floor area (GFA). He described a disconnect between organisational priorities and implementation.

Halim said measures being implemented included energy-efficient fittings, renewable energy installations on site, green fit-out guidance for tenants and green leases.