83% of Malaysian REITs expect ESG to significantly impact property valuations: Knight Frank
A Knight Frank Malaysia survey, conducted with the Malaysian REIT Managers Association, finds that 83 per cent of M-REIT respondents anticipate environmental, social and governance factors will significantly affect future property valuations. Regulatory requirements, carbon pricing and occupier dema
KUALA LUMPUR (Oct 27) — Some 83 per cent of Malaysian real estate investment trusts (M-REITs) anticipate that environmental, social and governance (ESG) factors will bring significant impacts on future property valuations, according to Knight Frank Malaysia's “Climate Resilience in Action: How Malaysian REITs Are Responding to a Changing Risk Landscape” report.
At the report launch event on Tuesday in Kuala Lumpur, the consultancy firm revealed that most of the total 18 M-REIT respondents expect ESG to affect valuations moving forward. The 2026 M-REIT ESG Survey was conducted in collaboration with the Malaysian REIT Managers Association (MRMA). Regulatory requirements, asset-level financial performance due to carbon pricing and occupier demand were cited as the primary drivers of ESG adoption over the next five years.
“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. Currently, only 28 per cent of M-REITs have over 40 per cent of their gross floor area (GFA) aligned with green building standards, pointing towards a gap between board and organisational priorities and execution on the ground,” said Knight Frank Malaysia group managing director Keith Ooi in his welcome remark.
The report also highlighted key decarbonisation challenges faced by M-REITs. These include balancing long-term decarbonisation investments with short-term distribution-per-unit (DPU) expectations (78 per cent), tenant resistance or low engagement (50 per cent), and physical or structural constraints (50 per cent). Additional operational obstacles include limited availability or quality of asset-level ESG data (33 per cent) and investors inadequately incorporating ESG factors into investment decision-making (17 per cent).
“However, 56 per cent of participants cited insufficient financial incentives from green or sustainability-linked financing, suggesting that current mechanisms may not yet provide sufficient commercial incentives to accelerate decarbonisation investments across M-REIT portfolios. 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 ESG manager Sophia Halim.
In her presentation, Halim also highlighted that to manage decarbonisation risks, M-REITs are implementing on-site energy-efficient fittings and renewable energy installations, providing green fit-out guides to tenants, and introducing green leases. Bursa Malaysia senior vice-president of Corporate Governance & Sustainability Michelle Tog said climate data becomes decision-useful when it informs asset management priorities, investment planning and portfolio resilience.
The launch concluded with a panel discussion featuring industry leaders including MRMA president and Sunway REIT Management Sdn Bhd CEO Derek Teh Wan Wei, MRMA honorary secretary and Alpha REIT Managers chairman Datuk Stewart Labrooy, AmREIT Managers Sdn Bhd CEO Chong Hong Chuon and Knight Frank Malaysia executive director of Valuation & Advisory Justin Chee. The session was moderated by Knight Frank APAC ESG director Jackie Cheung.
