(From left) Knight Frank Apac ESG director Jackie Cheung; Bursa Malaysia senior vice-president of corporate governance & sustainability Michelle Tog; Knight Frank Malaysia group executive chairman and group ESG Oversight Sarkunan Subramaniam; Malaysian REIT Managers Association (MRMA) honorary secretary and Alpha REIT Managers chairman Datuk Stewart Labrooy; MRMA president and Sunway REIT Management Sdn Bhd CEO Derek Teh Wan Wei; Knight Frank Malaysia group managing director Keith Ooi and Knight Frank Malaysia ESG manager Sophia Halim. (Photo by Zahid Izzani/The Edge)
KUALA LUMPUR (Oct 27): Some 83% Malaysian real estate investment trusts (M-REITs) anticipate environmental, social and governance (ESG) will bring significant impacts on future property valuations.
In Knight Frank Malaysia's “Climate Resilience in Action: How Malaysian REITs Are Responding to a Changing Risk Landscape” report launch event on Tuesday in Kuala Lumpur, the consultancy firm revealed that most of the total 18 M-REIT respondents expect ESG factors to affect valuations moving forward.
Based on its 2026 M-REIT ESG Survey conducted in collaboration with the Malaysian REIT Managers Association (MRMA) for this report, 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% of M-REITs have over 40% 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 that key decarbonisation challenges faced by M-REITs include balancing long-term decarbonisation investments with short-term distribution-per-unit (DPU) expectations (78%), tenant resistance or low engagement (50%), and physical or structural constraints (50%).
Additional operational obstacles include limited availability or quality of asset-level ESG data (33%) and investors inadequately incorporating ESG factors into investment decision-making (17%).
"However, 56% 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 session on the report key findings, she 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.
Meanwhile, 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.
“When a REIT undertakes its physical climate risk assessment, its value goes beyond the assessment itself. The greater value comes when the findings inform decisions. What assets are exposed, what adaptation measures are needed, what investment is required, and over what time frame, and how could these factors affect the resilience and value of the portfolio? These answers can inform asset management priorities, investment planning, and longer-term portfolio resilience. That is how climate information becomes useful,” said Tog in her opening remark.
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.