ESG alone unlikely to lift property valuations as returns remain key

PETALING JAYA: While Malaysian property developers have made significant strides in adopting environmental, social and governance (ESG) practices, such credentials alone are unlikely to lift company valuations, says Rakuten Trade head of equity sales Vincent Lau.

Lau said ESG is an important screening criterion, particularly for institutional and ESG-focused investors, with companies lacking adequate sustainability credentials potentially excluded from their investment universe.

However, he said ESG compliance alone is not the primary factor driving investment or home-buying decisions.

Instead, investors and buyers continue to place greater emphasis on fundamentals such as earnings, valuations, location and value proposition.

“I think investor enthusiasm for ESG has cooled from its peak in recent years, although it remains an important consideration alongside financial returns. Companies should continue adopting ESG practices where they make economic sense, but not at the expense of profitability,” he told StarBiz.

MBSB Research said it believes that stronger ESG integration can create long-term value for property companies by enhancing operational efficiency, strengthening brand reputation and improving long-term financial performance.

Despite the stable ESG ratings among property companies, it believes there are still areas for further improvement.

“These include strengthening green building requirements, encouraging wider adoption of green financing, promoting green lease practices and introducing carbon pricing mechanisms.

“These initiatives could help property companies further strengthen their ESG practices and create long-term value,” MBSB Research said in a report yesterday.

It said as of the latest review in June 2026, ESG Grading Band for property companies under its coverage are largely maintained compared with a year ago, with four companies (Sunway Bhd, IOI Properties Group Bhd, Mah Sing Group Bhd and Eco World Development Group Bhd) rated four-star while three companies (Matrix Concepts Holdings Bhd, SP Setia and UOA Development Bhd) rated three-star.