APAC property market focuses on ESG amidst rising energy prices, regulatory goals

Tenants and employees seek sustainable and wellness-focused properties.

Rising energy prices and government-imposed ESG disclosure requirements have become the main drivers behind the increased focus on ESG strategies in the Asia Pacific (APAC) property market, a recent report by CBRE said.

Discussing the report’s findings with Real Estate Asia, David Fogarty, CBRE’s ESG Consulting & Sustainability Services head for Singapore and Southeast Asia, said reducing energy consumption and carbon emissions are amongst the top factors affecting property value in the region.

Citing the current focus of APAC property professionals when it comes to ESG initiatives, Fogarty said: “They’re focusing on a range of initiatives across the whole ESG criteria, from strategy goal setting to reducing energy consumption and greenhouse gas emissions.”

As the world started to turn post-pandemic, there has been an accelerated focus on wellness and health, so property professionals concentrated on creating more healthy and livable spaces that incorporated such initiatives as biophilic design and the use of natural materials, he said.

Fogarty said this focus on ESG comes from multiple factors, including regulation, investors, customers, employees, and the general market.

There is a recognition that the built environment contributes over 40% towards greenhouse gas emissions, prompting all stakeholders to adopt more responsible and sustainable practices. These practices help minimize negative environmental impacts and contribute to regional and global sustainability goals.

Tenants and employees are demanding properties that offer sustainable and eco-friendly features, high-speed internet connectivity, modern amenities, and flexible workspaces. There is also a growing trend towards properties that prioritize health and wellness, with green spaces, fitness centers, and healthy food options becoming increasingly popular among both tenants and employees.

Fogarty warned that property owners who do not adopt ESG principles risk losing their competitive advantage in the market. “The demand from the market, from investors, and from your own people to have an ESG-focused product is continuing to grow, and those who don’t adopt it now are going to lose their competitive advantage,” he said.

When asked about the cost of implementing ESG initiatives, Fogarty acknowledged that there is an initial cost but emphasized the long-term benefits. ESG investments can help reduce operational costs, improve tenant satisfaction, and promote social and environmental impact.

As customers and regulatory demands for sustainability increase, buildings with eco-friendly features and certifications tend to have higher values and attract more interest in the real estate marketplace.

Fogarty concluded by reiterating the value of ESG initiatives and investments for properties moving forward. “ESG principles help guide a company towards best practice. It’s a management framework to really drive organizational improvement, employee and social engagement. In the long run, you’re going to be a lot better off, you’re going to comply with the market, you’re going to attract better people to your organization, you’re going to retain your employees, and you’re going to retain investors, and you’re going to be able to access more finance.”