Who’s driving ESG initiatives within KL’s office market?

KL’s office market sees a growing ESG focus, with corporates relooking at real estate strategies, particularly in the Financial Services and TMT sectors.

November 28, 2023

ESG has become among the top priorities for corporates in Malaysia, who began considering ESG factors at varying points in time. Additionally, there were several events, initiatives and programmes that promoted sustainability and encouraged companies to incorporate ESG considerations into their business practices, including:

  1. The Central Bank of Malaysia, Securities Commission Malaysia, and other stakeholders launched the Malaysia Sustainable Finance Blueprint 2019, outlining strategies to promote sustainable financing,encouraging corporates to incorporate ESG considerations into their business practices.

  2. Bursa Malaysia, the country's stock exchange, introduced the sustainability reporting framework, requiring listed companies to disclose ESG-related information in 2014.

  3. Paris Agreement 2015.

As a result, formal consideration of ESG in Malaysia has gained momentum in recent years. The trend is most noticeable within the office sector of Kuala Lumpur’s real estate market. Corporates from various sectors are relooking at their real estate strategies to identify areas where carbon reduction can be achieved. This comes as most major corporates have started setting ambitious sustainability goals, such as reaching Net Zero Carbon by 2030 and beyond. These companies also aim to address Scope 3 carbon emissions which implies that all partners across the corporate’s value chain should comply with these sustainability standards.

In October 2023, JLL surveyed corporates with a significant presence in the Asia Pacific region and operations in Kuala Lumpur. The aim was to understand their challenges when establishing and implementing an ESG policy. The survey revealed that 55% anticipate achieving a green real estate portfolio by 2025, another 41% plan to accomplish this by 2030, while only 4% expect to do so after 2030.

A deeper look into the results showed that corporates leading this initiative within Kuala Lumpur were largely multinationals from the Financial Services and TMT (Technology, Media and Telecommunications) sectors.

The survey also found that regarding ESG principles, most corporates tend to start with “low hanging fruits” such as reducing operational carbon through energy, water, and waste management, getting green energy audits done to map real estate emissions and raising employee awareness of sustainable workplace practices. This suggests that measurable and cost-efficient initiatives are prioritised over more CAPEX-heavy initiatives.

Figure 1: Top 5 sustainability priorities for corporates

Source: JLL

Regarding Scope 3 emissions, 43% of respondents reported that 51 to 75% of emissions stemming from Scope 3, while only 3% reported less than 25% of Scope 3 emissions. This suggests that a large portion of the local market still needs to elaborate their strategy to address such issues.

Figure 2: Proportion of respondents and their Scope 3 emissions

Source: JLL

All in all, JLL observes that it is crucial for landlords to make information and data points more readily available for corporates to make faster and more effective progress in their ESG implementations. Furthermore, it is also important for collaboration and engagement with suppliers, customers, and other stakeholders to promote sustainable practices throughout the value chain.