ENVIRONMENTAL, social and governance (ESG) has become the buzzword among investors today, with many real estate players realising that the right way forward is to embrace it.

       Zerin Properties chief executive officer Previn Singhe says interest in ESG issues among investors and corporates in the real estate sector has increased tremendously in recent years as a means of assessing the non-financial and social impacts of business decisions.

       Citing the United Nations Environment Programme, Previn says building operations alone accounted for about 31% of global final energy consumption and 28% of energy-related carbon dioxide emissions in 2020.

       “Following this, Under the Paris Agreement, 136 countries have included policies to improve building energy efficiency in their Nationally Determined Contributions.

       “However, the scope and details of these pledges vary greatly, resulting in a diverse landscape of real-estate related sustainability frameworks and strategies,” he tells StarBizWeek.

       Previn points out that all of these initiatives prove how important ESG is today in real estate.

       “To further illustrate this, in China, between 2016 and 2020, about 77% of all new buildings in urban areas were certified green buildings,” he says.

       Aligning interests

       UEM Sunrise chief executive officer Sufian Abdullah says corporate governance is important to the group as it establishes a set of rules and policies that regulate how a company runs and aligns the interests of all its stakeholders.

       “Investors demand for governance in the commercial real estate business because it allows a company to have norms and benchmarks for innovation while operating within a certain framework.

       “As ESG standards become more popular among investors, their importance has grown as the real estate market prepares for business in a post-pandemic world.”

       Sime Darby Property Bhd group managing director Datuk Azmir Merican says organisations with good corporate governance practices place a high level of importance on transparency and accountability for the benefit of their shareholders and stakeholders with various interests.

       “Without jeopardising any competitive or market advantages, organisations should be open and share the required information with the market as it would allow shareholders and stakeholders to make informed decisions.

       “Transparency can be demonstrated by disclosing verifiable or third-party assured data to back up statements as part of corporate disclosure.”

       Crucial factor

       Azmir adds that a company’s good corporate governance practices and its ability to be transparent are absolutely crucial to attract both local and foreign investors.

       Having good corporate governance will allow investors to evaluate a company’s management style, direction, business integrity and achievements.

       Gamuda Land chief executive officer Ngan Chee Meng says shareholders and stakeholders will invest in companies that invest back in people and the environment.

       “Beyond that, our customers would prefer properties that are mindfully designed with environments that are sustainably crafted to stand the test of time.

       “While building the future responsibly, we prioritise the preservation of the natural environments in which we operate. Biodiversity underpins the clean air, water and food integral to human health and helps mitigate climate change,” he says.

       Over time, Ngan believes that sophisticated long-term investors will rely on high-quality ESG data assessed through a formal structured approach to determine their portfolio selection, regardless of which country or industry a company operates in.

       “When we ventured into the highly regulated Australian infrastructure industry, we followed a rigorous selection process with greater emphasis on the ESG framework.

       “Having successfully expanded on our projects in Australia is proof that our ESG framework and sustainability programmes are strong and robust.”

       IOI Properties Group Bhd, meanwhile, believes that transparency is key to reciprocal accountability.

       “The two main pillars of corporate governance are transparency and accountability. These pillars are critical in successfully running a company and forming solid professional relationships among its stakeholders.

       “We believe that board accountability is about taking responsibility for a company’s activities and presenting a fair, balanced and understandable assessment of a company’s position and prospects to all stakeholders.”

       Building relationships

       IOI Properties Group strongly believes that open, clear and honest reporting will help a public-listed company to build relationships with its stakeholders.

       “Therefore, the integrated annual report allows the board to communicate the financial results and governance activities for the year and also to document their assessment of performance.

       “We should treat all stakeholders fairly and equitably and also recognise, protect and facilitate the exercise of their rights.”

       S P Setia Bhd, meanwhile, believes that implementing an efficient ESG-focused infrastructure system is vital, especially for undeveloped countries.

       “It provides access to the most basic services like energy and water for the community. Also, for developed countries, it may help to face new challenges, such as the increase of population in urban areas and the environmental concerns.

       “Additionally, ESG standards are already proving to be decisive in infrastructure closings. This is because investments are beginning to face community opposition, which is often due to the lack of ESG considerations that result in costly delays or changes to the initial project.”

       Eco World Development Group Bhd president and chief executive officer Datuk Chang Khim Wah says having good governance speaks of the leadership of an organisation, stewardship of its resources as well as transparency and accountability to its stakeholders.

       Ecoworld CEO Datuk Chang Kim Wah

       “When we first started in 2013, we began with our choice of name – EcoWorld; and our ‘Vision of Creating Tomorrow and Beyond’.

       “This is part of our mission statements and core values, of which sustainability is the number one core value.”

       Integral part

       Chang adds that sustainability is also an integral part of the group’s business strategy.

       “Our business strategy is built on the three pillars, namely economy, environment and society, which are all held together by our pledge to uphold high standards of governance in all our endeavours.”

       When it comes to ESG, Previn says that Zerin Properties chooses to lead by example.

       “Our ESG efforts are important as they provide an avenue to make a lasting impact, not just on the lives of employees but also the lives of Malaysians in general.

       “Amid the growing concerns over climate change, social injustices and financial mismanagement, the importance for companies to emphasise and focus on ESG is apparent.”

       Previn says Zerin Properties aims to make a difference to Malaysians and adopt sustainable strategies towards improving the lives of citizens and leading by example in the industry.

       He adds that Zerin Properties will be commencing ESG Certification of building projects and companies under the Zerin Habitat brand, to be launched in June.

       “Going forward, the path towards a sustainable future will not be an easy one, but it is a necessary journey that the company is committed to venturing on.

       “Our goals in the short to medium term would include further energy saving and waste management initiatives and we are looking to small and measurable goals that will build over time.”