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Hong Kong property
Business
Chester Leung
Chester Leung

Concrete Analysis | How ESG standards and sustainability awareness can affect property values

  • About half of respondents in a survey have taken steps to include ESG criteria in their investment strategy in 2021, up from 40 per cent in 2020
  • ESG initiatives in Hong Kong underline the importance of understanding how they can help secure value for investments in the long run

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The rise of ESG standards and public awareness of sustainability necessitate a new approach to real estate valuation. Photo: Shutterstock
Chester Leung

How do we value our properties? Professional real estate valuers have traditionally been taught to rely on financial ratios such as profitability and capital budgeting to determine the value of a property.

However, is it enough for today’s investment world? The rise of ESG standards, and public awareness of sustainability suggest that a new approach is needed.

Environmental, social and governance (ESG) issues have significantly affected real estate valuation in recent years, influencing how people recognise the value of an asset. The concept has gained maturity in developed markets like the US and EU.

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Hong Kong, despite a late start, is catching up quickly. The stock exchange operator introduced ESG reporting policies in 2020 and more companies have committed to sustainability in their corporate mandates.
In fact, according to a CBRE survey, practically half of the respondents have taken steps to include ESG criteria in their investment strategy in 2021, up from 40 per cent in 2020.

Hong Kong is making great efforts to transform itself into one of Asia’s major ESG investment hubs, from developing regulations and policies to green financing and project management. These initiatives underline the importance of understanding how ESG can help secure value for investments in the long run.

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