Malaysia's real estate sector undergoes an ESG-driven transformation, aligning with 2050 net-zero goals through new legislation and sustainable initiatives.
Guide
10 April 2025
Malaysia's real estate embraces ESG on path to net-zero 2050
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Malaysia has set an ambitious goal to achieve net-zero carbon emissions by 2050, with the real estate industry playing a pivotal role in this transition. As a major energy consumer, the sector faces both challenges and opportunities in adopting sustainable practices.
The country aims to significantly increase its reliance on renewable energy. Energy sector forecasts reveal that the share of solar PV in total installed power generation capacity is projected to grow from 12% in 2025 to 58% by 2050, representing a 14% CAGR. This shift requires the built environment to evolve and integrate new technologies.
Figure 1: Projected power system installed capacity mix 2050, (GW)
Source: Malaysia National Energy Transition Roadmap (NETR)
The years 2024-2025 mark a critical juncture in Malaysia's ESG transition. Three recent key policies are shaping the industry:
- The Energy Efficiency and Conservation Act (EECA), effective January 2025, sets new building energy efficiency standards.
- BURSA Malaysia's new Sustainability Reporting Requirements increase transparency and accountability in ESG reporting for listed companies, including real estate corporate occupiers.
- The Corporate Renewable Energy Supply Scheme (CRESS) supports the growth of solar PV capacity by enabling green electricity sourcing.
However, Malaysia faces substantial challenges, particularly within the real estate sector. The industry needs significant investments to implement new ESG practices, such as retrofitting buildings for energy efficiency and integrating renewable energy systems. Real estate SMEs in global supply chains may need additional resources and support to fully integrate ESG practices and meet Tier 3 requirements. This will help them remain competitive and compliant under new regulations.
These policies collectively drive the real estate sector towards more sustainable practices, from energy-efficient designs to increased renewable energy adoption.
The Malaysian government's proactive approach is evident in its ambitious policies and targets. The projected growth of solar PV capacity demonstrates the commitment to renewable energy and ESG principles, maintaining Malaysia’s competitive position in the global markets. This stance significantly impacts the real estate sector, which must adapt to incorporate these new energy sources into building designs and operations.
Looking ahead, upcoming initiatives like the National Climate Change Bill and National Energy Transition Roadmap will accelerate the sector's transformation. GHG emission statistics indicate electricity and heat producers as the largest CO2 emitters (118 Mt), suggesting future policies will focus on reducing emissions in this area. This could lead to stricter energy efficiency standards for buildings, increased incentives for on-site renewable energy generation, and potential penalties for high-emission properties.
Figure 2: GHG emissions by sector in Malaysia, 2022
Source: International Energy Agency
In conclusion, Malaysia's industry and real estate sector stand at the forefront of the nation's transition towards net-zero emissions by 2050. The sector must adapt to new energy efficiency standards, integrate renewable energy systems, and comply with stricter ESG reporting requirements.
Developers must incorporate sustainability features into new property designs, while landlords need to upgrade existing buildings to meet new standards. By proactively addressing these areas, the real estate sector will reduce its environmental impact, enhance property values, and position Malaysia as a regional leader in sustainable building practices and ESG integration.