Our urban success also presents a dilemma. By 2030, six out of ten people will reside in cities, and by the middle of the century, this figure will rise to seven out of ten. In ASEAN alone, an additional 205 million urban residents are expected to emerge by 2050. This is more than merely a demographic shift—it heralds an environmental reckoning. As our cities expand, agricultural land will decrease, and flood risks will escalate, particularly in low-lying areas.
Urbanisation also requires a surge in construction materials such as cement, steel, and sand, worsening the climate crisis. Buildings are the backbone of urban growth but also the Achilles’ heel in the fight against climate change. In 2022, buildings accounted for nearly a third of total energy system emissions — 26 % from operations and 7% from the production of construction materials.
The Paris Agreement envisions a future where every building achieves net-zero carbon by 2050. However, the reality is stark: only 5% of new buildings meet this standard today, and fewer than 1% incorporate zero-carbon specifications. Without a new approach, material consumption in cities is projected to more than double by 2050.
The urgency is evident. To remain in line with net-zero targets, operational emissions from buildings must be reduced by half by 2030, while embodied emissions from steel and cement must decrease by 25% and 20%, respectively. Yet, the transition continues to be slow.
Our challenge is not only technological but also financial. Without a significant shift in how we fund green buildings, the construction sector will continue to be trapped in a high-emission trajectory.
The Green Financing Imperative
The financial sector is crucial for unlocking a more sustainable built environment. Green financing has experienced explosive growth, with green debt financing skyrocketing from £10 billion in 2017 to £230 billion in 2021.
Approximately 70% of this total originated from green bonds. Innovative financing mechanisms are already shaping the transition. Consider UltraTech Cement in India; it has issued a $400 million sustainability-linked bond tied to a 22% reduction in carbon emissions by 2030. The bond's interest rate will rise if it fails to meet the target. Similarly, in North America, Kimco Realty allocated $365 million from a green bond to acquire energy-efficient commercial and residential properties, reducing emissions by 7,200 tonnes of CO₂. Even heavy industries are making the transition—Japan’s JFE Holdings has issued a $230 million carbon transition bond to finance hydrogen-based steelmaking and carbon capture technologies.
Closer to home, financial institutions in Malaysia are beginning to offer green mortgage products. Standard Chartered, OCBC, RHB, Maybank, and CIMB now provide financing for certified green projects. However, green capital needs more than product innovation — it requires transparency.
The Disclosure Deficit
For green finance to succeed, investors require clear, credible disclosures. However, Malaysia’s building sector lacks them. Although Bursa Malaysia’s Property Index is at a six-year high, climate disclosures lag behind. An EY Climate Risk Disclosure Barometer revealed that while climate risks are recognised, they are seldom acted upon. Only 14 listed companies in property, REITs, and construction disclosed climate-related risks—just six had clear targets, and only two established specific timelines.
Enhanced disclosure is vital for significant green investment. Without it, how can investors effectively assess climate risk? Can they differentiate between companies making authentic progress and those simply engaging in greenwashing in their annual reports?
Walking the Talk
The future of Malaysia’s property and construction sectors depends on more than just high-speed rails and special economic zones. It must focus on making green buildings the norm rather than the exception. Financial innovation and robust disclosures are two sides of the same coin. The capital needed to facilitate this transition is available, and the urgency is evident. What remains to be seen is whether the industry will seize this opportunity or continue to build the future on borrowed time.
Panel address on 'A Scorecard on ESG Reporting and Benchmarking', 4th International Green Building Conference, 23 July 2024 at One World Hotel, Petaling Jaya.
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