Do ESG Factors Drive Market Value in Commercial Property: Insights from Sri Lankan Valuers

Abstract

Recognizing the global emphasis on sustainable development, the RICS incorporated the ESG components into the property valuation standard. Thus, this study empirically examines the influence of ESG components on the market value of commercial properties and analyzes the challenges of ESG applications. Five-point Likert Scaled questionnaire, in-depth interviews were applied to collect data from two types of samples selected from professional valuers. Spearman Rank Correlation Test results shows that all three ESG components were positively correlated with market value changes, with the environment component having the highest mean value. The lower level of ESG concern in small and medium-scale commercial properties and the complex nature associated with estimating the ESG components are generated as the major issues in the word cloud analysis. The preparation of a formal guideline to reduce the complexities in the calculation ESG may improve its use in Sri Lanka.