How Can Valuers Break ESG Valuation Deadlock?

RICS, Property Journal (2023) | Asset Management, Risk Mitigation, Valuation

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Real estate valuers are facing mounting pressure from investors, lenders, and auditors to integrate environmental, social, and governance (ESG) factors into valuations. However, a lack of consistent data and market evidence has led to a valuation deadlock, where ESG risks are acknowledged but not reflected in asset pricing. This disconnect poses a risk of creating a "carbon bubble," where property values fail to account for decarbonization costs, regulatory compliance, and market expectations, potentially leading to abrupt price corrections and stranded assets.

RICS accredited valuers are bound by the institute's professional standards to reflect market behavior, not lead it. However, the inconsistent approaches of investors to ESG issues means that reliable transactional evidence cannot be established. The breadth and variability of ESG data, ranging from energy performance to climate risk assessments, further complicates valuat…