Drivers and Barriers for Integrating ESG Metrics in Swedish Commercial Property Valuation : Towards a Deeper Understanding of ESG in Valuation Practice

This thesis explores how sustainability metrics, Environmental, Social, and Governance (ESG), can be further integrated into commercial property valuation in the Swedish market. It aims to identify key drivers and barriers to this integration, using the concepts of absorptive capacity and policy network theory. The thesis is guided by three research questions: (1) How can ESG metrics be further integrated into commercial property valuation? (2) To what extent does the absorptive capacity of the valuation profession facilitate or hinder this integration? (3) What perspectives and arguments are put forward by different stakeholders regarding ESG integration? To answer these questions, semi-structured interviews were conducted with a range of stakeholders in the Swedish real estate sector. A qualitative thematic analysis was carried out, supported by a review of previous literature and theoretical insights. The findings show that while ESG awareness is increasing, integration into valuation remains limited. Key drivers include a growing understanding of ESG’s contribution to long-term asset value and alignment with investor and regulatory expectations. However, barriers such as the lack of standardized valuation methods, insufficient empirical evidence, especially for social and governance aspects, and varying competence levels hinder progress. Earlier research has noted the relevance of ESG but also gaps between sustainability goals and valuation practice. This thesis confirms those gaps and highlights differing stakeholder views on whether ESG should be integrated without stronger market-based evidence. It also reflects on potential unintended consequences, such as the risk of reinforcing gentrification and social exclusion, highlighting the need for ethical consideration alongside methodological development. This thesis concludes that enhanced absorptive capacity through education, shared standards, and stakeholder collaboration is essential. Valuation institutions are unlikely to lead change but may follow market developments. Some stakeholders express openness to adapting practices in response to long-term value creation from sustainable assets, while some are more skeptical.