Malaysia: Funds favour firms with superior ESG practices

Although environmental, social and governance (ESG) issues have been gaining prominence, they do not appear to enhance the stock valuation in the country.

The Covid-19 pandemic has prompted governments and businesses to focus on sectors like healthcare and green spaces, connectivity via the Internet, as well as work and education opportunities.

But does an ESG ranking and disclosure enhance valuation in Malaysia?

UOB Kay Hian said its studies concur with the consensus view that just being ESG-compliant does not necessarily enhance a stock’s valuation or share performance.

With the ESG theme beginning to feature in financial and investment decisions by financial institutions, the research house expects companies with better ESG practices and disclosure to be favoured by financial institutions and funds moving forward.

“Although the FTSE4Good Bursa Malaysia Index (F4GBM) has underperformed as compared with the FBM Emas Index, F4GBM’s performance had increased by 7% over the past four years as of Dec 20, last year.

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