PETALING JAYA: Banks need to be more proactive and steadfast in their environmental, social and governance (ESG) commitments.Analysts said ESG is vital for the sector in the long term as having sustainable banking would ensure responsible business as well as new opportunities.
They also said this would spark investor interest in the sector.
Hong Leong Investment Bank (HLIB) Research said it did not see any major annual improvement trend in the rating for the banking sector as the level of commitment towards ESG had stayed largely the same from a year ago.
Based on its proprietary ESG scoring model, among others, the average rating for banks was flat at 3.8 points in 2022 compared with a year ago.
It said most banks did well for governance, progressive on social but were performing below par on environmental factors.
In 2022, Alliance Bank Malaysia Bhd saw the steepest ESG grade improvement of 0.4 points, thanks to areas of environmental (higher sustainable financial composition and better disclosure) and social (broadly stronger showing across the board).
CIMB Group Holdings Bhd saw all three of its ESG components beating 2021’s performance.
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As for Bank Islam Malaysia Bhd, it gained momentum at both the social (larger percentage of female leaders) and governance categories (more optimal board size and independence).
RHB Bank Bhd was lifted by higher environmental scores (reduction in greenhouse gas emission and energy consumption intensity, the research house added.
Affin Bank Bhd was the sole decliner, hit by lower marks for social and governance ratings.
According to the research house, the banks were appraised under its coverage based on four aspects namely environmental, social and governance, along with disclosure and transparency.
They were graded from one to five (on an absolute basis) according to the brokerage’s proprietary scoring bands.