Maybank KE identifies potential ESG winners in economic transition

MAYBANK Kim Eng is positive that companies like DBS, Venture Corporation and ComfortDelGro offer strategic advantages as Singapore addresses the environmental, social and governance (ESG) challenges in the coming years.

In its Singapore ESG Compendium released on Monday, Maybank KE analysts said that the nation faces threats from climate change and social and governance risks from its role as a regional financial centre. Yet, there are also opportunities for companies to reform and be greener as more investors seek sustainable and transparent companies post-pandemic.

For instance, the top five performers in the SGX iEdge ESG Leaders index have outperformed their counterparts in the Straits Times Index by 616 per cent in 2020 alone, and by another 124 per cent year to date.

In the manufacturing sector, AEM Holdings stands out as an equipment maker that has balanced shareholder transparency with business requirements, said Maybank KE.

Electronics manufacturing services company Venture Corporation is also favoured by analysts as it has actively reskilled employees, who benefited from an average of 126.7 hours of formal training.

Venture Corp closed up 0.31 per cent at S$19.16, while AEM closed up 1.53 per cent to S$3.98 on Tuesday.

As for the transportation sector, the analysts like ComfortDelGro as it is on track to meet its medium and long-term environmental goals, such as reducing its 2023 and 2030 greenhouse gas emissions by 20 per cent and 50 per cent respectively through fleet replacement.

ComfortDelGro closed up 0.61 per cent at S$1.66 on Tuesday.

Moving on to Singapore's role as a regional financial hub, the analysts favour DBS, the Singapore Exchange (SGX) and UOB for their sustainability efforts.

In describing DBS's "critical role" in transition financing, the analysts cited the bank's 2024 target of S$50 billion of sustainable finance, which equates to 45 per cent of incremental loans between now and then being green.

Likewise, UOB's 94 per cent increase in renewable energy, green transport, water and waste management financing was cited by the analysts as part of moves that will ensure sustainable growth for the bank.

Meanwhile, SGX has taken steps to mitigate against disruption risks to its market and regulatory operations. SGX regularly conducts business continuity planning and pandemic scenario testing.

Shares of DBS closed up 2.9 per cent to S$30.87, while UOB closed at S$26.37, up 1.74 per cent on Tuesday. SGX closed up 0.9 per cent at S$11.18.

In the food and beverage sector, Maybank KE said Thai Beverage (ThaiBev) is on track to use reusable, recyclable and compostable materials for all its main packaging by 2025.

ThaiBev closed 0.74 per cent ower at 67.5 cents on Tuesday.

Looking at real estate investment trusts (Reits), Maybank KE flagged Ascendas Reit (A-Reit), Mapletree Commercial Trust (MCT) and Mapletree Logistics Trust (MLT) as being well-positioned in ESG factors.

While assessing A-Reit, the analysts like that its trustee-manager's high board independence contributed to the trust's strong corporate governance. Six out of nine board members are independent, including the chairman.

MCT has also stayed relevant by conducting monthly workshops for new employees of its tenants at VivoCity to train them on the mall's service culture and improving shopper loyalty, said the analysts.

As for MLT, analysts said that it is the first Singapore Reit to link its renewable energy generating target to a sustainability-linked loan via a six-year S$200 million facility from OCBC for its rooftop solar installation programme.

Units of A-Reit closed up 1.34 per cent at S$3.02, while MCT was at S$2.19, up 1.39 per cent on Tuesday. Units of MLT closed 1.93 per cent higher at S$2.11.