KUALA LUMPUR: Five domestic banks, namely Affin Bank Bhd, Alliance Bank Malaysia Bhd, CIMB Group Holdings Bhd, Public Bank Bhd, and RHB Bank Bhd, have shown year-on-year (YoY) improvements in proprietary environmental, social and governance (ESG) scoring model.
However, another three banks – AMMB Holdings Bhd, Bank Islam Malaysia Bhd (BIMB) and Malayan Banking Bhd (Maybank) – has shown a decline.
Hong Leong Investment Bank (HLIB Research) said in 2020, Affin saw the steepest ESG grade improvement of 1.1 points, thanks to areas of social (growing number of female leaders) and governance (more board independence and participation).
"Next in line, we have RHB (+0.6 points) due to better governance score, again from higher percentage mix of independent directors and meeting attendance rate.
"As for Alliance (+0.3 points), CIMB (+0.2 points), and Public (+0.2 points), they gained traction in the social category.
"Alliance was successful in increasing their talent retention rate, CIMB brought in more female directors, and charitable cost as a percentage of its bottom-line was higher than a year ago, while Public Bank invested more in employee development and learning," the bank-backed research firm said in a note today.
Overall, HLIB Research continues to see an improving trajectory in ESG scores for the majority of the banks under coverage, indicating that the level of commitment towards ESG has been growing.
"Now, Maybank and RHB are tied for first place with ESG grade of 3.8 (out of 5) while Alliance remained at the bottom of the rankings with 2.3 points; the formers excelled in areas of environmental and governance, whereas the latter was still relatively weak in all ESG categories (but is making strides to elevate its rating).
"With better sector ESG performance and undemanding valuations, we believe this is an opportunity to buy banking stocks," it added.
HLIB has kept its 'Overweight' call on the banking sector.