KUALA LUMPUR (April 17): About 60% of small and medium enterprises (SMEs) believe that adopting environmental, social and governance (ESG) principles can enhance their business performance, according to Alliance Bank Malaysia Bhd’s commissioned study.

The study — jointly commissioned with UN Global Compact Network Malaysia and Brunei (UNGCMYB) and SME Corp Malaysia — noted that SMEs view that ESG could improve their financial standing and productivity, despite perceiving it as costly and requiring additional resources.

Meanwhile, three out of five SMEs believe that ESG practices will create long-term value, a strong workforce and increase business opportunities, Alliance Bank said in a statement on Monday (April 17).

“ESG adopters cited improving productivity, cost savings and brand reputation as the key motivation for including ESG practices in their strategy.

“As for the non-ESG adopters, three key themes were identified for their hesitations towards adopting ESG — uncertainty about the impact of ESG, limited knowledge of ESG, and financial constraints.

“However, this group of SMEs highlighted that financial support from banks-sponsored training and learning opportunities and tax incentives will facilitate their ESG adoption,” it said.

Alliance Bank chief executive officer (CEO) Kellee Kam said that SMEs face unique challenges in their businesses, hence, the study was launched to assist SMEs in their ESG journey.

“As a bank that has a long-standing relationship with the SME sector, we understand the unique challenges businesses face.

“Locally, there is a lack of SME-centric frameworks and information to help small businesses on their ESG journey. As such, we launched this study to fill the gap in the market,” said Kam.

The survey was launched as part of Alliance Bank’s “BeESG” initiative to encourage more sustainable practices among businesses.

“Instead of viewing ESG as a compliance checklist, it is hoped that this study’s findings will encourage businesses to take the opportunity to turn ESG practices into a source of competitive advantage,” he said.

Among other findings in the study are that 78% of consumers make purchase decisions based on the products’ impact on the environment; one in four Malaysian SMEs has adopted elements of ESG practices in its business; 80% of ESG adopters recognise the value of ESG adoption and plan to continue pursuing it moving forward; 39% of ESG adopters reported improved profits and cost savings from ESG practices; 76% of ESG adopters started their journey within the last five years; and 58% of non-ESG adopters are open and keen to adopt ESG in the near future.

To become a bank for the community, Alliance Bank aims to support and provide guidance and innovative solutions to help its customers embrace sustainable practices to remain competitive and relevant.

“Our approach is defined by the 3As: Advocacy, Advice and Answers — as we advocate ESG adoption, we are also working with strategic partners to advise SMEs on their ESG transition, while we provide the suitable solutions as the answer to their constraints,” Kam said.

The bank also offers green propositions through the Sustainability Assistance Programme for financial solutions, BizSmart ® Solution Portal and #SupportLokal for non-financial solutions.

Apart from partnerships with UNGCMYB and SME Corp, the bank has built alliances with partners such as Bursa Malaysia and Malaysia Green Technology and Climate Change Corporation (MGTC) to provide professional consultancy and practical solutions to help businesses develop their ESG roadmaps.

Additionally, Alliance Bank aims to grow RM10 billion in new sustainable banking business by the financial year of 2025 (FY2025), as part of its sustainability agenda. To date, the bank has recorded RM6.7 billion in new sustainable banking business.

Shares of Alliance Bank closed one sen or 0.3% higher at RM3.35 on Monday, for a market capitalisation of RM5.19 billion.