Maybank leads the pack on ESG adoption

The financial institution aims to become the regional ESG leader by 2025


MALAYAN Banking Bhd (Maybank) has low exposure to environmental, social and governance (ESG) vulnerable sectors due to small loan exposure (funded) to vulnerable sectors such as palm oil (low at 2.29%), oil and gas (2.04%), forestry and logging (0.66%), coal (0.2%) and mining at 0.18% as at end-March 2021.

“Its non-funded exposure or holdings of bonds related to these vulnerable sectors were also low at well below 1%,” AmInvestment Bank Bhd analyst Kelvin Ong noted in a research report recently.

He added that Maybank received a rating of ‘AA’ in the MSCI ESG Ratings assessment and the group has consistently been included in the FSTE4Good index for the past eight years, reflecting the recognition of its sustainability efforts and practices.

Maybank aims to become the regional ESG leader by 2025 with a net-zero carbon emissions position under the group’s five-year strategy, M25 Plan, unveiled in April 2021.

Malaysia’s largest banking group by assets outlined four key commitments, including a RM50 billion commitment in sustainable financing, improving the lives of one million households across Asean, achieving carbon neutrality on own emissions by 2030 and a netzero carbon emission position by 2050.

The lender aims to achieve one million hours per annum on sustainability and deliver 1,000 significant Sustainable Development Goals-related outcomes.

AmInvestment has maintained its ‘Buy’ call on Maybank with an unchanged fair value (FV) of RM10.40 per share, pegging the stock at 1.3 times the price-to-book value and supported by return on equity in the financial year 2022 (FY22) of 10.4%.

Ong stated the FV reflects an additional 3% premium from an assigned four-star ESG rating.

CGS-CIMB Securities Sdn Bhd analyst Winson Ng reiterated an ‘Add’ call for Maybank and looked at a potential re-rating catalyst due to expected recovery in its core earnings per share (EPS) growth to its projected 9.2% in its FY21 forecast (FY21F).

Ng said Maybank’s dividend yield is also attractive at 4.9% in FY21F.

“We reduce our FY21-23F EPS forecast by 1%-2% and lower our dividend discount model-based target price from RM9.30 to RM9.10 as we increase our assumed share base from 11.4 billion to 11.7 billion to factor in the 279.3 million new shares issued under the dividend reinvestment plan,” he wrote in a research report recently.

The brokerage firm is more positive on Maybank as its exposure to ESG vulnerable sectors only accounted for 5.4% of its total loans as at end-March 2021.

“The small exposure to ESG-vulnerable sectors further supports our choice of Maybank as our ESG pick among the Malaysian banks,” he wrote.

Ng said other reasons include its most comprehensive ESG disclosure, its initiatives to work with customers to enable a transition to higher ESG standards, and leveraging its regional network to implement its ESG initiatives, which will broaden the base of beneficiaries.

“Guided by its risk acceptance criteria, which are sector-specific ESG-related financing guidelines, Maybank has dedicated teams (scrum teams) to work with customers on ESG-related matters with the aim of improving the customers’ ESG adoption,” Ng noted, adding over 100 Maybank’s employees involve or support the scrum teams.

Under Maybank’s first ESG commitment, ESG criteria will be integrated into the direct lending, investments and services of business divisions, guided by sustainable product frameworks.

For the second commitment, Maybank will continue its existing community initiatives, providing welfare assistance and financial aid to small and medium enterprises (SMEs) and underserved communities.

The group also intends to widen its retail product reach to the untapped communities for greater financial inclusion and improve the financial literacy of SMEs and school children.

On the third commitment, Maybank plans to reduce its carbon emissions by sourcing renewable energy, improving infrastructures, reducing staff travelling, and increasing its green building footage.

The group will also manage its water and waste consumption and recycling efforts.

Maybank’s fourth commitment includes people engagement, strengthening of business ethics policies and practices, responsible data management, compliance with the law, and strengthening the transparency and trust among stakeholders.

Maybank has established a board sustainable committee that reports to the board of directors and sits on top of the exco sustainable committee and its chief sustainable officer.

Maybank also rolled out its sustainability framework with the relevant risk acceptance criteria for industries and customers while its sustainable product frameworks are being developed.

Maybank shares slid 0.12% to RM8.03 last Friday, valuing the company RM93.9 billion.