Enabling MSMEs to adopt ESG practices is key to sustainable supply chains: report
[SINGAPORE] There is growing momentum among micro, small and medium-sized enterprises (MSMEs) in South-east Asia to adopt sustainability practices, but stumbling blocks such as financial constraints remain.
This issue was raised in a report by the Centre for Impact Investing and Practices (CIIP), titled Transforming for Sustainability: Driving Impact and Value through Supply Chain Action, released on Wednesday (May 7) at an Ecosperity Week event.
The report found that MSMEs in the region recognise the business value of adopting sustainability practices, with 39 per cent of respondents agreeing that they lower costs and improve long-term efficiency. Twenty-seven per cent believe these practices can attract or retain talent in a values-driven workforce.
This is a crucial trend as many multinational corporations are setting higher expectations across their supply chains in pursuit of their long-term sustainability commitments, the report noted.
MSMEs are often key suppliers for these global companies. Therefore, aligning themselves with the evolving standards is increasingly vital for these businesses to remain competitive and secure long-term growth opportunities, the study added.
Dawn Chan, chief executive officer of CIIP, said: 'MSMEs are the backbone of South-east Asia's economies and essential partners in advancing sustainable supply chains.'
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The findings are based on a survey of more than 3,500 MSMEs from countries in the region – such as Indonesia and Vietnam – as well as interviews with about 85 organisations in Asia.
The report also revealed that 84 per cent of MSMEs have adopted at least one environmental, social and governance (ESG) practice, with social measures being the most common due to mandated employee protection policies in each of the countries studied.
However, financial constraints remain a key hurdle to adopting more of such practices, with many of the MSMEs surveyed citing high upfront costs. This is despite half of them planning to increase their ESG budgets by 2027.
Manpower also remains an issue, with 60 per cent of respondents reporting moderate to significant difficulties in hiring staff for sustainability or related roles.
Some also cited the inability to derive immediate benefits from embracing ESG practices. Thirty-two per cent said the ability to gain new clients or enter new markets would be an important motivating factor for the future adoption of ESG approaches.
Enabled to thrive
To help MSMEs, the report identified five key enablers – among them is making the concept of ESG clear and simple. This would require the commercial benefits of ESG practices to be emphasised.
Another enabler is financing the change. While sustainability-linked loans are increasingly available, uptake by MSMEs remains low. This suggests that concessional rates alone are not enough, and investments in innovative MSME-targeted solutions are needed.
To this end, venture capital firms and impact investors are a third vital enabler. They play a crucial role in facilitating ESG adoption across supply chains by providing catalytic funding to incentivise innovation and reduce the barriers to adopting such practices.
These investors are particularly important in backing early-stage solutions and business models which are priced and designed for MSMEs.
'(These enterprises') growing interest in ESG signals a real opportunity to unlock business resilience and long-term value,' Chan said.
'This report aims to provide a clearer view of what MSMEs need to succeed (in), and how ecosystem players, from industry leaders to governments and financial institutions, can work together to accelerate scalable, sustainable impact,' she added.
Themed 'Impact for Outcomes – Perspectives from the Ground', the Impact Investing Roundtable 2025 where the report was released was co-organised by CIIP and Temasek.
Fashioning a solution
In the same vein, CIIP on Wednesday signed a memorandum of understanding with the Singapore Fashion Council (SFC) to advance supply chain sustainability within the fashion industry – with a particular focus on empowering MSMEs.
Under the agreement, SFC will lead the development and implementation of three key initiatives to support the sustainability transformation of the fashion and textiles sector. CIIP will contribute insights and ecosystem-building support.
The initiatives comprise:
a sectoral plan identifying the key challenges and strategic priorities for the local and regional fashion industries;
a guidebook with resources and practical road maps to help companies at different stages of their sustainability journeys; and
a digital toolkit providing MSMEs with access to ESG tools to facilitate decarbonisation and broader adoption of sustainability practices.
Zhang Ting-Ting, CEO of SFC, said: 'The future of fashion lies not just on the runway, but in the roots of our supply chains. MSMEs are the heartbeat of Asia's fashion industry – collective action and practical support are key to meaningful progress in sustainability.'
She added: 'By partnering with forward-thinking organisations like Temasek Trust's CIIP, we are bridging insight with implementation – empowering businesses with the tools and knowledge to future-proof their supply chains and thrive.'
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Overcoming challenges in sustainable finance
Helge Muenkel, chief sustainability officer, DBS Helge Muenkel, DBS chief sustainability officer PHOTO: DBS Victor Wong, head of sustainability office, UOB Asset Management Victor Wong, head of sustainability office, UOB Asset Management PHOTO: UOB Mike Ng, group chief sustainability officer, OCBC Mike Ng, group chief sustainability officer, OCBC PHOTO: OCBC BT: Sustainable investing has ebbed and flowed along with market sentiment and political winds. Why are investors hesitant, and what needs to be done to get climate-aware investing into the mainstream? Helge Muenkel: We have witnessed continuous improvement and strong efforts to transition our global economies to a net-zero future. According to the International Energy Agency, last year's global investments in clean energy were around double the amount going into fossil fuels. Ten years ago, fossil fuel investments were about 20 per cent larger than clean energy investments. Meanwhile, India is projected to achieve a major milestone in 2025, with renewable electricity providing for more than half of the country's power capacity, while China added more renewable power capacity in 2024 than the rest of the world combined. Notwithstanding this, current investment flows are still insufficient to allow us to meet the goal of the Paris Agreement. Furthermore, complexities in the macroeconomic and geopolitical landscape have understandably made investors more cautious in recent times. A NEWSLETTER FOR YOU Friday, 12.30 pm ESG Insights An exclusive weekly report on the latest environmental, social and governance issues. Sign Up Sign Up Importantly, sustainable investing is not a short-term but a structural trend. Climate risk is increasingly recognised as a major driver of financial risk. And hence, most major investors integrate environmental, social and governance (ESG) considerations into their overall decision process. Encouragingly, Asian regulators are stepping up. Across the region, many policies and regulations have been put in place that create an enabling environment, which supports climate action and related financing flows. This includes green and transition taxonomies and ESG disclosure standards. These developments bolster investor confidence and embed greater transparency in sustainable investing – important steps in shifting these financing flows into the mainstream. More work needs to be done. For instance, there is some ambiguity around what qualifies as transition and transition finance. The vast majority of assets and economic activities globally and in Asia are not yet green, and DBS believes it is critical to also allocate capital to support their transition to becoming greener. Beyond financing those assets and activities, transition finance can also help companies transform their entire businesses, all of which will contribute to the greening of the entire economy. We see progress across the region on several fronts. Localised taxonomies are evolving to reflect regional contexts and developmental needs. Markets like Singapore are evolving disclosure rules and incentives for credible transition finance. At DBS, we have observed growing sophistication in how capital is being deployed. For instance, we saw strong investor appetite for two green bonds DBS brought to the market recently. The first was the issuance of Equinix's S$500 million green bond in March 2025, its first Singapore dollar issuance. The second was Asia's first public sustainability-linked securities offering by ST Telemedia Global Data Centres in January 2024. Both bonds were meaningfully oversubscribed, signalling growing investor demand for credible climate instruments. Victor Wong: Investors' hesitation around sustainable or climate-aware investing, despite growing interest, often stems from structural challenges and other key concerns. For example, the lack of standardisation and transparency in how ESG factors are assessed and reported. Without consistent metrics, it becomes difficult for investors to compare ESG investment products and evaluate their true impact. Additionally, some investors are concerned that corporates and governments may scale back their climate commitments which affect the short-term viability of such investments. At UOB Asset Management, we view ESG integration as a strategic tool for value creation and risk mitigation. By embedding ESG considerations into our investment process, we aim to support long-term sustainability for our investees and their businesses. We also recognise that some investors may wish to explore and capitalise on advanced strategies to achieve specific impact or invest in specific themes. To meet these needs, we make ESG a core element of our investment thesis, aligning our strategies with both market realities and investor aspirations. Mike Ng: One of the key considerations for investors when it comes to their investment decisions is the potential return. The recent increased geopolitical uncertainty and evolving regulatory landscape have tested investors' appetite to commit to sustainable investments since they are unsure about the future regulatory environment and the impact it may have on their investment returns. In addition, some investors may be hesitant given concerns about low-quality ESG data, greenwashing as well as the perceived trade-off between sustainability and returns. While interest in sustainable investment may fluctuate from time to time due to market sentiments and the geopolitical context, we believe that the overarching trend towards investments that take ESG factors and risks into consideration is here to stay. The challenges of sustainable investment are also being actively addressed. Collaboration between stakeholders – asset managers, data providers and regulatory bodies – is paving the way for more standardisation in reporting frameworks and taxonomies, which will help mitigate concerns on data quality and greenwashing. Meanwhile, leading financial institutions are developing diverse and accessible products catering to varying preferences and risks appetites, and – over time – are also showing that sustainable investments can deliver required returns. Sometimes, enabling investors with information can also make a big difference in mainstreaming sustainable investing. Take, for example, the OCBC Sustainability Hub, launched in 2024. The innovative platform empowers investors with a personal ESG rating, enabling them to track, understand and act on their investments, and to make informed financial decisions. Within just six months of its launch, the Sustainability Hub achieved a 2.3x year-on-year increase in sustainability-themed investments. 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Across Asia, countries are racing ahead in electric vehicle (EV) manufacturing, charging infrastructure and intelligent traffic systems. Innovations such as ultra-fast charging and connected transport systems are also improving convenience and range, spurring consumer adoption. Investors are increasingly focused on mobility platforms, EV supply chains and battery recycling, all of which present strong growth prospects as urbanisation and climate pressure reshape how people and goods move across the region. In the agriculture sector, South-east Asia's role as a major rice producer makes agricultural adaptation a top priority. Agri-tech innovations and advanced water management systems can boost food security while safeguarding millions of livelihoods. With strong social returns, such investments are increasingly attracting private capital, from agribusinesses investing in resilient seeds to impact investors funding water-saving irrigation technologies. 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While the US has sidelined the green agenda for now, the global shift towards clean energy remains crucial for humanity's long-term survival and offers substantial economic and investment prospects. According to a World Economic Forum White Paper from 2023, an estimated additional US$4.3 trillion in revenue and 232 million new jobs could be created in Asia by 2030 due to climate adaptation and mitigation initiatives. We see opportunities in companies with exposure to clean energy and EVs, as well as transition enablers focused on smart grid infrastructure, energy storage and efficiency, and producers of metals and minerals. Policy shifts have also enabled the oil and gas industry to be part of the energy transition, by leveraging technology – bioenergy and carbon capture – and the ability to manage complex energy systems. From a geographical perspective, China in particular has emerged as a green industry powerhouse. 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Business Times
7 days ago
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Stoneweg European Reit outperforms global peers in sustainability rankings: report
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Business Times
30-05-2025
- Business Times
Issue 150: S-E Asia's ESG indices outperform; Sembcorp builds up regional pipeline
This week in ESG: CGS-CIMB sees structural drivers for ESG investing; Sembcorp in Malaysia-Singapore-Vietnam energy consortium Sustainable investing ESG pays off in South-east Asia Despite a pushback against environmental, social and governance (ESG) principles in the developed West, the sustainability theme continues to present potentially attractive investment opportunities in South-east Asia. A new analysis by CGS-CIMB shows that a number of well-followed ESG-themed stock indices have been outperforming their vanilla benchmarks since 2022. From May 2022 to May 2025, the FTSE4Good Asean 5 index of ESG leaders listed in Indonesia, Malaysia, the Philippines, Singapore and Thailand achieved an annualised return of 5.07 per cent. That surpassed the FTSE Asean All-Share index's 1.56 per cent annualised return over the same period. The Malaysia-only FTSE4Good Bursa Malaysia benchmark's annualised return was 3.46 per cent, more than the 3.10 per cent annualised return generated by the FTSE Bursa Malaysia EMAS index. That outperformance was comparable with Thailand's SETESG index, which lost 6.03 per cent annually on average versus the broader SET 100's steeper 6.41 per cent annual loss. A NEWSLETTER FOR YOU Friday, 12.30 pm ESG Insights An exclusive weekly report on the latest environmental, social and governance issues. Sign Up Sign Up CGS-CIMB attributes the outperformance to a structural shift towards integrating ESG into allocation decisions. Institutional investors are embedding ESG principles into their mandates, and regulators are making sustainability disclosures mandatory. The impact of these changes is long-term and widespread. Furthermore, businesses perceive competitive advantage through ESG-related branding, the firm says. Businesses in South-east Asia are no longer approaching ESG as mere compliance, but as a way to differentiate themselves from competitors. CGS-CIMB expects South-east Asian ESG to remain an attractive investment theme for a few reasons: Regional economic growth remains above the global average Inflation is not a major problem in South-east Asia's key markets Valuations are still attractive from an income and price upside perspective Markets are rewarding ESG outperformance and punishing misalignment Besides CGS-CIMB's report, a considerable amount of recent research has also turned the spotlight on investment opportunities in climate adaptation and resilience, with Singapore sovereign wealth investors GIC and Temasek publishing reports on that topic. The MSCI Sustainability Institute in April released a report that highlighted investment opportunities in Asian companies that provide resilience solutions against heat. Heat resilience solutions providers are particularly attractive in the universe of climate adaptation and resilience investment plays because their products are likely to draw significant private-sector demand, the MSCI authors say. A list of example companies that fall within the category of heat resilience solutions providers included SP Group – a leading supplier of district cooling solutions in Singapore – and Keppel – a Singapore-based asset manager with businesses in water treatment and sustainable real estate. The CGS-CIMB and MSCI reports are examples of a positive trend of investment research focused on ESG in Asia or South-east Asia. CGS-CIMB explains in its description of its proprietary ESG screening framework that global scoring models face limitations in South-east Asia due to regional circumstances that don't fit with the norms of developed markets where many of these models are developed. In the same way, it is difficult for most investors to translate ESG investment ideas that originate from outside the region to the regional context. For example, the energy and nature transitions in South-east Asia won't follow the same pathways as those in China or India, or even between countries within the region. Investors also need experts familiar with the region to connect ideas about big ESG trends to actual companies and products that are investable. Locally relevant research can help to unlock ESG-discerning private capital in South-east Asia. That could, in turn, provide market-based discipline to support better ESG performance among listed companies in the region. Just as growing coconut trees can provide a community with many benefits, nurturing domestic ESG research could help South-east Asia's market regulators to boost interest in their markets and to improve ESG performance at the same time. Sustainable business Sembcorp's growing South-east Asia pipeline Gas and renewable energy group Sembcorp Industries has been busy sowing seeds in South-east Asia so far in 2025. The latest announcement involves a strategic partnership with a Malaysian consortium and a subsidiary of Vietnam's state-owned oil company PetroVietnam to explore exporting renewable energy from Vietnam into Malaysia and Singapore. The deal includes a feasibility assessment for a potential undersea cable from Vietnam to Malaysia. Earlier in the month, Sembcorp said it had clinched S$650 million of contracts to provide chemical and energy solutions provider Aster with gas, power and utilities solutions for its Pulau Bukom and Jurong Island facilities. The two parties also signed a memorandum of understanding to explore strategic initiatives across Singapore, Indonesia and the rest of South-east Asia. So far this year, Sembcorp has also announced a solar contract with a Meta Platforms subsidiary, a hydropower import project with Sarawak Energy, two industrial park projects in Vietnam with partner Becamex IDC, the S$105 million purchase of a solar farm in the Philippines from CleanCurrent Renewable Energy, and a utility-scale solar and storage project in Indonesia. Not every announcement has been positive. Sembcorp said in March that a deal to import gas from Indonesia would be terminated because regulatory approval in Indonesia was not obtained. Not all of the deals will lead to revenue soon. For instance, the Vietnam energy import agreement is still in very exploratory stages. Outside of Singapore, Sembcorp's largest markets in terms of revenue are the UK, China and India. The rest of Asia – Sembcorp does not report South-east Asia as a separate geographical segment – makes up less than 5 per cent of total revenue. However, taken together, the recent announcements reflect a growing pipeline in South-eat Asia for Sembcorp. Other ESG reads
