HLIB Research said it has maintained 2025 to 2026 crude palm oil price assumptions of RM4,000 per tonne and RM3,800 per tonne for now.
PETALING JAYA: Most plantation companies in Malaysia continue to show improvements in their environmental commitments, particularly in terms of greenhouse gas (GHG) emissions and water intensities, says Hong Leong Investment Bank Research (HLIB Research).
Based on a recent review of the sector’s environmental, social and governance (ESG) developments, the research house noted planters have intensified efforts to adopt and integrate ESG principles across their operations. Note that the oil palm plantation sector has long been linked to deforestation, GHG emissions, labour exploitation and land rights violations.
These longstanding issues have resulted in increased global scrutiny and the introduction of stricter regulations by major importing regions such as the European Union (EU) and the United States, a noticeable shift in demand from buyers and consumers and the growing integration of ESG criteria into funding and investment decisions by financial institutions.
Beyond rising ESG adoption, HLIB Research noted the level of ESG disclosure among planters has improved over time, spurred by both mandatory and market-driven requirements.
Some examples include the EU Deforestation Regulation, which requires enhanced traceability and data systems, Task Force on Climate-Related Financial Disclosures reporting and sustainability disclosures mandated by Bursa Malaysia.
On the evolving ESG disclosure, the research house said the key elements within the environmental pillar, particularly GHG emissions and water management, are critical in assessing how planters interact with and impact the natural environment.
HLIB Research also noted four out of seven planters recorded lower GHG intensity, namely Hap Seng Plantations Holdings Bhd
, Johor Plantations Group Bhd, Kuala Lumpur Kepong Bhd (KLK) and SD Guthrie Bhd.
“These improvements stemmed from various reduction initiatives, such as the installation of biogas plants and filter belt presses, the purchase of green energy and the use of by-products like palm kernel shells.
“In terms of water intensity, seven out of eight planters achieved lower water intensity in financial year 2024 (FY24), signalling more efficient water usage and improved water management practices across operations,” it added.
Meanwhile, progress under the social pillar is more difficult to quantify due to its qualitative nature, despite many planters showing clear commitment to addressing key social concerns.
Governance practices among planters, on the other hand, showed uneven progress in FY24, particularly in board independence and gender diversity.
In terms of board independence, HLIB Research pointed out that all planters met the minimum requirement under the Malaysian Code on Corporate Governance with at least 50% independent board representation.
Hap Seng Plantations and KLK improved their board independence (from 40% to 44% in FY23 to 56% to 60% in FY24). In contrast, IOI Corp Bhd and TSH Resources Bhd saw declines (from 67% and 56% in FY23 to 57% and 50% in FY24, respectively).
ESG aside, HLIB Research said it has maintained 2025 to 2026 crude palm oil price assumptions of RM4,000 per tonne and RM3,800 per tonne for now, pending a review (with slight upside bias), as well as its “neutral” stance on the sector.
For exposure, its top “buy” picks are SD Guthrie with a target price (TP) of RM5.17, Johor Plantations with a TP of RM1.35 and IOI Corp with a TP of RM4.24 per share.
