PETALING JAYA: Three environmental, social and governance (ESG) themes are set to shape investment decisions this year namely carbon pricing, circular economy and waste management as well as mandatory sustainability reporting, under the National Sustainability Reporting Framework (NSRF).
Against this backdrop, Hong Leong Investment Bank (HLIB) Research said its top ESG picks are Bursa Malaysia Bhd
, for which it has a “buy” call with a target price (TP) of RM9.60 a share, IOI Corp Bhd (“buy”; TP: RM4.45 a share) and Solarvest Holdings Bhd (“buy”; TP: RM3.66 a share).
The introduction of a carbon tax on the iron, steel and energy sectors will directly affect cash flows and profitability of corporations, sharpening investor focus on operational efficiency and emissions intensity, and widening the valuation gap between leaders and laggards.
Rising material costs and tighter regulation are pushing the circular economy and waste management from a niche consideration into a core operational and margin preservation imperative.
The adoption of the International Financial Reporting Standards-Sustainability Disclosure Standards under the NSRF is set to improve data consistency and comparability, according to HLIB Research.
It said planters such as SD Guthrie Bhd and Johor Plantations Group Bhd are effectively transforming legacy environmental liabilities into recurring green revenue streams, validating the sector’s potential as a sustainable bio-economy hub.
In the downstream segment, Yenher Holdings Bhd is transforming organic waste into sustainable protein.
HLIB Research noted that 2025 was a year of mixed signals.
“While COP 30 (the United Nations Climate Change Conference) delivered progress through a tripling of global adaptation finance to US$120bil, it failed to mandate a fossil fuel phase-out, leaving the world on a 2.3°C warming trajectory.
“In Malaysia, sustainability considerations are increasingly viewed not as a trade-off to returns, but as integral to preserving value, enhancing resilience and managing structural risks over the investment horizon.”
HLIB Research said the number of sustainable and responsible investment funds registered with the Securities Commission continued to rise from 34 in 2021 to 77 in 2025.
“Total assets under management expanded more than fourfold over the same period from RM5.07bil to RM22.35bil.
“As the 12th Malaysia Plan concludes, the country is broadly on track, having exceeded green procurement targets (40.5%) and neared the 31% renewable energy capacity milestone under the National Energy Transition Roadmap,” it said.
Meanwhile, renewable energy capacity has reached 30%, led by solar energy which contributes more than 5GW, said the research house.
