SKEPTICS and critics have dismissed efforts to achieve environmental, social and governance (ESG) mandates as an exercise in futility, seeing them as mere ticking of boxes monitored by regulators but with no clear impact on the bottom line.
Recent local and international studies on the correlation between ESG issues and financial performance, however, are proving the opposite: Embedding ESG principles into corporate strategy and operations does result in positive financial outcomes.
And of the three, a March 2026 study by state-run think tank Philippine Institute for Development Studies (PIDS) revealed that governance performance was “the strongest and most consistent driver” of profitability, liquidity, solvency, efficiency, growth and market valuation.
According to the paper, robust governance frameworks such as board independence, reporting integrity, risk management and minority investor protection “translate directly into better cash flow management and investment discipline the following year; improvements strengthen long-term financial capacity and productive efficiency.”
These conclusions were based on PIDS’ analysis of 18 non-financial firms listed on the Philippine Stock Exchange with complete ESG data from Bloomberg and full financial and ownership disclosures for the years 2015 to 2023.
Governance indicators measured by PIDS in its discussion paper titled Governance and Value: A Disaggregated Environmental, Social and Governance (ESG) Analysis of Corporate Financial Performance (CFP) in Philippine Publicly Listed Firms covered board composition, executive compensation, shareholder rights and audit that can have a “material impact” on the performance of listed companies.
“[Governance’s] influence is robust across multiple indicators, reinforcing the value of strong board oversight, transparency and compliance in building firm performance,” said the PIDS study paper written by PIDS senior research fellow John Paolo R. Rivera and Ritsumeikan Asia Pacific University (APU) Graduate School of Management Prof Michael Angelo A. Cortez.
Beyond compliance
The Metropolitan Bank & Trust Co. (Metrobank) of the Ty Group is one of the growing list of Philippine companies that are reaping the rewards of good governance practices.
For the second straight year, it was recognised for consistently upholding high standards of corporate governance during the recent Golden Arrow Awards by the Institute of Corporate Directors, which evaluates shareholder rights, stakeholder relations, transparency and board responsibilities, as published on their company disclosures.
For Metrobank, sound corporate governance is deemed fundamental to long-term sustainability and maintaining the trust of stakeholders, thus its practices go beyond regulatory compliance.
At the core of its governance is a highly engaged board of directors – including respected independent directors who have no financial, material or employment relationship with the company – that provides strategic direction and oversight. The Metrobank board also operates through a well-defined committee structure that allows focused oversight across critical areas such as audit, risk, compliance, technology and sustainability.
These committees, many of which are led by independent directors, play a vital role in ensuring that risks are managed effectively, controls are in place and governance standards are upheld across the organisation, it said.
“Ultimately, our approach to governance reflects our broader purpose – to grow responsibly alongside the communities we serve. By strengthening our governance practices, we reinforce our promise that our stakeholders are in good hands, while building a resilient and future-ready institution,” Metrobank said.
Strict adherence to its governance measures has allowed it to weather the financial upheavals of 2026, with its net income steady at 24.9 billion Philippine peso (RM1.93bil) in the first half and with core businesses providing earnings through continued loan growth, stable margins and modest fee income.
Highest recognition
Another company that has taken corporate governance to heart is Ayala Corp, the holding company of the Ayala group that recently won the 5 Golden Arrow Award, deemed the highest recognition for excellence in corporate governance among publicly listed companies in the Philippines.
Ayala Corp was lauded for its performance on sustainability, resilience, stakeholder management, transparency, accountability and board strategy and management.
“At Ayala, we believe that the highest standards of corporate governance are a prerequisite for a sustainable business. We strive to be an institution that our stakeholders can always rely on. Strong corporate governance is key to building and keeping this trust,” said Ayala president and chief executive officer Cezar P. Consing.
One of the ways Ayala is being rewarded for following good governance principles is through global partnerships, with foreign companies trusting that Ayala walks its talk and that it considers long-term benefits over short-term gains.
According to Ayala, its corporate governance system includes a combination of internal and external mechanisms such as the structure of the board of directors and committees, oversight of management and sound policies and controls.
For the group, setting up proper controls, including conforming to regulatory requirements and international standards, is critical to ensuring a sustainable enterprise in the long term and becoming a partner of choice for world-class companies.
Ayala Corp chair Jaime Augusto Zobel de Ayala shared that in the past two years alone, Ayala has partnered with Kmart of Australia for the Anko stores, Al Seer Group of the United Arab Emirates for Spinneys, CP Group of Thailand for Makro, ABC Impact of Singapore for AC Health, BYD of China for AC Mobility and A.P. Møller of Denmark for AC Logistics.
“I believe we attract world-class partners because of our corporate governance standards, our desire and ability to scale our businesses to market-leading positions, the millions of customers that we reach and how our ecosystem works together. It is a potent combination of factors,” he said.
Metrobank and Ayala are just two of many Philippine conglomerates demonstrating clearly the value of good governance. Other listed companies are following suit, driven not just by the need to comply with regulations and demands of potential investors, but also by the simple truth that doing so makes sound business sense.
As these examples show, by doing good, these companies end up doing well.
