Investors prioritise other factors over a company's ESG scores

There are gaps in verifying environmental, social, and governance data.

As Singapore continues to be committed to green goals, capital markets firm CGS-CIMB found that companies should not rely on having high environmental, social, and governance (ESG) scores to drive their price performance.

“We are unable to find a consistent relationship where high ESG scores are the primary driver of price performance, with macro and business factors taking precedence,” CGS-CIMB said in its ESG update.

It also noted that there are gaps in qualifying and the verification of ESG data whilst there is a fragmented global reporting regime which poses issues about the comparability of the data.

CGS-CIMB also said the carbon tax hike in the Budget 2022 was also “aggressive,” which may prompt companies to raise their efficiency and cut the amount of greenhouse gas emissions.

On ESG stock selection, CGS-CIMB favours companies with “good fundamentals first, before taking into account their ESG scores and prospects.”

It also cited the sustainability efforts of Enterprise Singapore, the Monetary Authority of Singapore, and the Singapore Exchange to help firms go green.

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