Takeaways

• While global ESG investing is losing momentum, ASEAN is showing consistent ESG improvement and stronger investor returns.
• ASEAN companies with lower ESG risk have outperformed market benchmarks across short- and long-term horizons.
• Strong policy commitments and rising sustainable finance are positioning Southeast Asia as a stable ESG investment region.

As global markets retreat from environmental, social, and governance (ESG) commitments, Southeast Asia is moving decisively in the opposite direction. According to a new report by Maybank Investment Banking Group (Maybank IBG), the region is turning sustainability into a measurable source of investor returns.

The seventh edition of ASEAN ESG Alpha finds that while global ESG sentiment weakened sharply in 2025, ASEAN continued to improve ESG quality and reward investors. Globally, sustainable funds recorded significant net outflows, and 71% of ESG-linked indices failed to beat their benchmarks. In contrast, ASEAN companies with lower ESG risk consistently outperformed their domestic markets.

ESG Performance Driving Alpha

The report highlights a clear performance gap between ASEAN and global markets. Companies in the ASEAN-6 universe, i.e., those rated as having negligible, low, or medium ESG risk, generate excess returns over one-, three-, and five-year periods when compared to MSCI country indices.

Over the past year, these companies outperformed by 16.8%. Over three years, the excess return stood at 6.7%, while five-year performance showed a 6.3% gain. Notably, 68% of companies in the ASEAN-6 now fall within manageable ESG risk categories, with large and systemically important firms leading the transition.

Read More: ESG Integration Deepens Despite Economic Headwinds

Thailand Emerges as a Standout

Thailand stood out as a rare bright spot in an otherwise challenging global ESG environment. While sustainable funds worldwide saw outflows of USD 61 billion in the first nine months of 2025, Thailand attracted USD 1.5 billion in inflows and launched 37 new sustainable funds.

The country’s leadership is supported by an ambitious climate commitment, i.e., a 47% reduction in emissions by 2035 compared to 2019 levels. Meeting this target will require an estimated USD 7 billion in investment, creating opportunities across energy, infrastructure, and finance.

Sustainable Finance Gains Momentum

Across the ASEAN-6, sustainable bonds and loans reached USD 51 billion in 2025, accounting for 3.5% of global issuance. Singapore retained its position as the region’s main sustainable finance hub, leading in both green bonds and loans.

Indonesia and Malaysia also expanded their share of sustainable lending, signaling deeper engagement with transition finance. Indonesia alone faces an estimated USD 472.6 billion investment requirement to meet its 2035 climate goals, opening long-term opportunities in utilities, mining, and financial services.

Policy Backing Strengthens the Case

ASEAN’s ESG resilience is underpinned by policy momentum. In 2025, Singapore, Malaysia, Thailand, and Indonesia updated their Nationally Determined Contributions (NDCs), reinforcing long-term climate and sustainability targets.

Also Read: ESG Support Strong Among Investors, Surveys Show

“ESG quality in ASEAN continues to improve, and investors are being rewarded for backing lower-risk companies,” the report states. With strong policy ambition, rising capital flows, and improving corporate ESG scores, ASEAN is increasingly seen as a safe harbor in a volatile global ESG landscape.

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Source: BUSINESSTODAY