Some companies’ share price affected due to ESG discount

MIDF Bhd group MD Datuk Mokhzani emphasised the gap in valuation between where the companies share prices are and where they ought to be is the discount

Some Malaysian companies’ share prices have performed poorly due to the environmental, social and governance (ESG) discount according to MIDF Bhd group MD Datuk Charon Wardini Mokhzani.

He noted these companies have been trading lower than they ought to be despite sustained demand for their end products.

He emphasised the gap in valuation between where the companies share prices are and where they ought to be is the discount.

Not all the companies in the sectors concerned are misbehaving. Indeed, many of our great companies are addressing the issues raised and correcting the misperceptions about them, he said.

Unfortunately though, the sectors and our country have been tarred with the same brush, he said while speaking during the MIDF Green Conference themed “Beyond The Blah Blah Blah” yesterday.

Charon stressed that when there is enough money to be made by companies, the ESG factor suddenly does not matter that much. While we know that for the good of all mankind, we must be ESG-compliant and reduce our carbon footprint, the capitalist animal spirit in us can’t resist the opportunity to make money.

Nevertheless, Charon said many local companies today are addressing the issues of ESG and putting it at the forefront of their business.

He also highlighted the share price of oil companies, which got beaten down during the Covid-19 pandemic, is now reaching all-time highs as the war in Europe threatens to reduce the supply of basic commodities such as food, oil and gas.

This makes their prices go up and what used to be an ESG discount for hydrocarbons has gone the other way, he said.

In Malaysia, the ESG discount is going away too, and prices of the sectors concerned are going up, he said.

Charon described the word ‘green’ as a convenient shorthand for ESG and it does not just mean reducing carbon, it includes all things environmental, such as reducing pollution and waste, as well as the ‘S’ for social and ‘G’ for governance issues.