A number of well-followed ESG-themed stock indices have been outperforming their conventional benchmarks since 2022, presenting potentially attractive investment opportunities in Southeast Asia.
According to an analysis by CGS International, from May 2022 to May 2025, the FTSE4Good Asean 5 index of ESG leaders listed in Indonesia, Malaysia, the Philippines, Singapore, and Thailand achieved an annualised return of 5.07%, surpassing the FTSE Asean All-Share index’s 1.56% annualised return over the same period.
CGS attributes the outperformance to a structural shift towards integrating ESG into allocation decisions, as institutional investors embed ESG principles into their mandates, and regulators are making sustainability disclosures mandatory.
Businesses now also perceive competitive advantage through ESG-related branding, as they are no longer approaching ESG as mere compliance, but as a way to differentiate themselves from competitors.
Considering these findings, CGS expects Southeast Asian ESG to remain an attractive investment theme due to the regional economic growth that remains above the global average, as well as to the fact that inflation is not a major problem in the region's key markets.
Valuations are also still attractive from an income and price upside perspective, and markets are observed to be rewarding ESG outperformance and punishing misalignment.
