Tay & Partners | What ESG Means for SMEs – How It Supports Business and Growth

In Malaysia’s evolving business landscape, environmental, social and governance (“ESG”) is gradually attaining more traction, and it is no longer a mere buzzword. While there is no universal definition of ESG, ESG is generally understood as a framework to measure sustainability, ethical impact and governance. While ESG practices are commonly adopted by listed companies and government-linked companies, the relevance of ESG to small and medium-sized enterprises (“SMEs”) in Malaysia have been growing. SMEs can benefit in the following ways by embracing ESG practices:
- Investors are more likely to invest in businesses with strong ESG performance due to lower risk exposure and enhanced operational efficiency of these companies. As a result of this, SMEs that adopt ESG practices may find it easier to secure funding and business opportunities.
- SMEs may be eligible for government incentives aimed at promoting ESG compliance and sustainability incentives such as Green Investment Tax Allowance available for companies seeking to acquire qualifying green technology assets or those undertaking qualifying green technology projects for business or own consumption or Green Investment Tax Exemption for qualifying green technology service provider companies.
- Implementation of recycling and waste reduction programmes can lead to cost savings.
- ESG adoption helps SMEs avoid fines and regulatory penalties.
This article aims to explore how ESG supports business and growth of SMEs from the aspect of mergers and acquisitions (“M&A”) and initial public offerings (“IPO”).
Read the full article here.