This was disclosed in Alliance Bank ’ s “ The Path to Sustainable Impact - Sectoral Insights of Malaysian SMEs ” (“ ESG 2.0 Report ”), which Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad recently launched .

The ESG 2.0 Report delves into the progress of Malaysian SMEs in their sustainability journey . It provides crucial insights into the current landscape and how prepared they are to meet evolving regulatory , market , and financial demands while unlocking new market opportunities .

The study followed a three-step approach of in-depth discussions and interviews , a survey of close to 400 SME participants , and insights from secondary research .

Reflecting on the importance of ESG adoption among SMEs , Nik Nazmi said : “ As SMEs are the backbone of our economy , this effort plays a crucial role in strengthening Malaysia ’ s ESG ambitions , fostering resilience , and preparing businesses for both local and global opportunities .

“ This report is a timely and crucial resource , providing actionable insights and strategic guidance to help SMEs manage ESG risks effectively , differentiate themselves in

competitive markets , and thrive on both local and global stages .”

Sharing the sentiment , Alliance Bank Group Chief Executive Officer ( GCEO ) Kellee Kam said the Bank was committed to empowering Malaysian SMEs through its 3As approach , namely Advocacy , Advice and Answers .

“ This helps them integrate ESG practices as key drivers of long-term resilience and success . The significant increase in awareness and adoption since our first ESG report highlights an encouraging focus on sustainability as SMEs seek cost efficiencies and opportunities for market expansion ,” said Kam .

“ The second edition of this annual ESG survey offers deeper insights into emerging trends and sector-specific challenges while identifying areas for growth and improvement .

“ Together with our knowledge partners , we provide clear and accessible ESG guidelines to support SMEs in their ESG journey , aligning with our endeavour to become The Bank For Life .”

The ESG 2.0 Report reveals that SMEs adopting ESG practices cite cost savings , market demand , and innovation as the primary motivators for integrating sustainable practices into their operations , with 60 per cent of SMEs now onboard with ESG initiatives .

They recognise the long-term value of ESG practices , including improved risk management and increased productivity . In addition , Malaysian SMEs now cite

( From left ): Elina Jani ( CEO of GreenTech Ideaslab , MGTC ), Prof Emeritus Dato ’ Dr Adeeba Kamarulzaman ( President and Pro Vice- Chancellor , Monash University Malaysia ), Kellee Kam ( GCEO , Alliance Bank ), Nik Nazmi Nik Ahmad ( Minister of Natural Resources and Environmental Sustainability ), Faroze Nadar ( Executive Director , UN Global Compact Network Malaysia & Brunei ), Junior Cho ( Country CEO , Zurich Malaysia ), Rizal Nainy ( CEO , SME Corporation Malaysia ), Dr Marjan Muhammad ( Deputy President Research , INCEIF University ).

“ innovation ” as a Top 3 driver for ESG adoption , highlighting new business and market opportunities for SMEs .

Furthermore , 38 per cent of SMEs that have embraced sustainability in their business reported revenue increases of more than 50 per cent . The remaining 40 per cent of SMEs surveyed that have yet to adopt ESG practices ( non-ESG adopters ) are willing to embrace ESG practices if provided with financial assistance , sponsored training , and tax incentives .

Key findings of the ESG 2.0

Report are :

• Increased ESG adoption : 60 per cent of SMEs now adopt ESG practices , a significant increase from 28 per cent in ESG 1.0 , with the manufacturing ( 69 per cent ) and construction ( 60 per cent ) sectors leading the way . In an interesting shift from the previous survey , 37 per cent of ESG adopters said there was too much information on ESG now , confusing the sustainability standards and frameworks to follow ( ESG 1.0 : 13 per cent ).

• Primary motivators : 53 per cent and 51 per cent of ESG adopters cite cost savings and market demand as key drivers , respectively , with “ innovation ” now cited as top three reasons as a pathway to profitability .

• Benefits from ESG adoption : 38 per cent of SMEs that incorporate ESG achieved more than 51 per cent of increased revenue , while 24 per cent of SMEs that incorporate ESG

Nik Nazmi Nik Ahmad

achieved more than 51 per cent cost savings .

• Future opportunities : Currently , one in two SMEs ( 48 per cent ) are self-funding their ESG initiatives , and amongst the non-adopters , 52 per cent plan to implement ESG practices within two years , out of which 13 per cent intend to adopt in less than a year ; presenting an opportunity for various industry stakeholders to support their transition . Alliance Bank has empowered

SMEs on their ESG journey with a comprehensive suite of personalised financial and beyond banking solutions .

These include customised financing options , access to green funding through Bank Negara Malaysia ’ s Low Carbon Transition Facility and High Tech and Green Facility , and competitive rates for initiatives like solar panel installations and green mortgages .

Beyond financing , the Bank collaborates with like-minded industry leaders such as Bursa Malaysia and UNGCMYB to deliver practical ESG assessments , capacity-building programmes and roadmaps , equipping SMEs with the tools they need to integrate sustainable practices into their operations .

It also works with a range of green solutions providers to offer pragmatic ESG solutions such as energy efficiency , better water management , and more sustainable waste management solutions .

Looking ahead , Alliance Bank , together with its partners , will launch a series of sectoral playbooks in 2025-2026 , providing actionable guidance and best practices for SMEs across key sectors such as services , manufacturing , construction and agriculture .

These playbooks are designed to empower businesses with the tools and insights needed to navigate their sustainability goals effectively . – @ ESG