Do ESG stocks really give returns that beat the market? / Dr. Pipat Yodphrutkarn


Information on investing in ESG (Environmental, Social and Governance) funds in Thailand From the disclosure ofMorning Star It is stated that there are 113 funds, divided into 22 funds investing in Thai stocks, with a net asset value of 2.5 billion baht, and investing abroad, 91 funds, with a net asset value of 43 billion baht, with a total net asset value of 45,000 baht. million baht, it can be said that more than 94% of ESG funds sold in Thailand are mostly invested abroad, with only 6 asset management companies having issued ESG funds that invest in Thai stocks.

The government sector has the idea to establish a Thai ESG Fund to help support the market. Including being able to use it for tax deduction. It has similar characteristics to LTF funds but focuses on investing in securities that place importance on ESG. It is believed that this will encourage the issuance of more ESG funds that invest in Thai stocks.

Among a total of 886 Thai stocks (excluding listed companies that may be delisted), there will be approximately 1 in 4 securities that give importance to disclosing ESG information. Most of which are large securities with high market values. Its value accounts for approximately three-quarters of the total market capitalization.

Thaipat Institute As a pioneer in creating a business sustainability database in Thailand has seen the limitations of ESG disclosure being concentrated among large securities groups. So it was foundedSustainability Disclosure Community (Sustainability Disclosure Community) established in 2019 for use as a platform to promote businesses to be aware and give importance to the dissemination of ESG information to cover approximately 3/4 of the securities in the market in order to provide investment options. variety This includes non-traditional companies and other entities that place additional emphasis on ESG matters.

Current ESG assessment results of businesses in Thailand collected by Thaipat Institute Covers both listed companies, funds, private companies. and other businesses, totaling 905 businesses, which will be beneficial to those who wish to use such ESG information on a large scale.

As a result, taking advantage of ESG data in terms of investing There will be a part that complements the use of financial data. Where the financial report It is information that investors use to analyze a company’s operations that reflects past performance. As for ESG issues, which include both quantitative and qualitative information, Investors will use it for evaluating operations. to predictTrend of future operating results of the company (Forward-looking Perspective)

An example of a green investment item is that the company has improved the boilers of its power plants by changing from using coal fuel to renewable energy for generating electricity. It will make you know that future operating results will have a chance of increasing. By operating on such ESG issues, which is a result of energy costs saved, etc.

In this regard, ESG data is used to compare performance between companies. for investment decisions The same set of ESG issues cannot be used across all businesses. For example, financial businesses will have important ESG issues to consider, including personal data protection and data security. This issue It is not a material issue for businesses that are industrial plants. Where energy, water, air and waste management will be more important ESG issues to consider.

Therefore, evaluating performance using the same set of generic ESG topics for scoring and rating will not have much significance in the results.

ESG data evaluation is therefore required.Industry specific issues (Industry-specific Topics) For comparing, rating and ranking companies in the same industry group.

In addition, in evaluating in-depth information It also requires consideration of organizational strategy on issues that are material to the company. (Company-specific Topics) in order to know the direction of operations on that ESG issue that the organization uses as a driver of value in terms of creating growth (Growth) and increasing productivity. (Productivity) or Risk Management. How does it affect the bottom line of the business that is different from other companies in that industry?

By evaluating ESG data for selecting companies to be components of the Thaipat ESG Index, it covers consideration of industry-specific issues. and important issues affecting the company that are related to the operating results. To answer the needs of investors in the dimension of sustainable investment that companies with good ESG will be able to generate good investment returns as well.

Thaipat ESG Index is the first ESG index in Thailand. That uses the Equal Weighted Index method to calculate the index, meaning it gives importance to securities that are members of the index, regardless of the size of the securities. which eliminates the factor of size or largeness of securities This allows the index to reflect price movements equally for each security. and create opportunities for medium- and small-sized quality securities that pass Thaipat Institute’s ESG criteria. Can affect the value of the index on a par with large securities.

If comparing the returns between the Thaipat ESG Index (Total Return) from the base day (30 June 2015) until 13 November 2023 with the SET100 and SET50 (Total Return) indices, it is found that the Thaipat ESG Index gives returns. The total return is 22.70% (or an average of 2.47% per year), while the SET100 and SET50 indices provide total returns of 10.74% and 11.18% (or an average of 1.22% and 1.27% per year), respectively.

This means that if you invest with 100 baht from 30 June 2015 with SET100 stocks today (13 Nov. 2023), you will receive a total return of 10.74 baht, or equivalent to 1.22 baht per year, while if you invest with ESG stocks in the Thaipat ESG Index will receive a total return of 22.70 baht, or 2.47 baht per year.

However, the past performance of the index It is not a guarantee of future performance.

Article by Dr. Pipat Yodphrutikarn, President of Thaipat Institute.

The article is in Thai

Tags: ESG stocks give returns beat market Pipat Yodphrutkarn


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