KUALA LUMPUR (March 30): Astro Malaysia Holdings Bhd, Axiata Group Bhd, CIMB Group Holdings Bhd, Inari Amertron Bhd, My EG Services Bhd (MYEG), Sunway Bhd, and Yinson Holdings Bhd have been cherry-picked as UOB Kay Hian Securities (M) Sdn Bhd's top environmental, social, and corporate governance (ESG) picks with the Covid-19 pandemic lifting ESG to further prominence, UOB Kay Hian said.

UOB Kay Hian analysts including Vincent Khoo and Jacquelyn Yow Hui Li said besides looking at companies' ESG metrics, the research firm also focuses mainly on their fundamental growth based on their growth prospects and valuations.

"To play on the ESG theme, we have cherry-picked our top picks from the constituents of FTSE4Good," they said in a note yesterday.

"Covid-19 has lifted ESG to further prominence. ESG issues have gained much attention as the Covid-19 pandemic has prompted governments and businesses to focus more on sectors like healthcare and green spaces, connectivity via the internet, as well as work and education opportunities.

"While our studies agree with the consensus view that just being ESG-compliant does not necessarily enhance a stock's valuation or share performance, we observe that some companies with high ESG ranking and promising earnings growth tend to have better share performance and trade at premiums compared with their peers," they said.

FTSE Russell's website indicated that the FTSE4Good Index Series is designed to measure the performances of companies demonstrating strong ESG practices.

Transparent management and clearly defined ESG criteria make FTSE4Good indexes suitable tools to be used by a wide variety of market participants when creating or assessing sustainable investment products, according to FTSE Russell.

The UOB Kay Hian analysts said as sustainable funds will continue to gain the attention of asset managers and investors with the convergence of sustainability and mega trends in investing, UOB Kay Hian would include its comments on ESG-related issues in its future reports.

"ESG issues have been gaining attention alongside an increase in the AUM (assets under management) of ESG funds," they said.