While global investors have been pulling capital from ESG strategies, Southeast Asia is moving in the opposite direction, converting sustainability into a measurable performance advantage. A new report from Maybank Investment Banking Group finds that ASEAN markets continued to strengthen ESG quality and investor returns in 2025, even as global ESG sentiment weakened.

The seventh edition of ASEAN ESG Alpha shows that global sustainable funds experienced net outflows of USD 61 billion in the first nine months of 2025. Over the same period, 71 percent of ESG-linked indices globally failed to outperform their benchmarks. Against this backdrop, ASEAN equities demonstrated improving ESG scores alongside consistent excess returns.

ESG Quality Delivers Measurable Outperformance

According to the report, companies in the ASEAN-6 universe with negligible, low, or medium ESG risk outperformed their respective MSCI country indices across multiple time horizons. Over a one-year period, these companies generated excess returns of 16.8 percent. Over three years, the outperformance averaged 6.7 percent, while five-year excess returns stood at 6.3 percent.

As of 2025, 68 percent of companies across the ASEAN-6 markets fall within manageable ESG risk categories. The report notes that larger and systemically important firms are driving this improvement, indicating that ESG integration is increasingly embedded at scale rather than confined to smaller niche players.

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Thailand Emerges as a Rare Inflow Market

Thailand stood out as a regional exception to the global ESG capital retreat. While sustainable funds globally recorded significant withdrawals, Thailand attracted USD 1.5 billion in inflows during 2025 and launched 37 new sustainable funds over the year.

This momentum is underpinned by policy ambition. Thailand has committed to reducing greenhouse gas emissions by 47 percent by 2035 compared with 2019 levels. Achieving this target is estimated to require approximately USD 7 billion in investment, reinforcing the link between sustainability policy and long-term capital deployment.

Sustainable Finance Activity Expands Across ASEAN

The report highlights steady growth in sustainable debt markets across the region. In 2025, the ASEAN-6 economies raised USD 51 billion through sustainable bonds and loans, representing 3.5 percent of global sustainable issuance.

Singapore continues to function as the region’s primary sustainable finance hub, leading ASEAN in both sustainable bond issuance and loan volumes. Indonesia and Malaysia increased their share of sustainable lending during the year, signaling deeper participation in transition finance rather than reliance on green labeling alone.

Indonesia’s longer-term outlook is particularly notable. The report estimates that meeting the country’s 2035 climate targets will require USD 472.6 billion in investment, creating sustained demand across utilities, infrastructure, and financial services.

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Policy Alignment Reinforces Investor Confidence

Policy consistency remains a defining factor in ASEAN’s ESG resilience. During 2025, Singapore, Malaysia, Thailand, and Indonesia formally updated their Nationally Determined Contributions toward 2035. These updates provided clearer regulatory signals and reduced uncertainty for investors allocating long-term capital.

The report argues that this alignment between government policy, corporate transition strategies, and financial markets has helped ASEAN sustain ESG momentum at a time when other regions are facing political and regulatory pushback.

ASEAN Positioned as a Relative ESG Safe Haven

The findings suggest that ESG in ASEAN is no longer a defensive overlay but an active performance driver. Improving corporate ESG scores, expanding sustainable finance channels, and credible policy commitments are reinforcing each other.

As the report concludes, investors backing lower ESG risk companies in ASEAN are being rewarded with sustained excess returns. In a period of global ESG retrenchment, Southeast Asia is positioning itself as a relative safe haven where sustainability and financial performance continue to move in tandem.

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