Healthcare catches the ESG wave

MALAYSIA’S healthcare sector is on the cusp of a transformation as environmental, social and governance (ESG) considerations move from “nice-to-have” to “non-negotiable” for investors.

Forward-looking players stand to benefit as sustainability becomes a key driver of valuation, corporate reputation and long-term success.

The shift is already taking root.

A new report by research house UOB Kay Hian (UOBKH) Research finds that ESG is no longer a fringe metric – it is becoming central to how companies are assessed by stakeholders and capital markets.

“ESG is gaining global prominence as stakeholders integrate it into their business models and risk frameworks,” the research house notes, highlighting how this momentum is influencing corporate behaviour and investment strategy alike.

UOBKH Research evaluated nine listed Malaysian healthcare players across the hospital, pharmaceutical and healthcare services segments.

The goal: benchmark ESG competency using publicly disclosed data, from greenhouse gas emissions and waste management to board diversity and sustainability reporting.

The outcome? A mixed bag – with clear leaders, laggards, and lessons to be learned.

Frontrunners

Among the top scorers are Duopharma Biotech Bhd, IHH Healthcare Bhd and KPJ Healthcare Bhd – the “standouts”, according to the report.

These firms demonstrate comprehensive, embedded ESG practices that are both transparent and forward-aligned.

Hospital heavyweights IHH and KPJ each score an impressive 4.3 out of 5.0 on UOBKH Research’s scorecard.

IHH earns full marks in renewable energy (RE) adoption, plastic reduction and employee training – thanks to its mature policies and international infrastructure, such as solar energy projects in Malaysia and Turkey.

KPJ shines in waste management and earns a full score in greenhouse gas disclosures due to third-party assurance.

While hospital operators IHH and KPJ lead, Cengild Medical Bhd lags in ESG integration, UOBKH Research points out, adding that Cengild scores substantially lower at 2.0 points due to limited disclosures and gaps in governance metrics.

Its only relative strength? Accreditation from the Malaysian Society for Quality in Health, which earns it a score of 3.0.

The pharmaceutical space also offers a few bright spots.

Duopharma takes the lead with a score of 4.5, ahead of Apex Healthcare Bhd (4.2) and Pharmaniaga Bhd (3.8).

Duopharma’s standout credentials include verified greenhouse gas data, RE use, inclusive hiring, over 52,000 hours of structured training, and alignment with global standards like the Global Reporting Initiative, Sustainability Accounting Standards Board, and the International Sustainability Standards Board.

“Duopharma sets the benchmark,” UOBKH Research states, reflecting its leadership position not just in ESG, but also in broader sector dynamics.

Pharmaniaga scores well in emissions tracking and community engagement, but a lack of third-party data assurance knocks its score down.

Apex performs strongly given its size, particularly in RE and International Organisation for Standardisation (ISO) certifications, though it omits disclosures on leadership diversity and employee turnover.

Sector resilience

As for healthcare services companies, both Optimax Holdings Bhd and Alpha IVF Group Bhd lag behind their peers, underscoring the ESG maturity gap that often affects newer, fast-growing firms.

Optimax earns a 2.9 with solid performance in social and governance practices, but little disclosure on emissions or structured sustainability governance.

Alpha IVF trails with 2.2, scoring well only in healthcare certifications due to its Reproductive Technology Accreditation Committee and ISO 9001 accreditations.

Their low scores don’t mean they’re off the radar.

On the contrary, UOBKH Research sees potential in both.

“Their scores should gradually improve alongside deeper ESG integration to attract responsible investment and meet regulatory expectations,” it notes.

From an investment lens, the research house remains upbeat.

It assigns an “overweight” call on the overall healthcare sector, citing a blend of structural tailwinds, compelling valuations and defensive earnings.

“The hospital segment (IHH and KPJ) offers an earnings growth of 15.1% for 2025 against the backdrop of valuations trading at an undemanding negative one standard deviation to its five-year mean price-to-earnings ratio,” UOBKH Research highlights.

Meanwhile, Duopharma is expected to benefit from a recovery in input costs, and Alpha IVF is “undertaking exciting regional expansion”.

The resilience of healthcare, especially during periods of macroeconomic uncertainty, adds to its appeal.

“The sector is highly defensive, insulated from external trade that is at risk of a global economic slowdown,” UOBKH Research adds.

While the ESG frontrunners are already reaping reputational and investment benefits, companies that lag – particularly those with limited disclosures or early-stage ESG strategies – face mounting pressure to catch up.

The cost of inaction is rising, especially as regulatory frameworks tighten and investors demand more than just profitability.

Ultimately, companies that can weave ESG into the fabric of their operations – rather than treating it as a box-ticking exercise – will be the ones that thrive.

As UOBKH Research puts it: “More recently listed healthcare companies will need to dedicate themselves to and embrace sustainability more holistically, which will increasingly impact their ESG reputation and success in the longer term.”