PHL firms urged to embed ESG to attract investors

By Alexandria Grace C. Magno

PHILIPPINE COMPANIES need to integrate environmental, social and governance (ESG) practices into their core operations to remain competitive and attract both local and international investors, an analyst said.

This includes reducing emissions, improving social impact and strengthening governance, along with adopting transparent ESG reporting aligned with global standards.

“By aligning their operations with global ESG standards and adopting transparent ESG reporting practices, companies can enhance their credibility and attractiveness to both international investors and customers,” ESGpedia Vice-President Jozsef Acabo said in an e-mailed reply to questions.

He added that global investors increasingly consider ESG ratings when making investment decisions, giving companies with strong ESG performance a competitive edge.

Locally, firms that demonstrate robust ESG practices are more likely to secure sustainability-linked loans and other green financing options offered by Philippine banks. Overseas, international funds and institutional investors now heavily factor ESG performance into their decision-making.

“As a result, Philippine companies with strong ESG practices stand a better chance of attracting foreign investment,” Mr. Acabo said.

“There is a growing recognition that companies with strong ESG practices are better positioned to manage long-term risks, particularly in areas such as climate change and regulatory compliance,” he added.

This trend mirrors a wider investor shift viewing ESG as a value-creation strategy rather than mere compliance.

Mr. Acabo said aligning disclosures with established reporting frameworks such as the Global Reporting Initiative, Sustainability Accounting Standards Board (SASB) or the Task Force on Climate-related Financial Disclosures (TCFD) could enhance the credibility of Philippine companies among overseas investors.

Companies that adopt these standards signal a commitment to transparency and responsible operations, which might also help them manage long-term risks, particularly in climate change and regulatory compliance.

Mr. Acabo noted that global market shifts are adding urgency. Europe’s Carbon Border Adjustment Mechanism (CBAM) will impose levies on embedded emissions starting January 2026, while Southeast Asian markets like Singapore and Malaysia are raising expectations for low-carbon suppliers.

Companies in these regions may face direct carbon tax costs and will increasingly seek suppliers with proven low-carbon footprints to manage their exposure.

“Filipino suppliers that are advanced in their sustainability practices and have proper documentary proof of their sustainability efforts can stand out and remain competitive, while avoiding higher costs from levies,” he said.

The Philippine Exporters Confederation, Inc. earlier said even companies not exporting directly to Europe must comply with CBAM if they are part of the supply chain.

Philippine exporters need to familiarize themselves with the mechanism to remain competitive in global markets. ESG adoption, therefore, is not just a compliance issue but a strategic step for companies aiming to secure international contracts and partnerships.

“Philippine companies can distinguish themselves in the global market by embedding strong ESG practices into their core operations,” Mr. Acabo said.

“As sustainability becomes a central criterion for investors and customers worldwide, businesses that integrate responsible practices are positioned to meet increasing demand for sustainable products and services,” he added.