Responsible Malaysian stocks outperform the benchmark

Share prices in companies that practise good CSR are reported to have outstripped the record-breaking run on the Kuala Lumpur Composite Index (KLCI).

Arshad Adam, finance director of OWW Consulting, a specialist CSR company in Kuala Lumpur and Singapore, has reported that last year companies on the OWW Responsibility Malaysia SRI Index gained 36.7 per cent, compared with 31.8 per cent on the KLCI.

In neighbouring Singapore, however, the OWW Responsibility Singapore SRI Index was outperformed by the Straits Times Index (STI). While it rose by nine per cent the STI recorded 16.6 per cent growth.

Adam had an explanation: ‘We have fewer stocks to choose from in Singapore because companies are not reporting their CSR as comprehensively as in Malaysia, but there is some evidence that good CSR stocks in Singapore have good defensive characteristics in downturns,’ he said. ‘So far during 2008 the STI has fallen 9.8 per cent, whereas the SRI Index has fallen by only 7.5 per cent. In a bear market SRI stocks appear to perform better than the overall market.’

Adam said he was optimistic for 2008: ‘More companies will be improving their CSR reporting this year, so the scope of the OWW Responsibility Malaysia SRI Index will include more stocks than before and the quality of information will be better.

‘This will provide a wider choice of responsible Malaysian companies for SRI fund managers. Such information has so far been out of their reach because credible, consistent and comprehensive assessments of the CSR performance of Malaysian companies have not been available.’