KUALA LUMPUR: Alliance Bank Malaysia Bhd is on track to achieve its RM15 billion target in new sustainable banking business for green projects, aimed at supporting small and medium enterprises (SMEs) ahead of the 2027 financial year. As of January 2025, the bank has already disbursed RM14 billion in new sustainable financing, empowering SMEs to integrate environmental, social, and governance (ESG) practices into their operations, according to Aaron Sum, the bank’s Group Chief Strategy and Transformation Officer.
The achievement comes just two years and 10 months into the initiative, having launched in November 2022. Sum attributes the success to a comprehensive suite of personalized financial solutions, including customized financing options and green funding schemes from Bank Negara Malaysia. These include low carbon transition facilities, technology and green facilities, and green mortgages.
“We are ahead of schedule to meet our target, and we will announce a new goal in due course,” Sum said. “This growth reflects the increasing demand from SMEs as more of them adopt ESG practices and seek financing solutions.”
The bank’s commitment to supporting SMEs on their ESG journeys continues to gain momentum. Sum pointed out that many SMEs are turning to banks and government grants for funding, instead of relying on self-financing. This shift is contributing to the bank’s strong results.
SMEs’ Growing Awareness and ESG Adoption
Alliance Bank’s second edition of its annual ESG report, “The Path to Sustainable Impact – Sectoral Insights of Malaysian SMEs” (ESG 2.0 Report), reveals that awareness of ESG among SMEs has surged to 80% from 14% in the span of 18 months. Additionally, ESG adoption has increased to 60% from 28% over the same period.
The significant rise in awareness and adoption is driven by various factors, including regulatory pressures, cost savings, revenue growth, market positioning, and innovation. “One of the key reasons for increased ESG adoption is innovation,” Sum noted. “Businesses are no longer viewing ESG merely as a compliance requirement. The mindset has shifted to seeing ESG as an opportunity to innovate, create new products, and adopt sustainable manufacturing practices that reduce carbon footprints, lower costs, and support responsible local sourcing.”
This shift is also reflected in the bank’s findings that 38% of SMEs incorporating ESG practices reported a revenue increase of more than 50%, demonstrating the financial benefits of sustainable practices.
The report also highlights significant improvements in ESG awareness across various sectors: manufacturing (up from 18% to 84%), construction (up from 12% to 77%), services (up from 12% to 78%), and agriculture (up from 19% to 61%).
Alliance Bank’s SME-Focused ESG Support
While larger corporations are often ahead in ESG adoption due to their resources, Sum emphasized that smaller businesses face more challenges, particularly in terms of expertise and resources. “Larger corporations have had more time to prepare, but smaller businesses need more support,” he said.
To help address this gap, Alliance Bank provides SMEs with diagnostic tools, workshops, and practical guidance to develop their own ESG transition roadmaps. The bank also encourages SMEs to implement cost-effective sustainability measures, such as improving energy efficiency, to make the transition smoother and more affordable.
Importantly, Alliance Bank links ESG efforts to tangible financial benefits. “Once SME owners see the direct financial incentives, they are more likely to take action,” Sum explained. “It’s not just about compliance; it’s also about driving business growth and profitability.”
With its proactive approach, Alliance Bank is helping to accelerate the adoption of ESG practices among SMEs, positioning them for long-term success in a sustainable economy.
