SLOWLY but surely, ESG (environment, social and governance) perspectives are becoming an increasingly influential non-financial gauge among today’s institutional investors.

This coupled with the recovery theme encountering a slight setback with the Omicron COVID-19 variant being on the prowl, many investors would be keen to know how AirAsia Group Bhd fares with regard to its ESG performance.

Maybank IB Research which has done an evaluation of the airline’s ESG criteria concluded that AirAsia Group “has moderate ESG credentials”.

Below are a synopsis of the research house’s findings:

• Environmental (doing the best it can)

By burning jet fuel, the airline may not be deemed as environmentally friendly to many. That said, it operates fuel efficient A320 and A320neo aircraft which are among the most fuel efficient for flights of circa 1,000km.

AirAsia Group will gradually replace its entire fleet with the more fuel-efficient (by 10%-15% relative to the A320 and A320neo) A321neo aircraft. We gather that the A321neo aircraft will aid in realising its ambitious target of cutting net CO2 emissions to 50% of 2005 levels by 2050.

• Social (commendable)

The research house likes the fact that AirAsia Group supported its staff who were destined for lay off at the height of the COVID-19 pandemic last year by conducting CV writing and interview technique workshops, and mental health talks.

Moreover, the group also established an academy (i.e Redbeat Academy) to retrain staff in the sphere of technology and information technology (IT).

It is understandable that operational functions such as engineering are usually filled by males given only 35% of its staff are made up of women.

• Governance (room for improvement)

To be sure, some senior managers have made headlines for the wrong reasons (i.e summoned by India’ Central Bureau of Investigation and alleged bribery by Airbus) but to be fair, no misconduct has been proven to date.

Nevertheless, AirAsia Group’s decision to enter and exit the Japanese aviation industry twice despite never having generated an annual net profit either time raised many eyebrows.

“We believe that it will be best for AirAsia Group to concentrate its efforts on its home turf of Southeast Asia. Also, we believe that women could be better represented on its board of directors (with the appointment of at least one female director),” opined Maybank IB Research.

The ESG findings did not impact Maybank IB Research’s ratings on AirAsia Group as it reiterated its “buy” call with a sum-of-parts (SOP)-based target price of RM1.31 on the company.

At the close of today’s mid-day trading, AirAsia Group was down 5 sen or 5.52% to 85.5 sen with 28.65 million shares traded, thus valuing the company at RM3.33 bil. – Nov 29, 2021