How Malaysia is positioning itself as a regional SRI centre
Growing global adoption of SRI as investment principle makes it imperative for Malaysian publicly-listed companies to be equipped to meet global sustainability standards
Securities Commission Malaysia (SC) is positioning the country as a regional hub for sustainable and responsible investing (SRI) as it launched a new initiative to accelerate the performance of corporate Malaysia in supporting the achievement of the United Nations Sustainable Development Goals (SDGs).
Global Compact Network Malaysia, the local network of the UN Global Compact, and Capital Markets Malaysia have jointly launched the Global Compact Network Malaysia Centre of Excellence (COE) to drive the strategic development of the sustainability agenda.
Capital Markets Malaysia, an affiliate of SC, will provide strategic support and seed funding for COE as part of its initiative to position Malaysia as a regional centre for sustainable and responsible investment. For its part, COE will carry out capacity building activities to train companies on best-in-class corporate sustainability practices and conduct C-suite coaching sessions on reporting and engagement with institutional investors to ultimately prepare companies to meet global sustainability standards and align themselves with the SDGs.
SC on February 6 notes the growing adoption globally of SRI as an investment principle has made it imperative for Malaysian publicly-listed companies to be equipped to meet the global sustainability standards and be prepared to communicate their sustainability efforts meaningfully to stakeholders.
“SC is committed to the development of Malaysia’s sustainable financing and investment ecosystem, and will continue to encourage innovative and collaboration by the industry to advance our national sustainability agenda,” says SC chairman Datuk Syed Zaid Albar. “The partnership between Global Compact Network Malaysia and Capital Markets Malaysia is certainly a step forward to enable and accelerate private sector performance in incorporating globally-recognized sustainability standards.”
The Malaysian capital market has undertaken various other initiatives to advance the country’s sustainability agenda. These include the development of FTSE4Good Index, introduction of the sustainability reporting framework for publicly-listed companies by Bursa Malaysia and most recently, the Sustainable and Responsible Investment Roadmap for the Malaysian Capital Market (SRI Roadmap) by SC itself.
The SRI Roadmap contained 20 recommendations, which are mapped into five overarching strategies aimed at driving the development of a vibrant SRI ecosystem for Malaysia as well as the region. These strategies, according to Albar, serve to expand the range of SRI instruments, issuers, investors and ancillary services, while strengthening disclosure and governance by drawing synergies from Malaysia’s global leadership in Islamic finance.
To facilitate the issuance of more SRI products, the SRI Roadmap says efforts should be made to expand the breadth and depth of SRI products in the Malaysian capital market. The creation of a wider range of SRI products will attract the buyside – both institutional and retail investors – looking to invest with a purpose.
Towards this end, the Malaysian bond and sukuk market is encouraged to develop more innovative SRI bond and sukuk structures to capitalize on the current stage of growth of the market, taking it to the next level. Instruments that could be considered include those utilizing structures such as securitization and pooled finance.
In the equity space, while the FTSE4Good Bursa Malaysia Index provides greater profiling of ESG-compliant securities, the creation of more sustainability indices such as a Shariah-compliant SRI index and a green index will provide more investment choices for investors, including fund managers and asset owners.
What will also increase the range of SRI fund product offerings in the Malaysian capital market include launching of SRI exchange-traded funds, waqf (Islamic endowment of property) funds and green real estate investment trusts (Reits).
Meanwhile, although Malaysia’s efforts to promote SRI has been progressing steadily over the years, and while it continues to build scale on the supply side, the SRI Roadmap notes the initiatives should also be concentrated on attracting investors. This could be through direct investments in Malaysia’s SRI market as well as the intermediation of SRI mandates through fund managers in Malaysia.
This could be achieved through strategic dialogues with identified markets and roundtable engagements with target investor groups, which offer an effective platform to foster closer interaction – attracting them into the Malaysian SRI market.
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