Driving ESG in Corporate Malaysia

A Conversation with Datuk Muhammad Umar Swift – CEO of Bursa Malaysia

For years, the stereotypical view is that the main focus of companies is on profit. However,
in recent times, corporations are becoming increasingly aware of the importance of adding two extra Ps to their bottomline – namely People and Planet. This is in line with growing demands from stakeholders for organisations to be more aware of the impact they have on society and to incorporate environmental, social and governance (ESG) initiatives into their processes.

 

In Malaysia, one of the organisations leading the charge for this is Bursa Malaysia, which manages the Kuala Lumpur Stock Exchange (KLSE). International Business Review presents excerpts from an interview with Bursa Malaysia CEO Datuk Muhmmad Umar Swift on how the bourse has helped public listed companies in Malaysia enhance their ESG commitments.

On Ensuring Quality in Mandatory Sustainability Reporting

Since many PLCs are embarking on their sustainability journey from a fairly nascent stage, Bursa Malaysia provides ample support to them in terms of enhancing their practices
as well as on disclosure requirements.

We conduct an extensive range of advocacy programmes specifically tailored for our PLCs, from sustainability reporting workshops to more thematic areas such as climate change, anti-corruption, Greenhouse Gas (GHG) emissions measurements, etc. Other forms of support include comprehensive guidance via our Sustainability Reporting Guide and other related toolkits, as well as curated educational content on our BURSASUSTAIN site.

Since 2017, the Exchange has undertaken an annual Sustainability Disclosure Review exercise. Samples of PLCs’ sustainability reports are assessed and feedback given, to affect the improvements needed. We are heartened to observe good progress in the overall quality of disclosures over time.

Overall, we believe that a good sustainability report is one that is transparent, factual and comprehensive, covering PLCs’ key sustainability strategies, practices and commitments.

On Why ESG is Important for the Balance Sheets

Bursa Malaysia is, and continues to be, a strong thought leader in championing sustainability. We are convinced that sustainability is no longer a nice-to-have, but a must-have. Providers of finance and capital are already greening their portfolios – with institutional shareholders such as EPF and BlackRock being critical in their investee’s management of material sustainability matters.

Ripples in supply chain management have also reached Malaysian companies, with sanctions imposed for lapses in human rights practices. These incidences have been widely reported, both in the local and international media, and have affected the bottom line of prominent Malaysian PLCs

Bursa Malaysia is focused on helping companies listed on the Kuala Lumpur Stock Ecxchange (KLSE) enhance and showcase their commitment to ESG.

On How Bursa Malaysia Helps Build ESG Capacity

As a PLC and regulator, we collaborate and engage with stakeholders on several multi-stakeholder platforms, such as the Joint Committee on Climate Change (JC3), SC’s Corporate Governance Council, Institutional Investors Council, CEO Action Network, the 30% Club Malaysia, UN’s Sustainable Stock Exchanges, UN Global Compact Network Malaysia Brunei (UNGCMYB), to name a few.

We leverage these relationships to facilitate conversations between businesses, investors and fellow regulators to move the sustainability agenda forward. We believe in collective action – and moving the market together.

To increase awareness and build capacity, our stakeholders can leverage on BURSASUSTAIN, our online learning platform for information on sustainability, corporate governance and responsible investing.

Earlier this year, our Chairman, Tan Sri Abdul Wahid Omar, also shared his thoughts and vision for the Malaysian capital market in an inaugural open letter to Chairpersons of all PLCs on our Exchange. He stressed the importance of long-term resilient strategies as the country recovers from the COVID-19 pandemic, with a strong reminder that social inclusivity and environmental sustainability should focus on building back better collectively for corporate Malaysia.

This open letter is available on BURSASUSTAIN and moving forward, will be an annual open letter from Bursa Malaysia to encourage PLCs to raise the level of their sustainability practices.

On Walking the Talk with ESG

We are committed to improving our sustainability management practices and the quality of disclosures. We constantly benchmark ourselves with peer exchanges worldwide, as well as against various reporting guidelines and frameworks and ESG-index requirements to identify opportunities to step up our ambitions and efforts.

We have been included as a constituent of the FTSE4Good Bursa Malaysia Index since its introduction in 2014. Both indices (F4GBM and F4GBM Shariah) are consistent with the global ESG model that FTSE has developed, and draw strongly from leading global disclosure frameworks such as the Global Reporting Initiative (GRI) and Carbon Disclosure Project (CDP).

Last year, we were honoured to be included into the Bloomberg Gender-Equality Index 2020, which recognises companies committed to advancing gender equality in the workplace and communities.   

Among our key strengths is that as a frontline regulator and market operator, we work with a wide spectrum of stakeholders in the capital market. We strive to ensure we are inclusive in developing our sustainability strategies.

Inputs from stakeholders are critical in developing our sustainability strategies to ensure we design appropriate programmes, measures and initiatives that create value. As an exchange with a wide group of stakeholders, we have the opportunity to create multiplier impacts from our sustainability efforts and initiatives.

We are also building strong enablers to support the SRI ecosystem, by creating demand for SRI products, aligning investment products with investor requirements and expectations for sustainability, creating an enabling environment to facilitate the use of ESG data to support investment decision-making, and raising awareness and capacities to develop a mature and vibrant marketplace for SRI product

On How Malaysia Can Become an ESG Conscious Nation

We are now entering an important decade of action to combat climate change. The decisions we make today as a society will have lasting effects on our future. Thus, we must embrace business strategies that protect the environment and prevent the climate crisis looming in the background.

As the momentum on climate action picks up worldwide, the transition towards a low carbon and climate-resilient future can unlock tremendous opportunities for Malaysia. It can create new jobs, support economic development, boost our export advantage and improve the attractiveness
of the investment landscape.

There are three priorities to consider that will help shape a more resilient future coming
out of this pandemic.

Firstly, we must invest in human capital development to foster internal competencies to operationalise sustainability issues. Given the cross-cutting nature of sustainability, the benefits will outweigh the cost.

Second, we need to focus on continuous networking, learning and communication with stakeholder groups and peers on key sustainability issues. For instance, to support the transition towards electric, emission-free vehicles, we need the entire ecosystem of government, companies, consumers, regulators, intermediaries to effect change and work toward common goals.

Finally, we must move away from a box-ticking, compliance approach towards utilising sustainability as a driver for value creation. This requires a paradigm shift from short-termism to long-term systems thinking. This will ultimately unlock a new set of practices and behaviour that can influence core values and beliefs essential for sustainability and continuity.

As we build back better from the pandemic,
we must look towards increasing economic inclusion across all facets of the society, especially for communities that currently face barriers in accessing resources, services and capital. Only with all parties working together as a collective nation, can Malaysia become more ESG-conscious

According to investment analysis platform Morningstar Direct, ESG fund assets in
Asia reached US$25.1 billion in Q3 of 2019, after gaining a record US$8.7 billion during the period. In a highly competitive investment market, made even more so by the current pandemic – it is vital that Malaysian companies demonstrate their commitment to the ESG cause. And with organisations such as Bursa Malaysia and thought leaders such as Datuk Umar Swift leading the way, the way forward is being made clearer.

Email us at clientservice@ibrasiagroup.com or comment on our social media pages on Facebook and LinkedIn.

To read the interview with Datuk Muhammad Umar Swift in real, please visit our Voice of ASEAN site at https://voiceofasean.com/business/economy/driving-esg-in-corporate-malaysia/ or scan on the QR code.

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