22 June 2022 | By Dato’ Seri Dr Awang Adek Haji Hussin, Chairman, Securities Commission Malaysia
by Dato’ Seri Dr Awang Adek Haji Hussin
Chairman, Securities Commission Malaysia
at the Sustainable and Responsible Investment (SRI) Virtual Conference 2022
“Preserving the Climate through Sustainable Business and Living”
22 June 2022
Assalamu’alaikum warahmatullahi wabarakatuh.
- Salam sejahtera dan selamat pagi diucapkan kepada peserta SRI Virtual Conference 2022, yang bertajuk “Preserving the Climate through Sustainable Business and Living”.
- Terlebih dahulu, saya ingin merakamkan ucapan terima kasih kepada SIDC atas jemputan untuk saya menyampaikan ucapan, terutamanya ucapan awam saya yang pertama sebagai Pengerusi Suruhanjaya Sekuriti Malaysia. Melihat kepada barisan penceramah dan ahli panel, saya yakin bahawa perbincangan yang akan diadakan selama dua hari ini akan membuahkan pandangan yang berguna mengenai pripentingnya kemampanan untuk perniagaan, komuniti dan individu.
Coming together in the Decade of Action
Esteemed speakers, ladies and gentlemen,
- The United Nations has declared this decade as the Decade of Action. It calls for transformative economic, social and environmental solutions, to accelerate delivery of the Global Sustainable Development Goals or SDGs. The timeliness and urgency of this call cannot be overstated.
- Post-pandemic, there are multiple pressing challenges for the planet, its people, and our common prosperity. This year alone, we face rising global food and commodity prices, scarcity of supplies, and closer to home, recurring floods in our capital Kuala Lumpur and the Klang Valley. The scale and enormity of the issues, and hardships that follow, are daunting. And we have no choice but to take them on. This is indeed critical, and how we address the challenges of this decade, will have implications, not just for ourselves, but for our children and future generations.
- To paraphrase a common saying, there is no better time than the present, for action. Ultimately, we must strive for actionable outcomes that deliver positive and sustainable returns. The question for us is, how can we contribute?
- Certainly, we all have a part to play in ensuring progress of this important agenda, no matter how big or small. Whether it is a business or as individuals, collectively our actions must prevail to overcome the challenges. This was aptly demonstrated in the past two years as governments, corporations, individuals – in fact, the whole world – came together to fight a global pandemic. It was an unprecedented event, and the swiftness of our collective response was also unparalleled.
- No doubt there were challenges, particularly in the early stages of the pandemic, but if we look back earnestly, the results are undeniably positive. Countless lives were saved. Businesses were supported in their time of need. Now, as more countries move towards endemicity, our economies are opening up towards normalcy.
- Last year also saw the world come together to renew our commitments towards climate action. The Glasgow Climate Pact, the formal outcome of COP26, is a call to work together and push for meaningful actions to combat climate change.
- While we should celebrate such wins, it is more important to learn from recent experiences and intensify our efforts to truly make a difference.
Sustainability in driving corporate imperatives
Ladies and gentlemen,
- Businesses today face rising expectations from stakeholders and the communities they serve. More than ever, they are being assessed on their sustainability commitments and handling of social issues.
- Our corporates are rising to the challenge. Recent research by PwC found that 94% of the top 50 Malaysian public listed companies (PLCs) have environmental, social and governance (ESG) strategies in place1.
- Sustainable and inclusive business practices, benefit not just shareholders but all stakeholders. This includes employees, supply chain and business partners, as well as the community in general. A sustainable company is also typically better prepared to face challenges, navigate risks to their operating environment, and embrace new opportunities.
- Therefore, boards and management must take the lead, and ensure sustainability is at the heart of business strategy and operations. Crucially, investors must also play their role, by shining a spotlight on the credibility of corporate commitments and shape the narrative ahead.
- Progress has certainly been made. But there is still a long way to go.
Capital market as a platform for change
Ladies and gentlemen,
- Moving forward, the key to managing the transition to a more sustainable and greener future, is the availability of financing and impetus for change.
- Long-term, sustainable change requires investments in new technologies and innovative solutions. Market-based funding and risk management instruments, are well-equipped to facilitate public and private efforts in climate mitigation and transition.
- In this regard, the capital market can be an effective platform to mobilise capital for change; driving issuers, investors and market participants to be increasingly sustainable.
- Based on estimates from Bloomberg Intelligence, global ESG-related assets under management, will grow to US$50 trillion by 2025. This is primarily driven by fund inflows, focused on climate change.
- This, and more, are clear indications, ESG is moving from the periphery into the mainstream. The SC believes that the Malaysian capital market is well-positioned to facilitate this emerging asset class. Allow me to highlight some of our initiatives at the SC towards growing a sustainable market ecosystem.
Embedding sustainability into the Malaysian capital market
Ladies and gentlemen,
- Malaysia’s sustainable investments journey started as early as 2014 when the SC’s Sustainable and Responsible Investment (SRI) Sukuk Framework was introduced. This allowed for funds to be raised, to finance a wide range of green, socially beneficial, and sustainable projects. To date, RM8.3 billion of SRI sukuk has been issued under this Framework.
- Within the fund management space, the Guidelines on SRI Funds, was rolled-out in 2017, to facilitate the growth of ESG funds in Malaysia. As at 2021, 34 SRI funds have been launched2, offering our investors – both wholesale and retail – the opportunity to invest in conventional and Shariah-compliant ESG-focused funds. These funds also complement our large pool of SRI-aligned Islamic funds.
- As you are aware, the SRI Roadmap for the Malaysian Capital Market, issued in 2019, has been facilitating the development of a holistic SRI ecosystem, with significant progress made in terms of SRI products and capacity building initiatives. We will continue to pursue the SRI agenda for the next phase of the market’s development. This is clearly articulated in our third Capital Market Masterplan or CMP3. SRI, along with the Islamic capital market (ICM), will play a key role in accelerating the transition to a sustainable and inclusive stakeholder economy.
- We intend to broaden the range of products and services for Islamic social finance and impact investing, in alignment with SRI principles. The SC will also be developing a framework for market-based instruments, to enable transition finance in Malaysia. This will increase funding options for companies at various stages, of their sustainability journey.
- In December last year, we issued a public consultation paper on the principles-based Sustainable and Responsible Investment (SRI) Taxonomy. The Taxonomy aims to provide guiding principles, to identify and classify economic activities, that support environmental, social and sustainability objectives. This is important, as we need a common reference point, to enable faster and more orderly growth of sustainable finance.
- I would like to thank those who have provided their feedback and participated in the consultation process. We are in the midst of finalising the SRI Taxonomy, and target to release it by the end of this year.
- At the global level, harmonised sustainability disclosure standards, can ensure high quality, comparable and consistent disclosures. Towards this end, the establishment of the International Sustainability Standards Board (ISSB) last year, is both timely, and commendable.
- In line with this, Bursa Malaysia is in the midst of enhancing the sustainability reporting framework for listed companies. It recently concluded public consultations on the proposed enhancements.
- Separately, the SC is working with Bursa on the Voluntary Carbon Market, that the government plans to introduce by the end of this year.
- The SC also collaborates closely with Bank Negara Malaysia (BNM) as Co-Chairs of the Joint Committee on Climate Change (JC3), to accelerate financial sector adoption of the climate agenda, as well as preparedness to address climate-related risks. Currently, the JC3 is working to provide industry guides on climate risk management and disclosures, as well as facilitate innovation in ESG financing and investments.
- Going forward, we recognise market awareness will be paramount. Last year, the SC introduced our flagship Navigate programme to highlight market-based green financing. It aims to connect companies, particularly small and medium-sized businesses, with suitable financing instruments for green, social and sustainability purposes. This year, the programme will focus on financing for the halal economy, and the transition to low carbon activities.
- In addition, SC affiliates such as the Securities Industry Development Corporation (SIDC) and Capital Markets Malaysia (CMM), continue to offer capacity building programmes on various aspects of sustainability. I encourage you to seize these opportunities to enhance sustainability knowledge and industry capabilities.
Ladies and gentlemen,
- It is time for us to work together for meaningful, on-the-ground change. We must embody the 3Ps of People, Planet and Prosperity in our actions, business activities and everyday lives. And to keep sight of the fundamental goal: to transition to a more resilient, sustainable and equitable economy.
- As we move towards a net zero carbon Malaysia by 2050, it requires a concerted effort by each and every one of us. Capital market participants must step up efforts, to support a sustainable and climate-resilient way of life, and way of doing business. Issuers and investors must align towards achieving positive socioeconomic and environmental outcomes. Only then, can we make a difference.
- Today, let us utilise this platform to keep the momentum going, in advancing sustainability and our climate actions. For us to look ahead and prepare for a better future, not just for us today, but for the generations of tomorrow.
Thank you and I wish you a productive conference ahead.
1 Source: Positioning Corporate Malaysia for a Sustainable Future, April 2022
2 Since Guidelines on SRI Funds was introduced in 2017