16 June 2021 | By Datuk Syed Zaid Albar, Chairman, Securities Commission Malaysia
by Datuk Syed Zaid Albar
Chairman, Securities Commission Malaysia
at the Sustainable and Responsible Investment (SRI) Virtual Conference 2021
“Paving the Way for Profitability through Sustainability”
on 16 June 2021
Assalamu’alaikum warahmatullahi wabarakatuh.
A very good morning to all present in this SRI Virtual conference 2021 entitled “Paving the Way for Profitability through Sustainability”.
1. I would like to thank the organisers of this conference, Tengku Zarina and her team at the SIDC. This comprehensive programme focusing on sustainability is both timely and relevant. We have an impressive line-up of speakers and panelists, so we should be in for an interesting two days.
Ladies and Gentlemen,
2. While the pandemic raged around the world, so did the burning reality of the climate crisis, giving us food for thought about our priorities. The global response to the pandemic gave us a glimpse – like a movie trailer – of what a disrupted world could look like and how ill-prepared we are for such a crisis.
3. Yes, we are at a historic crossroads. We are managing short-term challenges in the face of medium and long-term uncertainties. The clarion call for businesses to look beyond the bottom line has become louder in the past year. Shareholders are asking corporates to look at their real impact on the world, beyond mere financial returns.
4. This point was driven home last month by two separate developments. One was the news that Exxon Mobil’s shareholders have elected to its board two directors nominated by a small activist hedge fund that sought change on the company’s climate policies. The election of these directors also received support from large investment firms like Blackrock, State Street and Vanguard. The other development was even more telling. A Dutch court ruled that Shell must reduce its carbon emissions by 45% by the year 2030. Both these developments were huge wins for environmentalists, and depending on who you are talking to also a huge win for the future of our planet. For the corporates, this is an indication of what could lie ahead.
5. On a personal level, I believe that the time for talk is over and we should now focus on real actions. We have the opportunity to reset, and re-shape the post-pandemic recovery towards a better future. Yes, we need to build back better and truly understand what that means.
6. At a fundamental level, the financial system is like the central nervous system of the economy. It coordinates and allocates resources within the economy. It steers resources to areas of growth and redistributes economic gains to savers. The capital market is of course an integral part of this system.
7. This foundational role of the Capital Market has made it an effective platform to drive change – sustainable change.
8. To kick off our conversation over the next two days, allow me to share three potential outcomes when markets and businesses embrace the values of sustainable development.
- Firstly, with greater awareness, comes greater appreciation of risks and rewards. This means companies will become more resilient and adaptable;
- Secondly, we can expect better economic and social outcomes in the longer term; and
- Thirdly, with greater corporate responsibility and accountability, will come improved quality of life and well-being, both from a social and an environmental perspective.
Ladies and Gentlemen,
9. If we consider the potential outcomes, and benefits, of embracing the right values, it becomes easier to appreciate why the re-set of the corporate mindset is critical. This reset involves shifting away from a pure profit motive to making those profits responsibly and equitably.
10. Companies today must possess good corporate governance and work processes, and also increasingly, they have to be able to demonstrate their environmental and social credentials as well. These are the E and S of ESG.
11. Studies have shown that businesses with ESG principles built into their strategy are better equipped to mitigate risk and drive sustainable growth. Investors are paying closer attention to the impact of ESG issues against a company’s ability to generate sustainable profits.
12. In this environment, to be successful, to be sustainable, businesses must adopt sound tools and methodologies to identify and assess their environmental and sustainability risks. This includes integrating management of sustainability risks and opportunities within their business operations.
13. The same also applies to investors and asset owners. If you are an investor or an asset owner, you want to consider more closely aspects in relation to environmental and social impacts when assessing the performance of your portfolios. Moving forward, we believe impact investing and social finance can lead the way towards better integration of climate and community needs alongside more commercial objectives.
14. The shift to a more sustainable and circular economy will also encourage growth in new sectors such as clean energy, low-carbon infrastructure and green industries. In managing this transition, the capital market will play a significant role in raising funds and managing investments.
15. It is essential that the market prioritises capital for productive purposes and ensures it is accessible to all businesses, especially our more innovative SMEs. In addition, greater investment opportunities must be provided to the wider population, for the benefits of economic progress to be shared more widely.
16. The SC has stepped up our activities and initiatives this year towards realising this objective. We recently expanded the scope of our SRI Sukuk and Bond Grant Scheme to enable more issuers to utilise the Grant to defray the costs of conducting external reviews for green, social and sustainability-linked bonds and sukuk.
17. We are also conducting events under NaviGate – our flagship capital market green financing series – to create awareness on the funding avenues available for green businesses.
Ladies and Gentlemen,
18. Today’s forum is an opportunity to act for the future. We need action to keep the momentum going.
19. The major aspiration of the UN’s 17 Sustainable Developmental Goals or SDGs is captured by the motto “Leave No One Behind.” Seen from this lens, the progress of our world – of how far we have come – should be measured by the state of our most vulnerable.
20. The SC is committed to refocusing the capital market towards advancing a sustainable economy. While we need to rebuild resilience into the ecosystem given today’s challenges, we will do so with a longer-term view. There is a post pandemic world that lies ahead – one that would still be facing a climate crisis and glaring social inequity.
21. Hence, I would like to reiterate that we all have a responsibility – as individuals and as commercial entities. We must scale up efforts to reduce our impact on the climate. We must consider our impact on society. We must reduce waste, and we may even have to rethink how we do business to promote sustainable development for a better future.
22. In summary, this is not only about finance and investment. It is also about changing mindsets, changing habits, practices, and processes. It is about being aware of your impact on people and the planet.
23. I wish all of you a productive conference and hope you will capitalise on your time at this conference to generate the best returns in terms of knowledge and understanding.