What is ESG?

ESG is an opportunity allowing boards and executives to build greater trust with their employees, shareholders, and communities in which they operate, while doing good for the planet. 

What is ESG?

Environmental

It examines a company's impact on the environment, including its use of natural resources, its greenhouse gas emissions, and its waste management practices. Companies that prioritize environmental factors may use renewable energy sources, implement recycling and conservation measures, and take steps to reduce their carbon footprint.

Social

It refers to how a company treats its employees`, customers, and other stakeholders. Companies that prioritize social factors may have strong labor policies, such as fair pay and benefits, workplace safety measures, and policies that promote diversity and inclusion. They may also prioritise consumer safety, product quality, and ethical supply chain practices.

Governance

Governance's evaluation begins from the management and oversight practices of a company, including its corporate governance structure, executive compensation policies, and accountability measures. Companies that prioritise governance factors may have independent and diverse boards of directors, transparent financial reporting, and strong anti-corruption policies.

ADOPT ESG OR BE ELIMINATED

“CDP Study Finds End-to-End Supply Chains Have Over 5 Times the Impact on Emissions Compared to Direct Operations”

Discover the Win-Win of Green Supply Chains: The Same Study Shows Companies Reap Financial and Commercial Benefits Alongside Environmental Impact

(Source: Malaysian Association of Sustainable Supply Chain and Innovation)

“97% agree that greater cooperation on key ESG data is needed between businesses and suppliers, says a survey of 800 Global Decision-Makers that reveals data access gap in ESG supply chain goals.”

(Source: Coupa Software)

Malaysia Airlines Bhd is encouraging prospective suppliers and vendors to meet the ESG requirements.

(Source: The Edge Markets)

MORE ESG, MORE $

https://www.bloomberg.com/professional/blog/esg-assets-may-hit-53-trillion-by-2025-a-third-of-global-aum/
Global ESG assets will surpass $53 trillion, which is more than a third of the projected total assets under management of $140.5 trillion. (Bloomberg, 2021)

Bank Negara’s Initiatives in ESG Funding

RM 1 Billion

in Low Carbon Transition Facility (LCTF) to assist Financial Institutions in providing financing for sustainable and low carbon practices

RM 800 Million

in High Tech and Green Facility to help SMEs and innovative start-ups in strategic green and technological fields

https://www.thestar.com.my/business/business-news/2022/11/30/greening-financefinancing-green
RM350b-RM450b investment needed for Malaysia to be net zero GHG emission nation by 2050

BURSA MALAYSIA

“Companies which ignore sustainability or ESG (environmental, social and governance) considerations in business strategy and operations will not be sustainable particularly in the longer term, and may be deprived of both equity and debt financing to fund their projects.”

-Bursa Malaysia Bhd chairman Tan Sri Abdul Wahid Omar

PERMODALAN NASIONAL BHD has investment plans in green and transition assets by 2030 for

RM 10 billion

https://theedgemalaysia.com/article/pnb-plans-invest-rm10b-green-and-transition-assets-2030

GROWING $ DEMANDS FROM BANKS FOR ESG

BANK ISLAM offers up to RM 15 MILLION for Producer ; RM 5 MILLION for User to provide green technology financing;

So far: Bank Islam has approved RM2.62 BILLION in green financing projects in Renewable Energy, sustainable waste management, sustainable public transportation and green manufacturing.

(Source: Bank Islam Website)
https://theedgemalaysia.com/article/pnb-plans-invest-rm10b-green-and-transition-assets-2030

OCBC GROUP has set a sustainable financing target of S$50 BILLION (RM165.5 million) by 2025.

OCBC Bank and the Malaysian Green Technology And Climate Change Corporation (MGTC) have partnered to offer businesses an easy way to measure their environmental impact and set sustainability goals. By incorporating MGTC’s low carbon operating system (LCOS) into their financing plan, OCBC Bank is helping companies thrive in a green economy.

(Source: FMT Malaysia)
https://www.freemalaysiatoday.com/category/business/2023/02/20/ocbc-bank-to-help-businesses-decarbonise-with-its-green-financing-plan/
https://www.thestar.com.my/business/business-news/2023/01/09/gamuda-partners-ocbc-malaysia-for-islamic-esg-linked-financing

GAMUDA BHD has partnered with OCBC Malaysia for RM 550 MILLION in Islamic ESG-linked financing

CIMB GROUP has raised the target to RM60 BILLION from RM 30 BILLION in sustainable finance.

https://www.nst.com.my/business/2022/09/833647/better-esg-grade-cimb-group-after-sustainable-target-achieved-2024

RHB GROUP Commits to Grant RM 1 BILLION in Sustainability Financing Programme for SMEs and Retail Customers by 2050

https://www.rhbgroup.com/files/others/highlights/20210928.pdf

Public Bank to Mobilize RM 40 BILLION in ESG-Friendly Financing by 2025, with Focus on Green Building Financing

https://www.nst.com.my/property/2022/08/825879/public-bank-mobilise-rm40bil-esg-financing-2025-says-its-chief

MARKET TRENDS IN MALAYSIA

SECURITIES COMMISSIONS: Fund industries are urged to launch more ESG funds

“The asset and fund management industry in Malaysia must ride on the wave of these trends and ramp up efforts in offering wider range of sustainable investment choices for investors. This includes the introduction of more innovative sustainable funds, focusing on thematic ESG themes."

By 2025, 70% of MNCs will eliminate suppliers that endanger their carbon transition plans

It refers to how a company treats its employees`, customers, and other stakeholders. Companies that prioritize social factors may have strong labor policies, such as fair pay and benefits, workplace safety measures, and policies that promote diversity and inclusion. They may also prioritise consumer safety, product quality, and ethical supply chain practices.

EPF: stepping up its commitment to sustainable investment goals

Governance's evaluation begins from the management and oversight practices of a company, including its corporate governance structure, executive compensation policies, and accountability measures. Companies that prioritise governance factors may have independent and diverse boards of directors, transparent financial reporting, and strong anti-corruption policies.

CURRENT ESG POLICIES IN MALAYSIA

GOVERNANCE

Updated Malaysian Code on Corporate Governance by Securities Commission Malaysia

  • emphasise the role of the board and senior management in addressing sustainability risks and opportunities
  • introduce new best practices that transition towards a net zero economy by managing ESG risks and opportunities

ENVIRONMENTAL POLICIES

National Policy on Climate Change (2009)

  • to address climate change with the introduction of policies and strengthening the framework

  • to consolidate the E, S and G of ESG

Twelfth Malaysia Plan (2021-2025)

  • to promote an economic model that balances socio-economic development with environmental sustainability

  • to encourage both public and private sectors to adopt and integrate ESG considerations into their decision-making processes

Bursa Malaysia

Sustainability Reporting

All listed companies are required to disclose their sustainability performance through a sustainability reporting framework that is aligned with international standards such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).

ESG Guidebook

This is to help companies understand and implement ESG best practices. The guidebook provides guidance on how to report on ESG performance, and includes case studies and examples of ESG initiatives

FTSE4Good Bursa Malaysia Index

Bursa Malaysia has partnered with FTSE Russell to launch the FTSE4Good Bursa Malaysia Index, which tracks the performance of companies that meet global ESG standards.

Corporate Governance Guide

It provides guidance to PLCs for adhering to recommended practices in the Securities Commissions and enhanced disclosure requirements under the Listing Requirements which includes guidelines on board composition, risk management, and transparency.

TALENT RECRUITMENT AND RETENTION

https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/five-ways-that-esg-creates-value

The London Business School’s Alex Edmans:

the companies that made Fortune’s “100 Best Companies to Work For” list generated 2.3%-3.8% higher stock returns per year than their peers over a greater than 25-year horizon.

(Source: McKinsey & Company)

A MarshMcLennan study:

Employers get the highest rating among surveyed employees and prospective talent which they earned the highest ESG scores. These companies showed a strong performance with the “Environmental” element and trended well across Social and Governance issues, too.

(Source: Corporate Compliance Insights)

https://www.corporatecomplianceinsights.com/esg-alignment-employee-retention-great-resignation/

Investors in PwC’s 2021 Global Investor Survey ranked ‘ensuring workers health and safety’ (44%) as their 2nd highest ESG concern; while ‘addressing human rights in the supply chain’ (34%) was placed 4th among the top ESG priorities of investors polled.

30% BETTER FOR
JOB PERFORMANCE

when inclusive teams are working under high-diversity environments.

(Source: Gartner Research)

90% INVESTORS BELIEVE
IN HIGHER STOCK PRICE WHEN

companies implement strong diversity and inclusion metrics.

(Source: Edelman’s 2020 Trust Barometer study (institutional investors’ special report)
https://www.pwc.com/us/en/services/consulting/library/consumer-intelligence-series/consumer-and-employee-esg-expectations.html

86% of employees

prefer to support or work for companies that care about the same issues they do

(Source: PwC’s Consumer Intelligence Series)

"Over 70% of Job Seekers Prefer Environmentally Sustainable Companies, More Than Half Willing to Accept Lower Pay: IBM Survey Finds"

companies implement strong diversity and inclusion metrics.

(Source: HR Drive)
https://www.hrdive.com/news/ibm-environmental-social-responsibility-key-to-attracting-global-talent/599519/

SUSTAINABLE CORPORATE REPUTATION

https://www.pwc.com/us/en/services/consulting/library/consumer-intelligence-series/consumer-and-employee-esg-expectations.html

In 2019, 90% of companies in the S&P 500 Index issued sustainability reports.

(Source: Conservice ESG)
https://www.triplepundit.com/story/2019/sustainable-investing-all-time-high-says-morgan-stanley/84916/

Morgan Stanley (2019): Sustainable Investing remains 'At All-Time High'

(Source: Triple Pundit)
https://kambeo.io/blog/does-esg-reporting-strengthen-brand-perception/

ESG Reporting makes a brand stands out:

Survey reveals: 70% of Consumers Demand Transparency on Brands’ CSR Activities, with 46% Influenced in Purchasing Decisions
(Source: Kambeo)

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