SC’s SRI fund framework lifts asset class

The new SRI guidelines will widen the range of products in the market

by KEVIN WONG / pic by TMR file

With the growing number of investors, institutional and pension funds subscribing to sustainable investment asset classes, industry players are positive on the outlook of sustainable and responsible investment (SRI) in Malaysia.

The Securities Commission Malaysia’s (SC) launch of the SRI fund framework in December 2017 had provided an additional boost to the asset class.

According to AIIMAN Asset Management Sdn Bhd MD Akmal Hassan, it is encouraging to see the development in the regulatory space that would spur growth for the segment and attract more investors to SRI funds.

“As an established Islamic finance hub, Malaysia is well-positioned to lead and promote SRI developments as Islamic finance shares having similar elements and values with that of the former,” he said.

The new SRI guidelines will enable funds to be now designated as SRI and will widen the range of products in the market.

“Asset managers who manage such qualified funds will be eligible for tax incentives that will further incentivise and drive growth for the SRI  segment.

“Additionally, shifting  demographic trends and behaviours have also created a greater awareness of SRI issues — with a whole new generation of young investors that are more conscious about the wider challenges that we face today, including climate change, equality and transparency,” he said.

Akmal added that rising globalisation and new technologies have increased the exposure of millennials to a range of issues that could possibly clash with their own personal beliefs, forcing them to form their own world views.

Although, Akmal pointed out that one of the challenges the sector still faces is the perception among investors that SRI funds often tend to underperform.

“Investors often believe that it is a trade-off when it comes to sustainability and performance, and that the two do not go hand-in-hand.

“However, our belief is that good governance ultimately leads to better financial performance, with industry research showing positive correlation between ESG (environment, social, governance) values and stronger returns,” he said.

“Together with more robust disclosure requirements under the SRI guidelines, as well as continued education and engagement by industry players, we hope that this will continue to spark conversations around ESG and the benefits of sustainability over the long term,” Akmal added.