KWAP sets aside RM800m for global ESG investment

The fund has signed on to the UN-supported PRI to commit to the sustainability and ethically impacted investments


Retirement Fund Inc (KWAP) has provisioned some RM800 million to be invested in the environmental, social and governance (ESG) aspect globally through two international fund managers.

KWAP CEO Datuk Wan Kamaruzaman Wan Ahmad (picture) said a total of RM3.8 billion has been set aside for the pension fund’s ESG investment, for both of its local and international portfolios, of which RM520 million has been materialised globally.

“Out of the RM3.8 billion, we allocate RM2 billion to our external fund managers for ESG initiatives, of which RM520 million has been utilised,” he said at the KWAP Inspire: Environmental Conference 2018 in Kuala Lumpur yesterday.

Currently, KWAP has six fund managers overseeing its ESG portfolio, two of which are investing internationally.

“We have not fully disbursed the amount to these firms, who are doing international investments for us. We are planning to give US$100 million (RM404 million) each to the two firms, which is around RM800 million,” Wan Kamaruzaman said.

He added that the remaining RM1.8 billion for the pension fund’s ESG portfolio is being managed internally for domestic investment.

“KWAP has been investing based on ethical principle. We avoid certain investments in listed companies that are considered ‘unethical’, such as in the tobacco and alcohol industries.

“We are looking to continue with this principle for our future investments,” he added.

In February 2018, the country’s second-largest pension fund signed on to the United Nations (UN)- supported Principles for Responsible Investment (PRI) to commit to the sustainability and ethically impacted investments.

In an earlier report, Wan Kamaruzaman said the pension fund aimed to make 70% of its assets under management ESG- compliant, compared to the current portfolio of 50% to 60%.

In 2017, the pension fund registered a gross income growth of 41.98% year-on-year to RM9.03 billion, which was the highest since its inception in 2007.

Its total fund size had also increased to RM140.8 billion from RM125 billion recorded in the previous year, while its overall gross return on investment grew 5.77%.

Going forward, Wan Kamaruzaman said the pension fund will be raising the allotment of its equities portfolio as there is still room to increase the equities allocation amid uncertainties in the global and domestic markets.

“We have been keeping a lot of cash since before the 14th General Election and it is the time for us to utilise and take advantage of the downturn in the equity market.

“Previously, we had not been significantly overweighting the equities. In the fixed-income space, we have been stable as, together with cash, it comprises 50% of our portfolio, and equities are up about 42.5%, he said.

He said despite the uncertainties in the global and domestic markets, KWAP is confident that there are specific sectors that would benefit from the situations.

“We do have the cash to deploy, we are just waiting for the right timing,” he said.

KWAP CIO Nik Amlizan Mohamed said the current ESG portfolio of the pension fund is also expected to be extended to alternative investments, including the real estate and private equity.

“We have made engagement with investment companies and our industry partners to build ESG guidelines on the corporate level, investment policy, private equity and fixed income.

“In the near future, we are applying the same to our alternative spaces, which are property and private equity, soon,” she said.