Malaysia’s top 100 PLCs lack disclosure on climate risk

by ASILA JALIL / pic credit: ey.com

MALAYSIA’S top 100 public-listed companies (PLCs) lack comprehensive climate risk disclosure as they only scored 34% for coverage of climate change-related risks and 12% for quality of the disclosures.

According to the Ernst & Young’s (EY) Climate Risk Disclosure Barometer 2020 Malaysia report released recently, the country’s PLCs are still at the nascent stage in climate risk reporting.

Despite encouragement by Malaysian regulators to adopt Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, PLCs generally adopt a “check-box” approach to climate risks.

“As communities struggle with the Covid-19 pandemic and with climate change trends becoming more apparent across regions, a ‘wait-and-see’ approach could heighten the risk of not developing robust strategies to strengthen business resilience,” EY Advisory Services Sdn Bhd climate change and sustainability services director Arina Kok (picture) said.

To determine the score for the company’s coverage of climate change-related risks, they were gained based on the percentage of the 11 TCFD recommendations assessed in their public reporting, including annual reports and the Carbon Disclosure Project (CDP). They were also given a rating, out of five, on the basis on the quality of the disclosure.

The report showed the scores for local PLCs were higher for coverage of metrics and targets at 45%, followed by risk management at 41%. In comparison, governance and strategy recorded lower scores of 22% and 24% respectively.

The quality for the disclosures of metrics and targets stood at 18%, followed by risk management (11%), strategy (7%) and governance (9%).

By sector, 20 companies from the consumer products and services sector were assessed, scoring 31% for overall coverage and 12% for quality.

The most common climate-related risks identified in the sector are the increasing effects of extreme weather such as drought, flooding and contamination.

Meanwhile, the financial services sector, which covers 15 companies, scored 25% for overall coverage and 8% for quality, while 14 companies assessed from the property, real estate investment trust and construction sectors scored 42% for overall coverage and 13% for quality.

Other sectors include energy and utilities, healthcare, industrial, plantation, technology, telecommunications and media, as well as transportation, with a varying number of companies assessed for different sectors.

Kok said “inaction” towards risks is not an option for companies as they need to consider the broader value chain resilience and build preparedness in facing systemic shocks from external factors, such as the Covid-19 pandemic and climate change.

“Mapping out potential future climate scenarios and their implications on your company’s risk management and strategy will be critical.

“Developing climate risks reporting can further steer strategic thinking towards the design of a green roadmap to build enterprise resilience,” she said.

The report also stated that there is a significant scope for companies in the country to leverage climate risk assessment to build long-term organisation resilience, such as a comprehensive assessment of climate risk impact using scenario analysis.

This will enable PLCs to prepare and mitigate the impact of climate change on current and future investments.

“The more immediate measures of PLCs are to step up climate risk reporting and steer strategic actions to include internal collaborations across the sustainability, risk, finance, operations and investor-related business functions,” the report stated.