MIDF targets 6% annual return for new ESG fund

by LYDIA NATHAN / graphic by MZUKRI MOHAMAD

MIDF Amanah Asset Management Bhd (MIDF Asset Management) targets a 6% annual return for its newly launched environmental, social and governance (ESG) Mustadamah Fund (MAEM).

Launched last Friday, MAEM features a ready-made investment solution for the local equity market that integrates ESG based on the FTSE4Good Bursa Malaysia Index’s constituent Shariah companies.

MIDF Asset Management VP Azlan Azizuddin said the fund would combine sustainability and responsible investment as one of the main features.

“The timely launch of the fund was done based on the back testing of three years and is definitely all Shariah-compliant, so it is stable and fully screened by the Securities Commissions of Malaysia.

“The objective will be for medium to long term, and all constituents of the portfolio are aligned with the ESG index,” Azlan said in a virtual webinar yesterday.

He said ESG issues are not only important in measuring the sustainability of non-financial impacts of investments, but also on the return profile and risk of these investments.

“Having ESG standards can weed out unsustainable companies with outdated practices and harmful side effects, as well as minimise the risk investors face.

“Some of the other reasons to invest are its resilience factor, the pandemic shows ESG and Shariah-based funds remain resilient from a downside risk basis,” he said.

The United Nations Global Compact (UNGC) has projected that ESG-related projects will require some RM45 billion investments for the next five years in Malaysia.

UNGC Malaysia and Brunei chairperson Ramesh Kana said despite a large amount of funding requirements, it is not the role of only the public sector to spearhead the ESG investments.

“Corporates need to take the lead, and the burden cannot be left alone to the public sector as it is too much of a strain for them. As such, the deployment of private sector investments through the capital market will be critical in financing these sustainable development needs.”

Ramesh said while the trend is still nascent here, the interest levels in creating a pool of ESG capital and ESG-related projects to address the sustainability needs have been growing, accelerated by regulatory support.

“The Malaysian government has facilitated the creation of a ‘framework of support’, and we see this as a very positive development and certainly one that is moving in the right direction. ESG consciousness should result in an execution framework,” he said.

Ramesh added that one of the main thrusts for ESG adoption in Malaysia has been growing pressure from global investors.

For instance, he said the pension funds have been active in pursuing ESG investing and instrumental in creating awareness of their expectations among analysts, fund managers and public listed companies.

He also said another driver for the “ESG consciousness” might partly be attributable to institutional funds joining the UN-supported Principles for Responsible Investment network of investors.