by ASILA JALIL / pic by TMR FILE

THE Securities Commission Malaysia (SC) plans to issue a consultation draft on Sustainable and Responsible Investment (SRI) taxonomy for the capital market by the year-end.

SC market development ED Salmah Bee Mohd Mydin said the development of the taxonomy is a critical building block to facilitate greater diversification to accelerate SRI as a serious asset class.

“This will assist issuers, investors, intermediaries and even asset owners into thinking about their strategies and planning their assets,” she said at a roundtable forum during the virtual Sustainable Finance Week in conjunction with Dubai Expo 2020 yesterday.

The capital market regulator is working closely with stakeholders including asset managers on the field, she said, with engagement being done on a partnership-based with those in the industry.

She added that other measures that would be considered to enhance the sustainability of the capital market is by implementing carbon pricing.

She said the area is getting traction in the country which would encourage more efforts in tracking, measuring and reporting carbon footprint.

“Certainly, we can push the agenda to reduce carbon emission faster and incentivise the right behaviour. We have expressed the commitment to be a carbon neutral country by 2050, so the capital market can step up in facilitating carbon pricing,” she added.

She said Bank Negara Malaysia (BNM) is working to launch a voluntary carbon market platform for carbon trading between green asset owners and other entities who are transitioning to be more sustainable.

In the 12th Malaysia Plan, the government has set a goal for the country to reach net zero carbon emission by 2050.

Among the plans mapped out to reach the target include increasing renewable energy capacity and implementing a carbon tax.

“Another key point needed in the ecosystem involves the role of institutional shareholders, which is a critical component in the investment community.

“We have seen large investors  including our pension funds admitting sustainability is a journey they will embark on. Three of our largest institutional investors have committed to integrate environment, social and governance practices in their investment process,” added Salmah Bee.

On Monday, BNM announced that it will steer the Asean Climate Change and Principle based taxonomy board with its Asean partners to develop a regional taxonomy that caters to each member’s financial system and economic path.

BNM assistant governor Fraziali Ismail said the central bank recognises Malaysia’s resilience is interconnected with its neighbours.

“The Asean taxonomy promotes harmonious standards for classifying sustainable economic activities while encouraging financial flows, consistent with orderly transitions across member states,” he said.