As sustainable finance becomes more mainstream, a credible and transparent common language on sustainability is required
By S BIRRUNTHA / pic by TMR FILE
THE Malaysian capital market is well-positioned to facilitate sustainable economic activities and business practices to help build a more inclusive and sustainable nation, according to the Securities Commission (SC) chairman Datuk Syed Zaid Albar (picture).
He noted that the capital market’s foundational role would make it an effective platform for driving long-term sustainable change.
He added that the corporate sector can also set the tone from the top and institute best practices to ensure sustainability and the capacity to secure long-term value for all stakeholders.
“As an integral part of the modern economy, the corporate sector must play its role — to drive transformational change with clear and achievable net-zero goals in place.
“It serves as the economy’s central nervous system, directing resources to growth areas and redistributing economic gains to savers,” he said at the Environment, Social and Governance (ESG) Corporate Summit-Driving Sustainability and Sustainable Transformation” virtually yesterday.
The summit was jointly organised by The Economic Club of Kuala Lumpur (ECKL) and the KSI Strategic Institute for Asia Pacific.
According to Syed Zaid, sustainability was not about saving the planet but rather saving mankind and its future, while aiming for social equity to ensure that no one is left behind and progress towards a net-zero future.
He highlighted that the World Economic Forum Global Risk Perception had identified climate action failure, extreme weather and biodiversity loss as the three most severe risks for the next decade. “We also acknowledge that for a successful net-zero transition, businesses will require significant financing to decarbonise.
“The SC is working to introduce market-based instruments to enable transition finance in Malaysia, thereby broadening financing options for companies at various stages of their sustainability journey,” he said.
Syed Zaid also noted that as sustainable finance becomes more mainstream, a credible and transparent common language on sustainability is required.
He said this addresses the risk of greenwashing, as a sustainable finance taxonomy is one tool for defining what constitutes sustainable economic activities.
Additionally, Syed Zaid also stressed that enabling greater transparency and clarity on issuer-level transition pathways could be another critical building block for a sustainable transformation.
“We need to identify, assess and measure the decarbonisation strategies of companies. Having robust sustainability reporting standards is a good place to start,” he noted.
He said there were strong calls for a globally consistent, comparable and reliable sustainability reporting framework — one that would both improve transparency and reduce the level of complexity in sustainability reporting.
Meanwhile, Bursa Malaysia chairman Tan Sri Abdul Wahid Omar expressed companies that choose to ignore sustainability/ESG considerations in their business will not be sustainable as they will be deprived of both equity and debt financing to fund their projects.
Abdul Wahid, who is also the chairman of ECKL’s advisory council, noted that these companies will have to pay a higher insurance premium to underwrite some of their risks and will have difficulty in recruiting talents to drive their business.
“They will not be able to sell their products or be part of the global supply chain as customers become more discerning in buying only sustainable products in the future,” he said during the summit.
Abdul Wahid also added that as a strong proponent of sustainability, Bursa Malaysia strives to provide an environment that encourages sustainable practices among its market participants.
“We do this through ongoing guidance, advocacy and engagements within the marketplace, alongside our role as a frontline regulator and market operator,” he said.
According to him, Bursa Malaysia has started collaborating with the Ministry of Environment and Water, and the Ministry of Finance to create a voluntary carbon market.
“This is a significant nation-building project that will assist Malaysia in meeting its climate ambitions, while also creating an ecosystem that is transparent, rule-based and meets the needs of intended market participants,” he said.
Abdul Wahid also pointed out that the ESG and sustainability issues are not new to corporate Malaysia.
In 2014, Bursa Malaysia introduced the FTSE4Good Bursa Malaysia Index to recognise public-listed companies that have taken steps to improve their ESG practices and disclosures.
Since then, the number of constituents has more than tripled from 24 in 2014 to 80 following the last review in December 2021.