ESG: The Boom of Sustainable Investment in Malaysia
Updated: Nov 8, 2022
Take a quick glance at the tabloids from the year 2021 and it is prominent that sustainability and ESG are taking the front seat of investors’ focus. How companies address climate change, social equality and transparent governance are now prime factors that determine many investors and consumer relations, stemming from recent uproars on the lack of environmental and social justice in both the public and private sphere.
Essentially, ESG stands for environmental, social, and governance – these three non-financial factors are now increasingly being measured and analyzed by investors to identify risk and companies’ sustainability in the market, and rightly so.
Hence the adoption of more sustainable business practices has been encouraged by governing bodies that are mindful of both local and foreign investments, with companies ramping up efforts to become more sustainable and transparent. A company’s ESG performance thus likely takes precedence in many investors’ visions when conventional financials are unable to convey certain non-material risks.
The Growing ESG Scene in Malaysia
As a developing country, Malaysia has shown less interest in ESG investing up until recent years. In September 2021, the government released its 12th Malaysia Plan, pledging to achieve carbon neutrality by 2050 – a commitment reiterated during the 2021 UN Climate Change Conference (COP26) in Glasgow, Scotland. While the pledge is focused on adhering to more environmentally-friendly practices, it also provides an opportunity to promote greener and more ethical investments.
Amidst recent climate agendas and economic slowdowns, COVID-19 has accelerated ESG adoption worldwide, as environmental degradation and social inequalities became increasingly transparent during the pandemic. Indeed, the rise in ESG adoption in Malaysia itself is reflected in the number of listed companies that now qualify for the ESG index, FTSE4Good Bursa Malaysia (F4GBM). The current number totals to 80 – three times more than what it was since the index was introduced in 2014. This phenomenon highlights the growing interest in sustainable finance, and the attention it continues to gain with the ongoing environmental and socioeconomic transformations in Southeast Asia.
The importance of Sustainability Goals and Metrics
The key functionality of ESG metrics is that it allows one to quantify what was traditionally seen as unquantifiable. While confusion is still prevalent on the workings of ESG, the good news is that there are many guides out there on how to determine these now-material impacts and what to report. Most stock exchanges, rating agencies, and large audit firms provide comprehensive guides on how and where to start - the overlying message is that reporting metrics should always focus on organizations’ sustainability goals and their measurable criteria.
Some common examples of metrics for each factor are as below:
Environmental – carbon emissions reduction (scope 1,2 and 3), renewable energy adoption, energy efficiency, utility savings, increased waste diversion, land protection
Social – diversity and inclusion, supply chain management, wage levels, provision of training, health and safety, gender equality, risks on forced / child labor
Governance – Board diversity, board independence, data privacy and security, supplier code of conduct, stakeholder engagement
Various business advantages bloom from companies with high ESG scores. Bursa Malaysia’s chief executive officer (CEO) Datuk Muhamad Umar Swift stated that during the COVID-19 pandemic, companies with good ESG practices were “more resilient”, whereby ESG assets were observed to perform better than non-ESG ones. The American stock exchange, Nasdaq, also proclaimed that having strong ESG programmes and strategies can be highly beneficial to companies, including the potential to,
Our Stance as a Cleantech Energy Solutions Provider
As a green consulting group operating in Southeast Asia, Progressture Solar embraces ethical environmental, social, and governance practices that are aligned with many ESG metrics and the United Nations’ Sustainable Development Goals (SDGs).
Our first and foremost belief is that renewable energy should be affordable, reliable, and sustainable for everyone – a responsibility we carry out by providing quality solar energy consulting services. Since 2013, we have prided ourselves in aiding organizations with their efforts to combat climate change and simultaneously reduce their ESG risk via the adoption of renewable energy into their business operations.
Progressture Solar also practices non-discriminatory methods by fostering a diverse, inclusive workplace culture, setting and upholding high standards for all employees, officers, and directors. Our obligation to sound corporate governance is expressed in our established policies and processes that ensure we meet high ethical standards. These commitments enable us to have sustainable and responsible business relationships with our clients while promoting more urgent action to combat climate change.
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