Azmi & Associates – Due Diligence on ESG Matters
2020 has unwittingly proved the significance of financial and non-financial risks in assessing resilience. Sustainable companies are seen to be able to stand through the economic turmoil with higher resistance, or at least did not deteriorate as badly as others. Due to this, more heads are turning towards the importance of the environmental, social and governance (“ESG”) criteria in the investment decision-making process and portfolio management.
ESG has emerged as an area of focus for governments, regulators, financial institutions and commercial organisations around the world even before the coronavirus spread around the globe like a wildfire. In Malaysia, Bursa Malaysia in partnership with FTSE Russell launched the FTSE4Good ESG Index in 2014 with the aim of providing more visibility and profiling of ESG-compliant companies. Bursa Malaysia has also came out with the Sustainability Reporting Guide in 2015 to guide listed issuers on how to embed sustainability in their organisation and help to identify, evaluate and manage economic, environmental and social risks and opportunities.
The revised Malaysian Code on Corporate Governance (“MCCG”) issued in April 2017 further enhances the ecosystem for sustainable and responsible investment in Malaysia. In November 2019, the Securities Commission of Malaysia launched the Sustainable and Responsible Investment Roadmap which aims to chart the role of the capital market in driving Malaysia’s sustainable development. The newly updated MCCG 2021 also addresses the urgent need for companies to manage ESG risks and opportunity with emphasis on the need for collective action by boards and senior management.
