Launch Partners

Tuesday, October 4, 2022

Launch Partners

Bursa Malaysia unveils Islamic ESG index to drive low-carbon adoption within capital market

The Malaysian stock exchange has expanded its benchmarking offerings in the ESG, low-carbon and climate risk index space with a new Shariah compliant ESG-themed index under the FTSE Bursa Malaysia Index Series in response to greater investor demand.

The FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Shariah Index, launched alongside its conventional counterpart FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Index, builds upon an existing portfolio in the FBM Index Series launched in collaboration with index partner FTSE Russell.

Constructed using the FTSE Russell Target Exposure methodology, the index tracks companies in the FBM Top 100 Index based on their ESG and carbon intensity performance. The objective is to hit a maximum 30% reduction in fossil fuel reserves intensity, slash back carbon emissions intensity by 30% and enhance ESG ratings by 20%. The indices exclude companies involved with controversial product activities such as weapons, thermal coal, extraction and electricity generation, tobacco, nuclear power, gambling, adult entertainment and companies involved with controversies related to the UN Global Compact principles.

“ESG has become a staple of the investment management landscape. Clients have started to demand products that make it easier for them to manage their portfolios with better ESG compliance and risk management,” said Muhamad Umar Swift, CEO of Bursa Malaysia.

The new indices are part of the exchange’s low-carbon economy commitment. Earlier this month, Bursa Malaysia reassured the industry that it will launch a voluntary carbon market (VCM) exchange this year, enabling companies to purchase voluntary carbon credits from climate-friendly projects and solutions. It is understood that the VCM initiative would comply with Shariah principles.

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