The Malaysian Ministry of Finance (MOF) has launched the Sustainable Investing Standards (SIS) on the 26th May 2023 to enhance the role of government-linked investment companies (GLICs) in driving sustainable investments.
The development of the SIS , which aim to enhance the role of GLICs in sustainable investments through providing guidance on incorporating sustainability considerations in their investment process, was led by the Securities Commission Malaysia (SC) based on the contribution of the PERKUKUH Working Group 11 comprising representatives from the MOF and GLICs.
With the role of GLICs to create long-term value and impact on the economy, the SIS are envisioned to act as a driver toward supporting the country’s commitment to meeting the global climate ambitions and sustainability agenda.
The investing standards include requirements on the integration of sustainability considerations in investment processes and the relevant disclosures to enhance the transparency in sustainable investment practices among GLICs.
While the SIS outline broad requirements and practical guidelines as a common standard for GLICs, individual GLICs are still required to ensure the implementation of the SIS is aligned with their own mandates and objectives.
Notably, in the case of the Employees Provident Fund (EPF), which launched its sustainable investment policy in March last year, it will be required to align its existing policy with the SIS and ensure that its mandates are implemented by its external fund managers (EFMs).
Due to the potential variance in the extent to which EFMs have implemented sustainability practices, the SIS guidelines are deemed fulfilled so long as the EFMs and service providers demonstrate commitment to and progress in integrating sustainability considerations into the provision of services to GLICs.
The SIS were developed in a collaborative effort with and are applicable to all Malaysian GLICs, namely the EPF, Khazanah Nasional, Kumpulan Wang Amanah Negara, statutory retirement fund Kumpulan Wang Persaraan, Lembaga Tabung Angkatan Tentera, Hajj savings fund Lembaga Tabung Haji as well as Permodalan Nasional.
The launch of the SIS follows the establishment of the national-level advisory committee on sustainability reporting (ACSR), also led by the SC and endorsed by the MOF, two days earlier on the 24th May 2023 to support the implementation of two sustainability disclosure standards from the International Financial Reporting Standards’s International Sustainability Standards Board, which are expected to be issued in June this year.
The ACSR will examine the approach and timeline for the implementation of the soon-to-be launched standards, considering the market’s readiness to meet the reporting requirements.
According to Awang Adek Hussin, the chairman of the SC, the reporting burden of the upcoming standard is a key area of consideration for the ACSR.
“We need to mitigate the risks of imposing [an] unnecessary reporting burden and adding to the cost of doing business. Therefore, consultation and engagement with the relevant stakeholders will be important in shaping the future direction of sustainability reporting in Malaysia,” the SC chairman remarked.