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SC revises SRI fund guidelines to facilitate ASEAN Standards implementation

The Securities Commission Malaysia (SC) has issued revised guidelines on Sustainable and Responsible Investment (SRI) funds on the 17th January 2023. The revised guidelines notably include amendments to facilitate the implementation of the ASEAN Sustainable and Responsible Funds (SRF) Standards in Malaysia.

“Given the significant growth of sustainable funds globally, more comparable, uniform and transparent disclosures are needed to mitigate greenwashing risks,” the regulator said in a statement.

The ASEAN SRF Standards are a relatively new set of guidelines issued by the ASEAN Capital Markets Forum, a high-level group of capital market regulators from all 10 ASEAN jurisdictions, in October 2022.

The standards aim to provide minimum disclosure and reporting requirements which can be applied consistently to collective investment schemes.

In addition to regulator facilitation of SRI funds to qualify as ASEAN SRFs, the latest revisions also aim to enhance disclosure and reporting requirements, ensure adequacy of information and facilitate informed decision-making by investors.

Notably, many of the added sections in the amended guidelines in relation to the investment strategies of SRI funds mirror that of the strategies outlined in the ASEAN SRF Standards in both substance and form.

Also in tandem are the new sections on reference benchmarks and indices, sustainability risk considerations, use of third-party verification as well as the reporting and disclosure obligations of issuers.

The revisions are effective immediately: SRI fund issuers with pending applications are required to make the necessary revisions to comply with revised guidelines. However, funds which have received approval from the SC but have yet to launch may proceed to launch the funds without complying with the revisions.

The regulator has provided a 12-month transition period for existing SRI funds to comply with the tightened requirements.

Originally issued on the 18th December 2017, the guidelines were revised for the first time on the 9th July 2021. To date, there are 63 SRI funds qualified under the SC, of which 22 are Islamic.

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