KUALA LUMPUR, March 31 — The Employees Provident Fund’s (EPF) move to completely embrace sustainable investing and reinforce its commitment to Environmental, Social and Governance (ESG) will benefit not only the country’s capital markets but also the people, Minister of Finance Datuk Seri Tengku Zafrul Aziz said.
The EFP is Malaysia’s largest institutional investor and pension fund.
Driven by its commitment to two overarching sustainable investment goals of ESG compliance by 2030 and a climate-neutral portfolio by 2050, the EPF’s Sustainable Investment Policy, Priority Issues Policies, and Priority Sector Policies are all steps in the right direction for its sustainable investment ambitions.
This is in addition to laying the foundations for more climate-resilient and socially responsible practices, as well as sound corporate governance, among its investee companies.
“The government believes that by institutionalising ESG policies in EPF’s investments, the benefits will cascade down the value chain of Malaysia’s capital markets, ultimately benefitting the Rakyat,” he said.
In fact, today’s pledges by all 16 of the EPF’s external fund managers to incorporate ESG considerations into their investment decision-making and to collaborate with the EPF to promote the ESG agenda serve as a great starting point, the finance minister said at the launch of the EPF’s sustainable investment policy.
However, while the strive is for higher standards by aligning policies with global standards or frameworks, its principles and approach must be tailored to national objectives, as well as local needs and requirements, he warned. This, he said is to ensure a fair and equitable transition that recognises each country’s unique characteristics, strengths and challenges in achieving those objectives.
ESG and labour standards
Furthermore, as global scrutiny on labour standards gradually increases, the government is confident that the EPF’s workers’ wellbeing policy will further strengthen labour practices among Malaysian corporates, while also serving as a testament to the country’s commitment to strive for better workers’ wellbeing.
On the social front, Malaysia is facing increased scrutiny of its labour practices, particularly the treatment of foreign labour by corporate Malaysia.
Tengku Zafrul said these issues have a tangible adverse impact not only on business profitability but also on the nation’s reputation as a whole. “As a result, it is undeniable that sustainable or ESG investing is becoming increasingly important, and is no longer limited to developed countries.”
According to Bloomberg Intelligence, global ESG assets are on track to exceed US$53 trillion (RM222 trillion) by 2025, accounting for more than a third of the projected total assets under management of US$140.5 trillion.
The rush into ESG assets is unsurprising given their expected long-term outperformance. On an annualised three, five, and 10- year returns, for example, the MSCI Malaysia ESG Leaders index clearly outperformed the MSCI Malaysia Index.
In other developments, Tengku Zafrul said the Ministry of Finance (MOF) has already begun budget-tagging specific measures to ensure that various ministries spend in accordance with their sustainability expectations.
“To maintain the momentum of this mainstreaming process, institutional investors must share key data on how each industry in their ecosystem has ‘shaped up’ in terms of sustainability,” he added.
This will enable future policies to be tweaked accordingly to improve Malaysia’s climate adaptation and crisis mitigation strategies as quickly as possible. — Bernama
