This article first appeared in The Edge Malaysia Weekly on November 27, 2023 - December 3, 2023

In a bid to increase the adoption of environmental, social and governance (ESG) practices among public-listed companies (PLCs), Bursa Malaysia Bhd announced last year that going forward, all PLCs will be automatically given an ESG score by FTSE Russell.

This is meant to familiarise Malaysian PLCs with ESG ratings, which are often used by external parties — investors and clients, for instance — to judge a company’s performance. It will help companies meet the increasing demand for transparency and disclosure on ESG issues.

Thanks to this expansion, The Edge Malaysia ESG Awards 2023 had a wider universe in the equity category. At our inaugural event last year, only PLCs on the FBM Emas Index, which accounted for about 30% of Malaysian PLCs, were eligible for the equity category.

This year, all PLCs with an ESG score from FTSE Russell as at June — more than 300 of them — qualified for the equity category, which was judged using FTSE Russell’s methodology.

It is hoped that by winning the awards, Malaysian PLCs can be acknowledged for their efforts and gain a better understanding of how global ESG rating firms evaluate companies on their performance. In fact, over the past year, Malaysian PLCs have shown an improvement in their ESG scores, according to FTSE Russell.

No company scored less than one, said Helena Fung, head of sustainable investment for Asia-Pacific at the London Stock Exchange Group, in an email interview with ESG in October. Meanwhile, there were increases of 33% and 50% respectively in the number of companies achieving higher ESG scores of three and four.

Fung observed that more queries and feedback were received from PLCs. Malaysian PLCs that want to access their ESG scores and understand the methodology can engage with Bursa Malaysia.

Two new categories were introduced for the awards this year, recognising PLCs that are not only doing well in ESG but rewarding their shareholders with consistent dividends. This is to reflect that sustainability does not necessarily mean sacrificing profit.

The other new category acknowledges PLCs in high-emission sectors that are investing in resources to decarbonise. Companies in these sectors generally find it harder to transition due to cost and resource constraints.

On the other hand, there was an increase in Malaysian Sustainable and Responsible Investment (SRI) funds to 63 funds in June this year. The Edge Malaysia ESG Awards 2023 fund category was judged using global financial services firm Morningstar’s strategy, and only SRI funds were eligible for the awards.

Positive inflows into Asia ex-Japan and China sustainable funds continued to be observed by the second quarter of 2023, reflecting interest in this asset class, according to Morningstar.

Overall, expectations of companies adopting ESG, aligning their sustainability reporting to global standards and meeting their climate targets are increasing. It is not an easy path and measuring ESG performance and impact is far from perfect, but the journey has to start somewhere.

The full methodology for the awards is explained in the following pages.

This special report features stories on the winners, which we hope will inspire others to do more.

Tan Zhai Yun
Editor
ESG, The Edge Malaysia

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