This article first appeared in The Edge Malaysia Weekly on December 12, 2022 - December 18, 2022
Last Wednesday, Perak Transit Bhd scrapped its plan to undertake limestone and silica sand-mining, a deal it entered into more than two years ago. The agreement was inked with Gemas Perunding Sdn Bhd, which is involved in the mining and quarrying of limestone and silica sand.
The termination is part of the transport terminal and bus operator’s strategy to improve its sustainable environmental, social and governance (ESG) standards, according to its filing with Bursa Malaysia.
ESG investing has been a hot topic in recent years, but it may not be easy for companies to strike a balance between maximising their profits and fulfilling corporate social responsibility. Corporations, especially those that are listed, need to answer to their shareholders.
That said, it is comforting to see more companies taking ESG seriously in line with the global commitment to achieve a low-carbon economy.
In August, Bursa Malaysia Bhd launched two new ESG-themed indices under the FTSE Bursa Malaysia Index Series, namely the FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Index and the FTSE Bursa Malaysia Top 100 ESG Low Carbon Select Shariah Index. The move expands the stock exchange’s benchmarking offerings in the ESG, low carbon and climate risk index space to cater to evolving investor demand.
From the investment point of view, corporates are also well aware of more institutional funds taking the ESG criteria as a core consideration when they make investment decisions. Global money keeps rolling into ESG funds, and Bloomberg reported that there had been a net US$44 billion (RM193.5 billion) inflow into ESG-labelled exchange-traded funds this year.
Today, however, the adoption of ESG practices among small- and medium-size companies is still low. But economic pressures will exert an influence over time and more small companies will start reviewing their business model in order to be more ESG-compliant. After all, it will become a motivation for them to attract institutional investors.
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