This article first appeared in The Edge Malaysia Weekly on December 12, 2022 - December 18, 2022

Public Mutual Bhd bagged two fund awards at The Edge Malaysia ESG Awards 2022. Its Public e-Carbon Efficient fund won gold in the best E (environmental) fund category while its Public e-Islamic Sustainable Millennial fund won silver in the best low carbon award category. Public Mutual CEO Chiang Kang Pey says the awards will motivate the company to continue pursuing greater goals.

“Our investment strategy — which entails taking a long-term view and focusing on companies with sustained earnings, strong financial positions and proven track records, in addition to their sustainable practices — has proven to be the best recipe for our success,” says Chiang.

It was particularly challenging to navigate the elevated volatility in equity markets due to the rise in interest rates, inflationary pressures and geopolitical tension. Nevertheless, Chiang says their funds remain focused on investing in companies that incorporate ESG considerations into their business practices and are underpinned by strong fundamentals and resilient earnings.

“The lack of standardisation in ESG disclosures and transparency in ESG reporting continues to limit the effectiveness of comparable analysis between investee companies. We are cognisant of this and rising greenwashing concerns. We will remain vigilant in the face of the changing landscape by continuously equipping our team with the relevant knowledge and skills to keep abreast of the latest developments. We believe that the transition towards achieving full sustainability targets is ongoing and will continue to improve in the foreseeable future,” he says.

The investing universe for the Public e-Islamic Sustainable Millennial fund comprises component stocks of the S&P Global 1200 ESG Shariah Index. Stocks in this benchmark are screened based on ESG criteria. The index excludes companies with ESG scores below a specified threshold in each industry group and those involved in activities with high ESG risks.

The Public e-Carbon Efficient fund’s universe is made up of constituents with a relatively low carbon footprint on the S&P Global 1200 ESG Index. The index provider has excluded stocks in industries with high carbon impact, such as energy, materials, transport, utilities, food and beverage, and tobacco.

“The sustainability aspects of our ESG funds’ portfolios are also monitored and reviewed to ensure that the funds’ investments are consistent with their sustainability objectives. In addition to ESG considerations, our investment process is based on a fundamental research approach, whereby we analyse the companies’ business prospects, financials, stock valuations and governance factors, which include the investee company’s management track record, business strategies and overall performance,” says Chiang.

In Malaysia, sustainable investing among retail investors is still at an early stage. However, the demand for ESG and sustainable and responsible investment (SRI) funds among retail investors has been encouraging, as shown by the interest generated by Public Mutual’s ESG and SRI retail funds, he adds.

Both funds, launched under the Public e-Series of Funds, are available exclusively online. They contribute to a lower carbon footprint, while at the same time allowing unit holders to have quicker and more convenient transactions.

“We expect the universe of ESG-compliant firms to broaden as more companies step up their ESG strategies and reporting. Investors, regulators and corporates will need to play their part in raising awareness and creating positive ESG impact,” he says.

“We expect inflationary pressures to continue to moderate as we head into 2023, allowing major central banks to slow the pace of monetary policy tightening. This will provide support to the global equity markets, which in turn should bode well for our two ESG and SRI funds.”

Nevertheless, Chiang expects investor sentiment to remain cautious on the back of a slowdown in global economic momentum and concerns over recessionary risks.

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