In the lead-up to the highly anticipated KWAP Inspire Conference 2024, Kumpulan Wang Persaraan (Diperbadankan) [KWAP] Chief Investment Officer Hazman Hilmi Sallahuddin shared an insightful commentary on the transformative power of sustainability and the essential role of a circular mindset in redefining Malaysia’s socio-economic landscape.

Responsible investing integrates environmental, social and governance (ESG) issues into investment decisions, enhancing traditional financial analysis. This approach, known as active ownership or stewardship, aims to influence companies or assets positively. Some investors focus on financial returns, considering ESG impacts, while others seek positive outcomes for people and the planet through impact investing.

Key ESG issues include climate change, biodiversity, human rights, conducive working environment, diversity, equity, inclusion, board structure and executive remuneration. ESG issues are often interconnected, with their cumulative impact being significantly greater than when considered in isolation. For instance, climate change, categorised as an environmental issue, can significantly affect human health and the economy of a country experiencing climate-related challenges that can later amplify as a huge systemic risk which will impact financial returns.

As a UN PRI signatory since 2018, KWAP reports annually on responsible investment activities, emphasising transparency. “Our investment beliefs and objectives are clear: to generate sustainable and responsible risk-adjusted long-term returns,” said Hazman.

By incorporating ESG factors, adhering to PRI principles and maintaining transparency, KWAP aims for sustainable investments that stimulate business growth and benefit society and the environment.

Embedding a circular mindset is essential to advancing a climate-smart nation. Creating a circular mindset will foster a culture dedicated to keeping resources in use for as long as possible,” emphasised Hazman.

The circular economy is a transformative model that redefines our approach to product life cycles. For instance, the Malaysian palm oil industry employs innovative practices by using palm oil mill effluent (POME) to generate biogas, a renewable energy source. This not only reduces landfill waste but also creates new revenue streams, clearly demonstrating how a circular business model can enhance Malaysia’s socio-economic status.

Within one year, KWAP has introduced two new funds: Dana Perintis and Dana Pemacu, with the aim of building the local venture capital and private equity ecosystem, as well as fostering sustainable impact by focusing on thematic investments in eight key verticals — Energy Transition, Food Security, Education, Silver Economy, Healthcare, Digital Economy, Financial Inclusion and Advanced Manufacturing.

“Through the new funds, we aspire to support more local companies in scaling domestically and internationally through both conventional and shariah-based channels, ultimately strengthening financial markets and enhancing local talent development in Malaysia,” said Hazman.

Youth participation in the United Nations Sustainable Development Goals (SDGs) initiatives is active and inspiring in Malaysia. Organisations such as the Malaysian Youth Delegation (MYD) are empowering young people to engage meaningfully in these efforts.

“I am inspired by how today’s youth confidently and courageously advocate for their beliefs,” Hazman remarked. “With the same spirit of enthusiasm and innovation found in today’s youth, KWAP has established the Circular Economy Young Leaders for Change (CYCLE), a youth movement within KWAP which advocates circularity practices. This initiative empowers young leaders to champion sustainable practices, ensuring that resources are used efficiently and waste is minimised. CYCLE aims to foster a culture of sustainability, reflecting KWAP’s commitment to environmental stewardship and responsible investment.”

With social media, young people are effectively raising awareness and mobilising action for SDGs, instilling hope for a sustainable future.

The government’s support can further bolster youth involvement, creating an environment where young people can become influential change-makers. Their passion and innovative approaches are crucial to driving transformative progress on a global scale.

Hazman emphasised that one of the objectives of the conference is to cultivate an inclusive ecosystem for sustainability collaboration and innovation. By promoting ESG awareness and sustainable investments, KWAP aims to empower investors to be catalysts for sustainable and responsible nation-building.

KWAP Inspire Conference 2024 calls on civil society organisations, government agencies, ministries, asset owners, asset managers, financial institutions and investee companies to participate and collaborate. The event aims to offer a platform to exchange insights, explore innovative solutions and foster partnerships that drive Malaysia towards a climate-smart future.

As KWAP continues to integrate ESG principles into its practices, the sovereign pension fund is set to establish its decarbonisation plan towards a Net Zero Portfolio by 2050. The upcoming conference is a crucial step in this journey, inviting all stakeholders to join the movement towards sustainable and responsible nation-building.

Hazman concluded by reaffirming KWAP’s commitment to achieving this purpose, covering its fiduciary duty not just with regards to financial returns but also sustainable and responsible returns. “The passion and innovation that young people bring to the SDG initiatives are driving positive change, and working together to achieve these goals remains a priority.”