Permodalan Nasional Bhd (PNB), one of the largest fund managers in Malaysia, launched its sustainability framework and 10 ESG commitments two years ago. Since then, it has made significant strides in achieving those targets.

For one, the fund manager formalised its Sustainability Policy to ensure the effective implementation of ESG initiatives across its enterprise and investment portfolio. It also increased transparency around ESG performance and initiatives, and aligned its reporting with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

In addition, PNB met its aim of ensuring fair compensation for its employees by establishing the Living Wage Framework in January 2023, which provide fair compensation, covering basic needs like food, housing and transport.

Voting transparency is another area that PNB has prioritised to set a commendable standard for corporate governance in Malaysia. In 2023, PNB updated its Proxy Voting Guidelines to incorporate a new guiding principle that emphasises ESG-related considerations namely on climate, labour as well as nature and biodiversity. This addition underscores PNB’s progressive approach to responsible investing and sets higher expectations for its investee companies regarding sustainability ambitions and disclosures .

PNB is the first Malaysian institutional investor to publish voting decisions ahead of general meetings to drive shareholder engagements with investee companies and provide transparency of its voting decisions.

In December 2023, PNB began exercising its voting rights in key international markets like the US, the European Union, Japan and China. This marked a historical milestone for PNB as it expands its shareholder activism internationally, while enhancing its capabilities on governance matters in more matured markets.

PNB’s climate ambitions include becoming a net zero enterprise by 2025 and achieving a net zero portfolio by 2050. Thus far, the firm has successfully reduced its Enterprise Scope 2 greenhouse gas emissions by 33% and is enhancing tracking and reduction of its Enterprise Scope 3 emissions.

The fund manager is transitioning its fleet to electric and hybrid vehicles and expects to see more emissions reduction after the relocation to its new office in Merdeka 118, which is triple rated under the standards of LEED, GreenRE and the Green Building Index. It will also develop its capabilites in the voluntary carbon market to support its net zero enterpise target by offsetting residual emissions with high quality carbon credits, aligned with the carbon mitigation hierarchy.

PNB’s investment emissions intensity has decreased 8% year on year, primarily driven by lower emissions from its top 10 largest emitters due to increased adoption of clean energy sources, energy efficiency improvements, better land management practices, among others. To guide its near-term climate efforts, PNB set interim climate targets for its investment porfolio. This includes a commitment to reduce investment emissions intensity by 30% by 2030 against a 2022 baseline and ensure 70% of its portfolio emissions are covered by credible net zero targets by 2030. To ensure a climate-resilient investment portfolio, PNB is also exploring the use of an internal carbon pricing mechanism to support the investment decision-making process.

In line with this, PNB is actively scaling up climate engagement efforts with its top emitters and key investee companies. It has also developed its own net zero credibility assessment to evalute the climate ambitions, strategies and disclosure quality of its investee companies.

It is important to highlight that ESG is not just about risk management. It is also about spotting new opportunities in the low-carbon economy and taking into consideration future consumer preferences and realities.

That is why one of PNB’s commitments is to invest RM10 billion in new green and transition assets by 2030.

PNB will continue investing in efforts to achieve its ESG commitments by enhancing its engagements with investee companies and collaboration with other investors.

The fund manager is part of Government-linked Enterprises Activation and Reform Programme (GEAR-uP), a GLIC coalition support-

ing structural reform in Malaysia as outlined in the Ekonomi MADANI framework.

Under GEAR-uP, PNB focuses on modernising Malaysia’s industries by promoting high-value, sustainable activities, including investments in new industrial parks, automation, smart agriculture, green energy and energy transfer.

Moving forward, there will be a greater focus on nature and biodiversity considerations, acknowledging that nature-related risks have become a critical concern alongside climate change.

PNB is considering to develop a Nature and Biodiversity Policy, which will be applicable to the company and its subsidiaries, as well as investee companies that are highly exposed to nature-related risks.

Other than introducing a living wage within the organisation, PNB published a Labour Rights Policy in 2022, which outlines clear expectations to manage key material issues such as forced and child labour, diversity and inclusion, fair wages and benefits, among others, for both its enterprise operations and investee companies. Labour rights also continue to be a key focus area in its stewardship engagements with investee companies.

The fund manager is also on track to have 40% women in leadership positions by 2025. The Development Programme for Women Leaders was organised in 2023 to equip high-potential senior women with essential leadership skills.

It is also important for the fund manager to create positive impacts across the communities it serves via corporate social responsibility initiatives. This is guided by its Social Investments Framework, which aligns with national development and community needs and centres on the pillars of education, health, community development and environment.

For instance, PNB has invested RM430.1 million in education programmes since 1996, supporting 5,857 students. RM40.7 million was allocated to scholarships for 1,195 students in 2023.

Financial literacy programmes are another focus of the fund manager. The Celik Kewangan Belia MADANI initiative will provide one million new IPTA and vocational students with a RM50 free initial investment and essential financial tools to encourage financial planning among the youth.