This article first appeared in The Edge Malaysia Weekly on September 18, 2023 - September 24, 2023

Since Bursa Malaysia Bhd began making sustainability reporting mandatory for public-listed companies (PLCs) in 2016, one common feedback from industry players is that more support is needed to help them comply.

This was especially after the regulator introduced enhanced reporting requirements last September, which requires Main Market PLCs to report on 11 common indicators by December 2023 and provide disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations by December 2025.

“Our expectation was that different players would emerge and provide the support [to generate] the data [needed] for the reporting requirements. The feedback we were getting was that it was not happening. That posed a conundrum for us. Investors are asking for greater disclosure and PLCs are saying they’re not ready for it,” Bursa Malaysia CEO Datuk Muhamad Umar Swift tells ESG.

Companies want affordable resources to calculate their carbon emissions, report according to globally recognised standards and provide relevant data to their investors and clients, who are increasingly demanding such information.

“The feedback we’ve gotten is that solutions aren’t available and they’re too expensive. So, we just set about answering these two calls to action,” he says.

Bursa Malaysia launched the Centralised Sustainability Intelligence (CSI) platform earlier this year in collaboration with the London Stock Exchange Group (LSEG). The platform is meant to help PLCs and non-listed companies, including small and medium enterprises (SMEs), calculate their carbon emissions and report according to global frameworks and standards, among other things, and serve as a central repository for ESG data.

This tool may become more important as global reporting frameworks and standards evolve. For instance, the International Sustainability Standards Board’s standards may soon become the global sustainability disclosure baseline.

“As we begin to see the alphabet soup [of reporting standards] coalesce into an alphabet, we think the time has come to facilitate that process and give it some direction. We don’t like to see duplication of efforts, so we set about creating a tool where we can empower companies to report once and share the data set, which is compliant with the Asean taxonomy and maps to international standards,” says Muhamad Umar.

The goal is to ease the reporting process for companies, so they just have to key in their sustainability-related data once into the platform, which can be integrated with other markets and with banks.

Ideally, companies that have this sustainability information ready will have wider market access as potential customers look for suppliers with a lower carbon footprint. Banks, meanwhile, can offer targeted solutions to help companies pivot.

“We’re not saying that our solution is the best and only one. What we believe is that we need a ubiquitous solution that is at the right price point,” says Muhamad Umar.

In recent months, the regulator signed memorandums of collaboration with companies such as Mah Sing Group, Alliance Bank Malaysia, UMW Corp Bhd, Malayan Banking Bhd, Petroliam Nasional Bhd (Petronas) and CIMB Bank Bhd to onboard the companies and their supply chain onto the CSI platform.

“In doing so, the PLCs will see where their supply chain sits in the overall transition strategy. The PLCs, in our expectation, will help their supply chain pivot,” he says.

For example, companies like Mah Sing will ask their suppliers to use the platform to report their emissions data. With the consent of the companies involved, Alliance Bank can view their emissions profile and offer solutions like sustainability-linked loans that tie the financing rates to the companies’ sustainability key performance indicators.

It is important to note that the CSI platform is separate from the mandatory sustainability reporting requirements that Bursa Malaysia imposes on PLCs. For the latter, PLCs must use the Bursa LINK system to report. The CSI platform, meanwhile, is voluntary.

Some may question whether Bursa Malaysia is cornering the market — where technology players and consultants currently operate in — by introducing this solution. Muhamad Umar says it is driven to meet an industry need.

“From our perspective, we think offering [it in a] modular nature where people can opt in or out [is good].”

The platform is currently in its proof-of-concept stage and is free to use. Eventually, when the pricing model is established, Bursa Malaysia wants to keep it affordable. How? By achieving economies of scale, says Muhamad Umar, who wants to promote this solution to stock exchange regulators in the region that have similar goals.

“This has resonated particularly with [our counterparts] in Jakarta and in Bangkok. They also want SMEs on this journey and use PLCs as [the entry point].”

His vision for CSI goes beyond just the platform. The data will be useful in helping companies and the nation transition to a more sustainable and lower-carbon economy, and make local players more resilient and competitive.

“The role of PLCs is to green their supply chains. We bring in banking partners to provide funding for the transition. We then have conversations with ministries to see what grants are available. It’s a multi-faceted approach, with a view to strengthening Malaysia’s economy, creating jobs and profits,” says Muhamad Umar.

There are three parts to the CSI platform. The first is focused on reporting. Currently, companies can use it to generate a TCFD-aligned report by selecting relevant options and inputting information into the system. There is also a Scope 3 carbon emissions calculator.

Scope 3 emissions mostly covers the footprint of a company’s supply chain. Using the technology that Bursa Malaysia and LSEG have acquired, an estimation is provided for the Scope 3 emissions of a company, based on the location and industry of its suppliers. With that estimation, companies can identify which of their suppliers likely have the highest carbon footprint, and engage with them to calculate the real emissions baseline.

“Instead of approaching multiple companies [in your supply chain] to complete surveys [on their emissions baseline], now there is a way for your procurement team to design and work on a supply chain [decarbonisation] programme together with banks. This facilitates a conversation with your suppliers to encourage them to disclose their carbon footprint and improve their ESG reporting,” says Wong Chiun Chiek, director of Bursa Intelligence. “This will translate into cheaper financing rates for SMEs in the supply chain, as can be seen in the collaboration between Mah Sing and Alliance Bank.”

Other features that will be launched include a carbon monitoring dashboard, peer analysis to benchmark one’s performance, and Scope 1 and 2 carbon calculators and scenario analysis, which allow companies to understand their climate-related risks and opportunities.

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