This article first appeared in The Edge Malaysia Weekly on November 27, 2023 - December 3, 2023

Public Mutual Bhd walked away with two awards at The Edge Malaysia ESG Awards 2023. The winning fund, Public e-Carbon Efficient Fund (PeCEF), clinched the gold award in the best low carbon award category and the silver award in the best E (environment) fund category.

According to Public Mutual CEO Chiang Kang Pey, PeCEF selects its investments with reference to an ESG index and adopts an added overlay of investing primarily in stocks of companies with an efficient carbon footprint — those with lower levels of carbon emissions relative to peers in their respective industries.

To address a lack of standardisation and transparency in corporate ESG disclosures and reporting guidelines, as well as greenwashing concerns, Public

Mutual’s investment decision-making process involves an internal ESG framework to complement third-party ESG data.

“We are also increasingly vigilant and proactive in engaging with investee companies identified to have ESG weaknesses to help them improve their ESG credentials over time. We believe the transition towards achieving sustainability targets is ongoing and will continue to improve in the foreseeable future, amid increased scrutiny by investors, regulators and society,” says Chiang.

“In addition, policymakers could actively push the ESG agenda and regulators can ask listed companies to adopt more stringent ESG practices and increase their sustainability reporting disclosures.”

In 2023, the biggest challenge the fund managers faced was the elevated volatility of the global equity markets amid the rapid rise in bond yields and the US Federal Reserve’s higher-for-longer interest rate stance to curb persistent inflationary pressure. This was coupled with a slower-than-expected post-reopening economic recovery in China and escalating geopolitical tensions.

“PeCEF focused on investing in companies with strong fundamentals and resilient earnings to ride the markets’ short-term volatility. These companies must also incorporate ESG considerations into their business practices,” says Chiang.

Chiang expects investor sentiment to remain cautious amid concerns over an uncertain global economic outlook, geopolitical tensions and elevated interest rates.

“Inflationary pressures may continue to moderate into 2024, however, thus giving major central banks the flexibility to tweak their monetary policy. Despite its higher-for-longer interest rate stance, the Fed may pivot by cutting interest rates in 2024 if inflationary pressures cool sufficiently. This will support global equity markets, which should bode well for the performance of equity funds such as PeCEF,” he says.

In 2023, Public Mutual launched its first domestic ESG fund, PB Sustainable Growth Fund. This brings its range of Sustainable and Responsible Investment funds to four funds. As at 29 Sept 2023, the aggregate NAV of all the fund company’s SRI funds under management amounted to RM801.89 million.

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