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

Companies can no longer get away with a superficial embrace of environment, social and governance (ESG) without understanding or embodying what it means, given that scrutiny on greenwashing is on the rise, said Minister of Natural Res­ources, Environment and Climate Change Nik Nazmi Nik Ahmad at The Edge Malaysia ESG Awards 2023 gala dinner, held on Nov 6 at Hilton Kuala Lumpur.

Nik Nazmi, who was the guest of honour at the awards ceremony, stressed that the focus now is no longer on whether governments and businesses should embrace ESG but on the credibility of ESG initiatives that have been implemented.

“I have seen a growing sense of urgency and willingness on the part of Malaysian businesses to embrace ESG. What is needed is constancy and a willingness to support your compatriots within your respective industries. ESG should not only apply to your own organisations but also in all aspects of your supply chain as well as operations,” he said.

Nevertheless, the adoption of ESG among Malaysian public-listed companies (PLCs) and asset management firms has improved over the years.

For instance, the number of funds designated as Sustainable and Responsible Investment Funds by the Securities Commission Malaysia increased to 63 in June this year. This means a bigger universe for the fund category of The Edge Malaysia ESG Awards 2023.

The same was observed in the equities category, as more PLCs now have ESG scores provided by FTSE Russell.

“This year, 356 PLCs were appraised by FTSE Russell and therefore eligible to be considered for the awards under the equities category, compared to 296 last year. The plan is to eventually cover all PLCs,” said Datuk Ho Kay Tat, publisher and group CEO of The Edge Media Group, in his welcome speech.

Ho acknowledged the challenges that the companies faced amid economic headwinds this year. Despite the difficulties, the award winners stayed committed to their sustainability mandates.

This was proved by the net inflows into ESG funds, which were still positive up to the second quarter of the year, he added.

“From these trends, it is clear that more corporates and funds are responding to requirements by their investors, global supply chain partners and customers to be ESG-compliant and to improve their sustainability reporting.”

The Edge Malaysia ESG Awards 2023 was organised in collaboration with Bursa Malaysia and FTSE Russell, with Morningstar as the knowledge partner for the funds category and Deloitte as the auditor.

UOB Malaysia is the main partner again for this year’s awards, with Astro Awani as the official broadcast partner. A new partner for the awards this year is BMW Group Malaysia, which has introduced electric vehicles with a focus on sustainability and circularity.

A total of 63 awards, including gold and silver, were presented to the 48 PLCs and asset management firms during the awards night, which saw about 380 people in attendance.

Two new awards were added this year in the equities category to recognise PLCs that not only do well in ESG but also give consistent dividends to shareholders.

“It is important to strike the right balance to meet the needs of the various stakeholders,” said Ho.

The other new category rewarded PLCs in high-emission sectors that have been doing more to be part of the “green transition”.

Ho conceded that the transition to net zero cannot happen overnight, especially for companies in high-emission sectors. For these industries, it may take years. Nevertheless, The Edge Malaysia ESG Awards aims to acknowledge the steps taken by these companies.

The big winners of the night were Press Metal Aluminium Holdings Bhd, which clinched two gold trophies in the equities category for industrial products and services and for the green transition award, and Hektar Real Estate Investment Trust (Hektar REIT), which took home two gold awards for the REIT and outstanding ESG and dividend returns categories.

Tan Wui Li, group sustainability manager at Press Metal, said the awards affirmed the company’s continuous effort to make a positive impact and contribute to a sustainable future.

“We will continue to put our efforts into enhancing our ESG practices, focusing on climate transition through operation efficiency and further reducing our environmental footprint. Recognitions like this will further motivate us to keep driving change,” she said.

Hektar REIT assistant manager in investor relations, ESG and special projects Muhammad Bakthiar Ul Haq said the company was thrilled about winning the gold award this year, especially considering it received a silver award in the same category last year.

“We are constantly working towards a roadmap to improve our sustainability agenda. Frankly speaking, one of the things that has really helped us get this win was our regular analysis of the FTSE Russell indicators,” he said.

Another contributing factor to the firm’s success was finding ways to improve ESG disclosures within the company and to be transparent not only for the good news but also for the challenges and developments that are not in the company’s favour.

In the asset management space, the biggest winner was BIMB Investment Management Bhd, which took home three gold and three silver awards.

CEO Azdini Nor Azman said ethical investment was the key factor in the company’s win.

“BIMB, being shariah-compliant, is already one leg into being ethical. [But] being shariah-compliant is not just about being religiously compliant. Being religiously compliant and having that ESG aspect adds value,” she said.

Embracing ESG should not be seen as punitive, as the government wants to act as a facilitator and catalyst, Nik Nazmi said in his speech. It will not demand that the public do something that it will not do itself.

“Recently, we launched Phase 1.0 of the Industry Environmental, Social and Governance (iESG) Framework to accelerate the transition towards sustainable practices among manufacturing companies. Also, the Energy Efficiency and Conservation Bill will now be debated in the upper house,” said Nik Nazmi.

These will provide a regulatory framework to enable the public and private sectors to work together towards an energy-saving nation, as well as create more energy-efficient solutions.

Nik Nazmi also weighed in on the government’s ongoing efforts to balance sustainability goals and continued subsidy programmes to ensure the disadvantaged do not shoulder the weight of the transition.

“One of the major challenges that we face for sustainability is the blanket subsidy. I’m sure BMW recognises our journey to embrace electric vehicles will be made easier if there’s less or no petrol subsidies,” he said.

The transition towards targeted subsidies needs to happen not just to meet the country’s sustainability ambitions but also to ensure that the interests of underprivileged communities are safeguarded, said Nik Nazmi.

“This year alone, out of a budget of RM388 billion, subsidies in total were estimated to be RM64 billion. But, now, it’s estimated to be RM81 billion, which is a huge chunk of our budget. So, we need to start this transition and we want to make it fair to ensure that [the underprivileged] will continue to be assisted. It’s certainly unfair for the top richest households to be getting most of the subsidies whether we are talking about fuel or electricity,” said Nik Nazmi.

“But at the same time, what we’re doing to balance this out is enabling easier access to solar power as an incentive for consumers to reduce the use of conventional energy, which is also covered by subsidies.”

He reiterated the government’s intentions in rolling out the National Energy Transition Roadmap (NETR) in August, which outlined Malaysia’s strategy to reduce carbon emissions in the energy sector.

“Our goal is to systematically increase the contribution of renewable energy to our Total Primary Energy Supply from the current 4% to 23% by 2050. The successful execution of NETR is projected to significantly boost Malaysia’s gross domestic product from RM25 billion in 2023 to RM220 billion by 2050. This is also expected to generate 310,000 jobs,” he said.

The minister concluded by saying that inclusivity would be key in the fight against climate change. It must exist between and within nations, and between and within the public and private sectors.

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