KUALA LUMPUR (Oct 15): A study by the Securities Commission Malaysia (SC), together with the World Bank, highlighted that environmental, social and governance (ESG) disclosures of Malaysia’s public listed companies (PLC) are lacking in regard to climate change, nature, and biodiversity indicators.
“Overall, the assessment shows that corporate disclosures and companies’ overall approach to managing governance and social issues were good for most of the sampled companies,” said the SC and World Bank in a joint report entitled ‘ESG Disclosure Assessment of Malaysia’s Listed Companies and Recommendations for Policy Development’ released on Tuesday.
“Disclosure levels were weaker for specific environmental indicators, especially those related to climate change, nature and biodiversity,” it noted.
The report contains findings on an assessment of ESG disclosure practices of a sample of 90 PLCs, as well as Malaysia’s “largest four asset owners”.
“Only 10 of the largest companies by market capitalisation have comprehensive TCFD (Task Force on Climate-related Financial Disclosures) disclosures,” the report said.
The report defined “comprehensive” as where a company discloses on at least 80% of TCFD-aligned indicators.
“Overall, disclosures on Scope 1 and 2 emissions are reasonably good, with 42% of companies reporting the data, but only a small portion of companies discuss the related risks associated with these emissions. Additionally, only about a quarter of companies, generally larger ones, report on Scope 3 emissions.
“Concerning the financial or business impact of climate-related risks and opportunities on a company, fewer than 30% of companies provide this type of information,” it added.
Meanwhile, only about a third of the assessed PLCs disclose some form of nature-related or biodiversity reporting.
“When reporting on nature-related indicators, companies generally do not acknowledge nature-related dependencies or the risks to their business of depending on nature,” it added.
In terms of recommendations to enhance ESG reporting regulation and practices in Malaysia, the report proposed for the SC to affirm and clearly define its objectives for corporate ESG reporting, acknowledging that the new National Sustainability Reporting Framework already emphasised the importance of providing consistent, comparable and reliable sustainability information to enhance Malaysia’s competitiveness and attractiveness to investors.