KUALA LUMPUR (Jan 23): A win for environmental watchdog RimbaWatch against two Malaysian ministries over Shell Malaysia’s “green” claims could make environmental, social and governance (ESG) statements legally enforceable, with penalties for misleading claims, MBSB Research said.

The watchdog filed a judicial review against the Ministry of Domestic Trade and Cost of Living and Ministry of Natural Resources and Environmental Sustainability for failing to act on Shell Malaysia’s alleged misleading “carbon neutral” and “eco-friendly” claims, arguing the Malaysian government isn’t meeting international climate protection standards under the ICJ Climate Change Advisory Opinion. The ministries, however, said the issue is beyond their jurisdiction.

The case, now in the High Court, argues the ministries neglected their legal duty, potentially violating international climate standards, and focuses on whether greenwashing breaches the Environmental Quality Act 1974 and Consumer Protection Act 1999.

RimbaWatch seeks to compel the government to investigate greenwashing, overturn previous refusals, and confirm statutory duties, which could lead to a formal Green Claims Guideline, similar to Singapore and the UK, the research firm said in its ESG thematic report entitled ‘Nipping greenwashing with new reporting standards’ released on Friday.

Globally, greenwashing is rising, doubling over the past five years, from 20% of climate-related ESG incidents involving greenwashing in 2021, to 25% in 2025. Asia accounted for 20%–25% of cases, with top offenders being oil and gas, banking, and food and beverage. 

In Malaysia, greenwashing rules became mandatory between 2024 and early 2026. The government and financial regulators now require green claims to be supported by audited data, not just marketing. This comes alongside the Carbon Tax set for 2026, aimed at improving reporting accuracy and preventing tax evasion. Key regulatory updates and actions have been introduced to enforce this mandatory approach for companies.

MBSB Research said the RimbaWatch case signals a historic shift with ESG claims in Malaysia becoming legally enforceable. Companies that cannot substantiate claims face regulatory penalties, reputational damage, and restricted access to capital, while genuine ESG leaders could see higher valuations and lower borrowing costs.

It said companies with strong ESG practices, like Tenaga Nasional Bhd (KL:TENAGA) and Gamuda Bhd (KL:GAMUDA), are expected to benefit from a change in rule, as they already have audited, science-based sustainability programmes.

MBSB Research sets a RM16.40 target for Tenaga, favouring it for integrating sustainability into core operations and having credible, audited transition plans under the National Energy Transition Roadmap. Gamuda, with a RM6.35 target, is preferred for its science-based urban planning targets and verifiable ESG data, making it attractive for government and international financing.