KUALA LUMPUR (Sept 9): Malaysia’s largest public listed companies have made a start on climate reporting under the National Sustainability Reporting Framework (NSRF), but their disclosures still fall short when it comes to linking climate risks to financial performance, according to a joint study by the Minority Shareholders Watch Group (MSWG) and Climate Governance Malaysia (CGM).
The study, which reviewed sustainability-related disclosures by 91 Group 1 listed issuers, found that companies were generally stronger at identifying climate risks and establishing governance and risk management processes than at showing how those risks could affect their financial position, performance and cash flows.
That gap is particularly relevant to investors as the NSRF brings sustainability reporting closer to the financial reporting framework. While 96% of companies identify climate-related risks and opportunities, only about a third disclose their expected effects on financial performance or cash flows, with fewer providing quantitative estimates of the potential financial impact.
MSWG chief executive officer Ismet Yusoff said the first reporting cycle provides an important foundation, but the next phase needs to make sustainability disclosures more connected to financial information and more useful to investors.
“The next phase is about making disclosures more connected, financially meaningful and useful to investors,” he said, adding that minority shareholders need to understand how sustainability risks could influence strategy, financial prospects and capital allocation.
Overall, the companies recorded a validated composite disclosure score of 54.6%, reflecting relatively established reporting practices but significant room for improvement in the depth and usefulness of disclosures.
Governance was one of the stronger area with all 91 companies identifying a governance body responsible for overseeing climate-related matters, while 98.9% disclosed management’s role.
However, only 60.4% provided information on the skills and competencies available to oversee climate-related risks and opportunities, while just 33% demonstrated that trade-offs had been considered in decision-making.
Risk management was more developed, with an average disclosure score of 73.8%. Metrics and targets, however, were the weakest area at 44.5%, pointing to a gap between having processes to identify and manage risks and having the data needed to measure progress.
The study also examined how companies could be exposed to carbon pricing and found that 20 companies have Scope 1 to Scope 3 emissions that would reach break-even below a hypothetical carbon price of RM1,000 per tonne of carbon dioxide equivalent. Together, these companies represent RM551 billion, or 41% of the cohort’s market capitalisation.
Their disclosed emissions amounted to 202 million tonnes of CO2e, or about 79% of the total emissions reported by the companies covered in the analysis.
Six companies, namely PETRONAS Dagangan Bhd (KL:PETDAG), Tenaga Nasional Bhd (KL:TENAGA), Malakoff Corp Bhd (KL:MALAKOF), SD Guthrie Bhd (KL:SDG), Press Metal Aluminium Holdings Bhd (KL:PMETAL) and Malayan Banking Bhd (KL:MAYBANK), account for roughly three-quarters of the exposed emissions in this group.
The analysis also pointed to the difficulty of assessing value-chain emissions. Scope 3 accounts for 57% of disclosed emissions, but eight companies reported no Scope 3 emissions, while another 28 reported only limited categories such as business travel and employee commuting.
In the report’s introductory message, CGM founder and non-independent director Datin Seri Sunita Rajakumar said Malaysia’s early adoption of ISSB-aligned requirements places the country firmly within the global shift towards investor-focused sustainability reporting.
The significance of the first reporting cycle, she says, is not about achieving perfection from the outset but about building the capabilities, governance and market discipline needed for reporting to mature.
The longer-term measure of progress will be whether sustainability information becomes “increasingly comparable, decision-useful” and embedded in how companies think about resilience and long-term value creation.
The study found a wide variation in reporting maturity, with company scores ranging from 2% to 83%. This suggests that while some issuers are already developing more sophisticated reporting practices, others are still at an early stage.
The full report is available on the MSWG (www.mswg.org.my) and CGM (www.cgmalaysia.com) websites.