WHAT ARE YOU LOOKING FOR?
Popular Tags
Speech
IIC-SIDC Corporate Governance Conference 2022 “Investment Stewardship In Times Of Heightened Sustainability Demands”
Speech
KEYNOTE ADDRESS
YB SENATOR TENGKU DATUK SERI UTAMA ZAFRUL BIN TENGKU
ABDUL AZIZ
MINISTER OF FINANCE MALAYSIA
IIC-SIDC CORPORATE GOVERNANCE CONFERENCE 2022 “INVESTMENT STEWARDSHIP IN TIMES OF HEIGHTENED SUSTAINABILITY DEMANDS”
23 SEPTEMBER 2022 | 9.00AM – 10.00AM |
SECURITIES COMMISSION MALAYSIA”
SALUTATIONS
Bismillahirahmanirahim
Yang Berbahagia Dato’ Seri Dr Awang Adek Hussin
Executive Chairman of Securities Commission Malaysia
Yang Berbahagia Datuk Seri Asri Hamidon
Secretary General of Treasury, Ministry of Finance
Yang Berbahagia Tan Sri Ahmad Badri Mohd Zahir
Chairman of Employees Provident Fund
Yang Berusaha Puan Rohaya Mohammad Yusof
Chairman of the Institutional Investors Council Malaysia (IIC)
Yang Berbahagia Datuk Zainal Izlan Zainal Abidin
Deputy Chief Executive Officer of Securities Commission Malaysia
Yang Mulia Tengku Zarina Tengku Chik
Chief Executive Officer of SIDC
Yang Mulia Tengku Zarina Tengku Chik Chief Executive Officer of SIDC
Members of the IIC Board
Board members and senior representatives of Corporate Malaysia
Members of the IIC Board
Members of the media
Distinguished Guests
Ladies and gentlemen
Assalamualaikum and a very good morning.
INTRODUCTION
- First and foremost, I would like to thank the co-organisers, Institutional Investors Council Malaysia (IIC) and Securities Industry Development Corporation (SIDC) for inviting me to officiate and deliver the keynote address at the IIC-SIDC Corporate Governance Conference 2022 themed “Investment Stewardship in Times of Heightened Sustainability Demands”.
- In conjunction with this conference, the launch of the revised Malaysian Code for Institutional Investors 2022 or better known as MCII 2022 is indeed, timely, particularly when the embracing of ESG values by our capital market participants is a no longer a question of IF, but rather of WHEN and HOW.
MALAYSIAN GOVERNMENT EFFORTS IN DEVELOPING CORPORATE GOVERNANCE POLICIES
Ladies and Gentlemen,
- The world as we know it is rapidly changing in all aspects be it social, political, economic or environmental. We have felt the impact of these changes right here in our own backyard, be it through the pandemic, which aggravated various socio-economic fault lines, or the recent climate-change related disasters on our doorstep.
- The Government has always remained steadfast in nurturing and developing projects and programmes that prioritise ESG principles or in strengthening our governance framework with one particular area of focus being integrity and good governance.
- In the last two-and-a-half years, in collaboration with the private sector and civil society, the Government has managed to support our people, businesses and the economy through our RESPONSIVE and RESPONSIBLE policies, to the point where we have enjoyed three (3) quarters of growth and the lowest post- pandemic unemployment rate at 3.7%.
- This includes the various policies that we operationalise through the ecosystem of the Government-Linked Investment Companies.
- In particular, the launch of the Principles of Good Governance (PGG) for Government Linked Investment Companies earlier this year is the key reference document for establishing governance and sustainability baselines for all GLICs. Furthermore, our sovereign wealth funds and key funds are also signatories to the UN Principles of Responsible Investment.
- However, the path to a prosperous, inclusive and sustainable Malaysia cannot be done by GLICs and the GLC ecosystem alone, but instead demands the embracing of strong ESG principles by all market players, especially our institutional investors.
THE ROLE OF THE CAPITAL MARKET PLAYERS TOWARDS SUPPORTING SUSTAINABILITY/ESG INITIATIVES
Ladies and Gentlemen,
- It should be no surprise that our national aspirations – be it becoming a high-income nation by 2025, reducing greenhouse gas emissions intensity to 45% of GDP by 2030, or being a low-carbon nation by 2040, – should not rest solely on the shoulders of Government or GLICs.
- In fact, realising these collective aspirations will also demand leveraging on institutional investors as well, and for good reason: with nearly 2.2 trillion ringgit in assets-under-management (across all asset classes) including nearly 750 billion ringgit in the local stock exchange, institutional investors carry considerable collective influence.
- Given their size and capacity, institutional investors CAN and MUST play a key role to drive effective oversight, catalyse future proofing and unlock value by actively engaging with their investee or portfolio companies not just in the interest of returns, but also on purpose, premised on ESG principles.
Ladies and Gentlemen,
- Effective corporate governance (CG) is a crucial tool in the ESG toolkit, to help ensure that appropriate policies, processes and structures are in place for businesses to remain competitive and sustainable in the long run.
- This brings about the concept of stewardship in long-term institutional investors, such as pension funds, who are also effectively asset owners that could exert considerable influence on the operations and corporate behaviour of their investee companies.
- Responsible oversight of assets and stewardship are crucial to protect the interests of the people – the ultimate beneficiaries. These include, for example, subscribers of pension funds or schemes like you and me, or retail investors of various funds issued by asset management companies.
. - To that end, I am extremely pleased to be here today, to witness the progress made on updating and revising the Malaysian Code of Institutional Investors. It could not have come at a more opportune time, as we incorporate many fresh lessons learnt from the recent pandemic.
- I am heartened to learn that the revised Malaysian Code of Institutional Investors 2022, which replaces the first MCII that was published in 2014, will comprise six (6) of the original principles and one (1) new principle while also introducing a new section entitled “Stewardship Spotlight” .
- This new principle emphasises the role of institutional investors in leveraging their influence over current or potential investee companies, policymakers, service providers and other stakeholders collaboratively with a view to maximise their overall long-term value.
- Consequently, the expectation is for institutional investors to shape, influence and champion the ESG agenda within the Malaysian capital markets.
- On that note, I applaud the current progress, commitment and strong stance shown by our institutional investors in this area, such as promoting labour rights, improving living wages of employees and enhancing gender diversity in senior management (including having at least 30% women on their boards of directors).
- The hope here is that these benchmarks such as the MCII are embraced by other institutional and corporate investors as a viable set of guidance to improve their internal governance.
ESG AND THE INCLUSIVITY AGENDA
Ladies and Gentlemen,
- The next point I would like to share is equally, if not more important. As you advance your respective ESG agendas, please consider how you can support smaller businesses, or smaller cap companies in starting their own sustainability journeys.
- I say this because smaller companies – with limited resources and capacity - face challenges when assessing, disclosing and reporting on in-depth ESG data and sustainability issues, and as such, may face disproportionate burdens and report fewer disclosures compared to their large cap counterparts.
- These challenges should not be underestimated, because the narrow application of ESG metrics and criteria risks systematically excluding such companies from future sources of funding, undercutting their growth potential and undermining our sustainability journey as a whole.
- I know that quite a few of the institutional investors present here today actively consider small cap companies in their strategic asset allocations. To that end, guiding and encouraging smaller companies to embark on their own sustainability journeys must also be the collective moral imperative of institutional investors, moving forward.
- To put things into perspective, investors in the past typically make their investment decisions by going through research notes, observing quarterly numbers and attending annual general meetings in making their investment decisions.
- However, with the sustainability agenda in mind, these no longer suffice. Stewardship demands for investors to elevate their level of engagement with a purposeful two-way dialogue to meet the targeted objectives of the investee companies and, ultimately, their own.
- In fact, companies with poor governance and which generate negative impact on the environment and communities will quickly experience how swiftly markets react to their actions (or inactions) by pulling out their investments and placing them elsewhere.
- However, the reverse is also true. Just a few months back, a listed company that was served with a labour-related order from a major market saw its share price reduce. However, a week after the company announced remedial measures costing roughly about 80 million ringgit, its share price went up more than 25%, adding billions to its market capitalisation. For many of us who look at the bottom line, I am sure that this kind of outcome makes perfect commercial sense.
- So, the key takeaways from my speech today are simple: firstly, shape up on ESG or lose access to capital with a purpose, particularly when ESG assets are set to reach 53 trillion US Dollars by 2025. Secondly, in the spirit of fostering inclusivity in ESG, consider how you can facilitate and enable your investee companies’ sustainability journeys. We must embark on this journey together if we wish to achieve broad-based, meaningful prosperity for our nation. All of us are only alright if ALL of us are alright.
CLOSING REMARKS
Ladies and Gentlemen,
- Before I end, I wish to commend IIC for the hard work done in revising and ensuring the comprehensiveness of MCII 2022. All of you here, as market makers and participants, must play your role to speed up the nation’s ESG and sustainability journey.
- My hope is for the revised MCII to raise the bar on the signatories to proactively manage and report on their ESG-related investment activities.
- With that, dan dengan lafaz Bismillahirrahmanirrahim, I hereby launch the Malaysian Code for Institutional Investors 2022.
Wabillahi taufiq wal hidayah Wassalamualaikum warahmatullahi wabarakatuh
