Malaysia takes lead in developing, promoting SRI
The increasing awareness and demand for sustainable and responsible investing globally is creating significant opportunities for further growth of Islamic finance, in view of the commonalities in the principles and values underlying both segments.
KUALA LUMPUR: Malaysia, widely acknowledged as being in the forefront of Islamic finance, is taking the lead in promoting the sustainable and responsible investing (SRI) proposition based on its shared values with Islamic finance.
As part of initiatives to generate greater awareness on responsible investing, Securities Commission Malaysia (SC) and Bursa Malaysia Bhd (Bursa Malaysia) co-hosted the Responsible Investment Forum in Kuala Lumpur that was organised by United Nations-supported Principles for Responsible Investment (PRI).
Global SRI assets increased 25 per cent over the two years from 2014 to 2016 to US$22.9 trillion. The Global Sustainable Investment Review 2016 reported that Malaysia with 30 per cent share in Asia (ex Japan) is the largest SRI market in the region, as it recognises syariah-compliant funds as part of the SRI universe.
Speaking at the forum, Development & Islamic Markets of SC managing director Zainal Izlan Zainal Abidin said, “The increasing awareness and demand for sustainable and responsible investing globally is creating significant opportunities for further growth of Islamic finance, in view of the commonalities in the principles and values underlying both segments.”
He added that SC continues to facilitate development of products and services that meet the requirements of both SRI and Islamic finance to ensure the capital market serves the needs of investors and issuers.
Malaysia pioneered the development of the syariah-compliant SRI segment through the formulation of the SRI Sukuk framework by the SC in 2014.
The SC is currently developing a framework for SRI investment funds and these initiatives are part of SC’s developmental agenda to facilitate the creation of an ecosystem conducive for SRI stakeholders.
The push towards SRI has also been championed by Bursa Malaysia. It launched the FTSE4Good Bursa Malaysia Index in December 2014 that is aimed at profiling companies with good environmental, social and governance (ESG) practices.
The internationally benchmarked FTSE4Good Bursa Malaysia Index was the first ESG index to be launched in Asia and it initially comprised 24 constituents. It has since increased to 43, a testimony of the continued growth of ESG practices among corporates in Malaysia.
“Bursa Malaysia believes that there is a strong value proposition for companies to adopt, practice and report on sustainability in a meaningful manner,” Bursa Malaysia chief executive officer
Zainal Izlan Zainal Abidin, SC Development & Islamic Markets managing director
Datuk Seri Tajuddin Atan said. “By placing sustainability at the core of the market, Bursa Malaysia sets to enable a win-win situation for key players across the value chain, especially for our listed issuers and investors.”
Martin Skancke, PRI Board chair, who delivered the keynote at the forum commented that with interest in ESG growing rapidly, the event provided an opportunity for investors to build their knowledge and awareness of responsible investment, and to explore drivers, trends and practices.
“The PRI’s core mission is to promote responsible investing and encourage more widespread ESG integration. It is vital that investors become active owners across all the asset classes in which they invest,” he added.