KWAP targets ‘sustainable’ companies

CEO: RM2bil invested in assets with environmental, social and governance factors

KUALA LUMPUR: The Retirement Fund Inc (KWAP), which has almost RM125bil in assets under management (AUM) is targeting companies with a “sustainable” long-term strategy that incorporates environmental, social, and governance, or ESG factors.

Chief executive officer Datuk Wan Kamaruzaman Wan Ahmad said KWAP has invested more than RM2bil of its AUM into ESG-related assets.

“Last year, we expanded our ESG investment initiative by allocation US$200mil in two global asset management companies.

“We also outsourced more than RM1.5bil into four local asset management houses since 2014,” he told reporters recently.

The strong focus on ESG-related assets by KWAP is a result from significant global institutional investors like BlackRock and Vanguard who are taking a longer view of company performance.

Last month, BlackRock chief executive officer Laurence Fink posted a letter to CEOs, cautioning them that the world’s largest asset manager won’t support companies that fail to make positive contributions to society.

“A company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process,” Fink wrote.

In October last year, a McKinsey & Co study found that asset managers no longer consider ESG a niche strategy.

Wan Kamaruzaman pointed out that ESG- focused investments can deliver superior returns and bodes well with KWAP strategy in terms of long-term value creation.

“Over the years, we have been transforming KWAP from just an investor into a responsible investor.

“This is not just because stakeholders’ expectation but the expectation of future generations,” he said.

In 2017, the FTSE4Good Bursa Malaysia Index, which comprises 44 listed companies, grew by 17.6% year-on-year compared with a 9.5% increase of the benchmark index FBM KLCI.

The size of ESG-linked stocks on Bursa Malaysia, tracked by FTSE4Good index, has a market capitalisation of RM502.6bil, which is almost half of the FBM KLCI market capitalisation of RM1.14 trillion.

The FTSE4Good index has been designed to identify Malaysian companies with recognised corporate responsibility practices.

Among the companies that are listed on the FTSE4Good index are Tenaga Nasional Bhd, Malayan Banking Bhd, CIMB Group Holdings Bhd and Public Bank Bhd.

Additionally, Wan Kamaruzaman said KWAP has undertaken engagement initiatives on the ESG issues with its investee companies.

“Last year, we visited 27 companies to ask them to adopt certain practices,” he said.

He said the greater focus on ESG investments among institutional investors would prompt more listed companies to focus on sustainable long-term growth.

“We hope to see more companies, especially from the plantation sector, to be included in the FTSE4Good index, as they form one of the biggest industry in Malaysia,” he said.