RAM: Malaysia evolving into sustainable responsible investment hub

PETALING JAYA: Malaysia is evolving into a sustainable responsible investment (SRI) hub, supported by its prominent global presence in Islamic finance, according to RAM Ratings.

“The proactive efforts and strong commitment of Bank Negara Malaysia, Securities Commission Malaysia (SC) and Bursa Malaysia have paved the way for both responsible and green finance to thrive in Malaysia,” the rating agency said in a statement.

According to data from the SC, six SRI or green bond and sukuk programmes – with a cumulative value of US$1.02 billion (RM4.14 billion) – were issued between July 27, 2017 and April 27, 2018.

RAM said the SRI market is also bolstered by the growing number of domestic and international investors that are actively engaging with corporates on environment, social and governance (ESG) issues.

“Increasingly more investors are factoring ESG into their analysis as part of best practices, and this is driving demand for SRI,” RAM deputy CEO Promod Dass said.

The rating agency noted that this trend is evident from the rise in the number of signatories to the United Nations-supported principles for responsible investment (PRI), from only 63 as at April 2006 to 1,961 as at endApril 2018.

“This global swell in PRI signatories translates into a surge in assets under management (AUM), from US$6.5 trillion to US$81.7 trillion over the same period.”

RAM also highlighted that Khazanah Nasional Bhd and government pension fund KWAP became PRI signatories on Feb 1, 2017 and Feb 7, 2018, respectively.

“The world’s largest pension fund, i.e. Japan’s Government Pension Investment Fund (GPIF) that is also a PRI signatory, has allocated US$8.9 billion of funds to SRI; this represents about 3% of GPIF’s portfolio of Japanese stocks.

“The GPIF (which has US$1.4 trillion AUM) also indicated that in the medium term, the fund could increase its investment in companies with commendable ESG practices,” it added.