SC: Innovation is key to serve the needs of investors in sustainable, responsible investment

KUALA LUMPUR: Innovation is the key in enabling the asset management industry to serve and meet the needs of investors seeking Sustainable and Responsible Investment (SRI), said Securities Commission Malaysia (SC) deputy chief executive Datuk Zainal Izlan Zainal Abidin.

He said asset managers can and should continue to offer more sustainability-linked products that cater to different risk-return profiles of investors -- institutional and retail as well as high net worth individuals across different asset classes.

“Given the significant commonalities in the principles underlying Islamic and sustainable investing, innovation in product development can generate solutions that cater to both segments,” he said during a virtual presentation on day three of the Sustainable Finance Week at the Expo 2020 Dubai.

Zainal Izlan said there are clear benefits for both shariah and environmental, social and governance (ESG) criteria to be incorporated into product structures as these can be offered to a wider investor base.

He said other initiatives such as index construction can facilitate further growth of sustainable investing.

“Relevant indices provide useful benchmarking information and also enable product development such as exchange-traded funds,” he said.

He said that achieving the desired outcomes in growing sustainable investments requires the collaboration of multi stakeholders.

“The asset management industry is a key component of the ecosystem, but achievements would require the collective participation of other stakeholders such as shariah advisers, rating agencies, data providers, and others.

“At the same time, cooperation between industry and regulator is critical to ensure development is facilitated while preserving market integrity,” he said, adding that the collaboration across borders is also important to further broaden the sustainable investment market.

He said the assets under management of Principles for Responsible Investment (PRI) signatories had grown to US$121.3 trillion in March 2021 from US$81.7 trillion in 2018.

The number of PRI signatories had increased to 3,826 as at March 2021, compared to only 1,951 just three years before.

“Underpinned by the commitment to integrate ESG criteria into their investment processes, these asset managers and potentially many others may be the catalyst to move the needle towards achieving a carbon-neutral world by 2050,” he added.