Of sustainability within O&G
THE Covid-19 pandemic has shifted investors’ focus towards environmental, social and corporate governance (ESG) in a heightened bid to enhance visibility, transparency and accountability for Corporate Malaysia.
The country has made great strides in this respect. Bursa Malaysia was one of the earliest bourses in the region to introduce an ethical investment stock market index in the FTSE4Good Bursa Malaysia Index back in 2014.
The index supports investors in making sustainable investments in local public-listed companies, and currently has 75 constituents as of end-2020, compared to 24 in 2014.
Meanwhile, in December 2019, the Securities Commission Malaysia released its Sustainable and Responsible Investment (SRI) Roadmap for the Malaysian capital markets, aimed at creating an SRI ecosystem and charting the role of the capital markets in driving sustainable development.
Corporate Malaysia is not one to be left behind. In fact, Malaysia ranks among the top leading countries when it comes to sustainability reporting.
KPMG in a December 2020 survey revealed that 99 of the top 100 companies in Malaysia publish sustainability reports, just behind Japan (100) and ahead of other regional peers such as India (98), Taiwan (93), and Australia (92).
The survey, titled International Survey of Sustainability Reporting 2020, also found that 97 of the top 100 companies in Malaysia included sustainability information in their annual reports.
“While Malaysia’s high inclusion rate of sustainability
data in annual reporting is driven by Bursa Malaysia, we see this active participation from Malaysian top companies to be an encouraging sign, which sets the tone and example for other jurisdictions to follow,” said KPMG Malaysia’s head of governance and sustainability Kasturi Nathan, in a statement accompanying the survey findings.
“In fact, we’ve observed a
growing understanding amongst Malaysian boards and companies on the importance of operating in a responsible manner and the impact of ESG issues on society and economic sustainability which directly correlates to longterm financial performance and corporate value.”
But we’re not stopping there. The Securities Commission continuously updates its Malaysian Code on Corporate Governance (MCCG), the latest being the issue of longserving independent directors in Malaysian public listed companies (PLCs) as a concern.
As at March 31 this year, 434 independent directors have served their respective boards for more than 12 years; of these, 49 have served on the same board for over 20 years.
“To encourage periodic refresh of board composition, the MCCG recommends that
the two-tier voting process be implemented for reappointment of independent directors with tenures of more than nine years,” the commission said in a statement.
“The two-tier voting process which was first introduced in 2017, acts as a speed bump for boards and shareholders to carefully evaluate the decision to retain independent directors with tenures of more than 12 years and provide minority shareholders the opportunity to vote against such retention in the second-tier voting process.”
The latest additions to MCCG 2021 took effect immediately upon its announcement on April 28 this year, and the first batch of companies to begin reporting on their adoption of these practices will be those with financial years ending December 31, 2021.
The two-tier voting process
will be applicable for resolutions tabled at general meetings held on or after Jan 2, 2022, it said in a statement.
The 2021 update focused on, among others, board policies and practices on the selection and nomination criteria for directors, and further guidance for practices with low levels of adoption as reported in the SC’s annual Corporate Governance Monitor reports.
The MCCG 2021 also focuses on the role of the board and senior management in addressing sustainability risks and opportunities of the company.
The last update of the MCCG was in 2017 and the SC has observed encouraging adoption of the Code by listed companies since then, with the majority of the best practices recording adoption levels of over 70 per cent.