Assalamu’alaikum warahmatullahi wabarakatuh. |
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Good morning, Yang Amat Mulia Tengku Zatashah Sultan Sharafuddin Idris Shah; |
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Good morning distinguished guests; |
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| 1. | It is a pleasure to be delivering the opening remarks for this conference on behalf of the Securities Commission Malaysia, and to also make an announcement. |
| 2. | First though, I would like to commend the SIDC and your partners for your efforts in putting together this conference. The conference theme “The Strategic Value of Sustainability”is in fact very closely aligned to our own efforts to develop a flourishing sustainable and responsible capital market ecosystem. Let’s spend a few moments to reflect on what the sustainable and responsible investment environment is like, at the moment. |
| 3. | As a result of the big changes that have taken place this year, social impact issues such as protecting jobs and livelihoods, have really been at the forefront. They have really come into focus. The pandemic, has not only affected business revenues, but also have highlighted just how much the companies need to pay closer attention to social and governance risks and it’s also likely to have accelerated the trend towards sustainable and responsible investment (SRI). |
| 4. | This is borne out in some of the recent statistics which you’re probably already familiar with. The global issuance of sustainable bonds reached almost 200 billion US Dollars during the first half of the year, that is up to almost half, of the same period last year1. Green bonds in particular, made up the bulk of those issuances at 40%, and social bonds also increased and now account for about one quarter (1/4) of that total. |
| 5. | Another statistic, within ASEAN, is the amount of ACMF-labelled sustainable bonds, that’s the ASEAN Capital Market Forum Bonds, which stands at about 5.5 billion US Dollars2. I am happy to note that Malaysia accounts for 27% of that. So, you can see from these figures, just how much growth there has been, and also how widespread the demand is, for capital market products that provide both financial and social returns. |
| 6. | So against that backdrop of the popularity, the importance of sustainable and responsible investment products, let us focus on what we are doing to advance those. |
| 7. | The Securities Commission strongly believes that capital markets play a critical role to ensure a better future for all. We are mobilising capital and investments towards sustainable and inclusive development, as well as bring much-needed transparency, financial discipline, and commercial accountability to the market. |
| 8. | With these outcomes in mind, we’ve formulated the five-year SRI Roadmap for the Malaysian Capital Market, which we launched that late last year. But the foundations for Malaysia’s SRI journey actually started much sooner - 6 years ago, in 2014 - with the introduction of the SRI Sukuk Framework and an Environmental, Social and Governance (ESG) Index. |
| 9. | So against that backdrop of both the environment, and our 6 years track record, I’d like to share our progress so far, in five (5) aspects, and they all start with i – issuers, investors, instruments, internal culture and the information architecture. |
| 10. | So first, to issuers, now the intention is to ensure a supportive fund raising environment for these green, social and sustainable issuances which I have already mentioned. And this involves embedding sustainability principles into the various frameworks and providing guidelines to attract prospective issuers, creating that certainty. This year, the focus is on initiatives to incorporate ESG, as part of company rankings and screening methodologies. And more details of these, will be made known as and when these initiatives are formalised. |
| 11. | In terms of sustainable fund raising in Malaysia, three new IPOs3 were listed on the stock market last year. Now as of July this year, around 5 billion Ringgit of Islamic bonds have been issued under the SRI Sukuk Framework. Our domestic credit rating agencies, have also demonstrated their willingness to provide the market with what they need, the ability to offer climate and sustainability-related ratings, and this will provide more confidence to issuances of such debt. |
| 12. | The SC also intends to raise awareness of alternative fund raising platforms, such as Equity Crowdfunding (ECF) and Peer-to-Peer (P2P) Financing, especially among Micro SMEs in green and social sectors. The aim is to provide them with more opportunities to raise capital for growth. |
| 13. | So, that’s what we have been doing for issuers. Now on to the instruments, our second objective is to expand the range of innovative SRI instruments. There has been growing demand for SRI funds, even at this challenging time. The SC has received four applications for qualified SRI funds and one qualified SRI fund has already been launched this year. |
| 14. | We are also exploring with market participants on suitable waqf or Islamic endowment investment structures to channel funds for social impact ventures. Given its appeal in meeting social outcomes, we strongly believe this is the sort of asset type that can really prosper at this time. |
| 15. | In terms of investor interest, our GLICs4 have recently signalled their willingness to embrace ESG principles, which really highlights the importance of ESG in their investment decisions. This of course demonstrates the readiness of domestic institutional investors to step up and lead the SRI agenda from the top, from those Government-Linked Investment Companies. |
| 16. | The influence of key shareholders in driving corporate social obligations and sustainability, when it comes from the top, is going to attract more like-minded investors and grow our SRI investor base. |
| 17. | So I’ve covered 3 of the 5i’s. The fourth is internal culture. We need to encourage a strong culture centred on sustainability. The pandemic has shone a light on board and management preparedness for social and governance risks and in some cases, non-financial issues have an actual material financial implications to the business. |
| 18. | Hence, I would like to reiterate my call from earlier this year for boards to be ready and equipped to not only steer their companies through this period of uncertainty, but to embed long-term resiliency in their organisations, and that’s where this internal culture is so important. |
| 19. | Finally, but also importantly, an effective ecosystem requires, a comprehensive information architecture. In other words, we need to be, using the correct term. We need to make the taxonomy on SRI, common. We need to make sure that it infuses to all of our communication to promote the development of this asset class. It calls for an approach that places emphasis on knowledge and technical competence. |
| 20. | So those are the 5i’s. Now, this year two SRI centres of excellence have already been established. The first initiative is a collaboration between Capital Markets Malaysia and the Global Compact Network Malaysia to reinforce sustainable practices in the private sector. The second SRI centre is the Malaysian Sustainable Finance Initiative (MSFI), an initiative with the UK government that will provide capacity building programmes and an online repository for green and sustainable finance. Both of these efforts are timely to raise awareness and deepen market participants’ knowledge base. |
| 21. | That brings me to the announcement I promised, at the beginning of my address. To complement these efforts, I am pleased to announce that the Securities Commision Malaysia will set up a dedicated SRI Centre in collaboration with the Bond and Sukuk Information Exchange (BIX). |
| 22. | This SRI Centre is part of the SRI Roadmap recommendations that we set out the 5-year plan and it will enhance transparency and access to information on ringgit-denominated SRI bonds and sukuk. It will provide comprehensive and up-to-date information from a single source, to all market participants as well as the general public. And this SRI Centre, that I am announcing today will be publicly available starting today. |
| 23. | Ladies and gentlemen, In summary, looking forward, it goes without saying that shaping a competitive and thriving SRI market ecosystem in Malaysia will of course not be easy. It will require the commitment and cooperation of all stakeholders. We must all remain focused on those 5i’s that I have mentioned at the outset - issuers, investors, instruments, internal culture and the information architecture. The SC of course encourages and looks forward to market-driven solutions, including greater use of technology and digital tools. |
| 24. | So in the words of Benjamin Franklin, “An investment in knowledge pays the best interest.” I urge all of you to generate the best return on your investment, and wish all of you a productive conference ahead. |
| Thank you. | |
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