Opening Keynote 2 at GO ESG ASEAN Conference 2021 - Driving Corporate Governance within Malaysia’s ESG Landscape
24 November 2021  |   By Foo Lee Mei, Managing Director, Securities Commission Malaysia

Opening Keynote 2
Driving Corporate Governance within Malaysia’s ESG Landscape

24 November 2021 (Day 1) | 9.20am-9.30am | Virtual via Streamyard

Distinguish guests, delegates, ladies and gentleman,

1. Good morning, I hope everyone is keeping well and safe.
2. Firstly let me thank the United Nations Global Compact (UNGC) for inviting the SC to deliver the second opening keynote this morning.
3. I would like to commend UNGC for organising this conference at such an opportune time and the 700 over participants who have signed on today. I am truly encouraged by your interest and commitment in ESG and sustainable development.
  Ladies and gentleman,
4. The recently concluded UN Climate Change Conference (COP26), revealed that existing plans on cutting gas emissions by 2030, known as nationally determined contributions (NDCs) were inadequate. According to new analysis, the world is on track to achieving a disastrous level of global heating of 2.4°C by the end of this century.
5. There is an urgent call for action by all. In the next 10 minutes, I would like to share with you the SC’s perspectives on this issue and interventions to accelerate ESG fitness of boards.
6. There are multitudes of stakeholders who must step up their commitment and take action; however at the heart of corporate governance lies the role of the board. What does good looks like for boards and listed companies?
7. To illustrate the answer to this question, I would like to use 3 symbols which all, if not most of you are familiar with of late – the triangle, the square and the circle (in that order). While obviously leveraging on the popularity of these symbols in the Squid Game - but nope, we are not discussing the plot in “Ojingeo Geim” today.
  This is the formula of triangle + square = Circle

Ladies and gentlemen

8. The deeper symbolic meaning of a triangle is enlightenment, revelation or a higher perspective. The triangle is also said to direct energy and power in the direction which it points.Thus, the first step a director must take in achieving ESG fitness is to acquire knowledge, comprehend the meaning and scope of ESG and collectively with other board members identify ESG strategies and risks affecting the company.
9. The 2020 Harvard Business Review highlighted that while 56% of boards thought that they were spending too much time on sustainability, they were in fact merely consumed by compliance tasks instead of building strategies. Thus, to accelerate the ESG fitness momentum, SC will introduce capacity-building programs for boards (Leading for Impact program) to strengthen boards’ knowledge and technical know-how in addressing sustainable risk and opportunities.
10. Since at the heart of corporate governance lies the role of the board (as I mentioned earlier), the board’s composition is also critical in ensuring that the company is able to navigate through new challenges, remain competitive and implement strategies to meet investors’ expectation.
11. Thus, I would like to reiterate that a well-diverse board is needed in order to enhance the quality of the board’s deliberation and decision-making. By diversity, I mean - age, experience, ethnicity and gender. All else remaining equal, McKinsey’s 2019 studies have shown that companies in the first quartile for gender diversity are 25% more likely to have above average profitability than companies in the fourth quartile. Despite the clear empiricall evidence showing the causality of gender diversity on boards and achievement of above average profitability, there are still 252 listed companies on Bursa Malaysia with all male boards.
Ladies and gentlemen,
12. Let me move to the square. The symbolic meaning of the square revolves around dependability, balance, grounding and direction. The square has also been said to be a symbol that people trust as the straight lines forming the square shows stability.
13. After comprehending the importance of embracing ESG, it is time for the board to ensure that the strategies are implemented to provide a solid foundation for sustainable growth. A company grounded in good corporate governance will exhibit ethical and sustainable business practices and is often trusted by its customers and stakeholders. Thus, the famous Milton Friedman’s quote that “the business of business is business” has long been discarded as company leaders begin to embrace concepts of sustainability and corporate responsibility as trust deficit of business grew with the rise in corporate scandals.
14. To my mind, transparency is key, as it is the most effective tool for building trust. In this regard, over the last few years, the SC has employed machine-learning capabilities to track and analyse the quality and transparency of corporate governance reportings by listed companies. We do see encouraging improvements in the quality of disclosures with a 12% increase in scores on areas such as how remuneration of boards and senior management are determined and the process adopted by the board in identifying board candidates. I urge all boards to review their engagement strategies and enhance the quality of their disclosures – focusing not on quantity but quality of information.
Ladies and gentlemen
I now come to my concluding paragraph – focusing on the circle.
15. As we are all aware, the Covid 19 pandemic has fuelled the rise of conscious consumerism. As a result, we see large number of companies committing to achieving net-zero or carbon neutral, pledging reduction in greenhouse gas emission and investing in climate action.
16. The circle in the equation symbolizes totality and wholeness. The fact that it has no sides signals something on going or infinite. This state of being, should be what good looks like for business of the future – (a) where businesses reflect on their impact on the world, (b) they reflect on how their business model is alligned with societal needs and (c)they are conscious of the need for economic inclusion.
17. Our recent review of sustainability statements of 40 listed companies for the 2020 reporting period (30 large and 10 mid-small cap companies accounting for60% of Bursa Malaysia’s market capitalization) shows that while these companies have scored highly in terms of compliance with disclosure requirements, only 19 companies identified climate – related considerations as material.
18. Moving forward, a sustainability reporting framework to drive more quality disclosures and enhance transparency will be put in place. In the short and medium term, we do expect greater acceleration in listed companies’ focus on climate considerations, in particular, decarbonisation efforts, as Malaysia strives towards becoming a carbon neutral nation by 2050.
  Ladies and gentlemen,
19. Malaysia’s journey in building a holistic corporate governance ecosystem since 2 decades ago is almost complete; with robust corporate governance principles made applicable to all financial and capital market intermediaries as well as public listed companies. This success would not have been possible without the close collaboration between the regulators, the private sector, CG stakeholders and recently, with the public sector. The PERKUKUH initiatives launched recently, by the Malaysian Government will see the streamlining and adoption of good governance practices amongst the Government Linked Investment Companies (GLICs).
20. The SC is optimistic that good corporate governance will prevail if all stakeholders come together to promote and demand good governance practices; if I may repeat, demand good governance.
21. As I end I would like to quote what Rohini Nilekani(founder of Arghyam Foundation – NGO that focuses on water and sanitization issues in India) once said,
  “We cannot be mere consumers of good governance; we must be participants; we must be co-creators”
22. With that let me wish you a productive session ahead. Thank you.
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