Taking Malaysian capital markets closer to sustainability

Introduction of SRI taxonomy to provide clarity on metrics and thresholds to capital market participants

PETALING JAYA: The introduction of a sustainable and responsible investment (SRI) taxonomy will take Malaysian capital markets another step closer to full sustainability, according to the Securities Commission (SC).

SC chairman Awang Adek Hussin said the taxonomy would facilitate the identification and classification of various types of economic activities that were aligned with environmental, social and governance (ESG) objectives.

“This will ensure transparency for capital market participants on what constitutes being sustainable,” he added at the SC-Securities Industry Development Corporation (SIDC) SRI Taxonomy: Insights and Implementation conference here today.

Awang Adek said sustainable and responsible investment would present a significant opportunity for growth for the capital markets.

He said the taxonomy’s environmental component was aligned with the Asean standard as well as Bank Negara Malaysia’s climate change and principle-based taxonomy.

Awang Adek expressed hope the SC’s effort to provide details of individual components of the taxonomy would boost Malaysia’s appeal and attract more investors that place a premium on sustainable practices.

“On the part of the SC, we hope that the SRI taxonomy will encourage the development of new products and opportunities, (that are aligned with our objectives,)” he said.

Awang Adek said this would ensure that the capital market continued to meet the growing demand for sustainable investments in Malaysia.

Malaysia is one of the Asian nations at the forefront of the effort to introduce guidelines for sustainable finance.

The SC first introduced its guidelines for SRI funds in 2017, with funds amounting to RM7 billion.

Moving forward Awang Adek said the SC would be working on the next phase of the SRI taxonomy, to provide further guidance in identifying activities based on comprehensive metrics and thresholds.