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Introduction

Bursa Malaysia has always advocated sustainability as key to business success today. A holistic approach to business management, incorporating economic, environmental, social and governance considerations alongside financial ones, will serve as a sound business model that supports business continuity and long term value creation for stakeholders and society at large.

Trends in Sustainability Reporting and Investment

Trends in Sustainability Reporting and Investment

Sustainability Reporting Frameworks

'Sustainability reporting' is a broad term used to describe reporting on economic, environmental, and social impacts, risks and opportunities. Sustainability reporting has gone through transformation over a period of time; from Corporate Responsibility Reports to Corporate Social Responsibility Reports, Sustainability Reports and more recently, Integrated Reports.

A unifying factor in the latest form of reporting is the focus on material issues to provide meaningful and strategic reporting. Leading sustainability reporting frameworks such as Global Reporting Initiative (GRI) G4 Guidelines, Integrated Reporting (<IR>) and standards by Sustainability Accounting Standards Board (SASB) have slightly different definitions of materiality. However, any one of them may be used as a guide to begin the journey on sustainability reporting.

Trends in Sustainability Investment

Sustainability investment is also increasing globally and it has been largely driven by demand from a range of institutional and retail investors, with a majority driven by client demand.

The 2014 Global Sustainable Investment Review found that, from 2012 to 2014, the global sustainable investment market:

While the sustainable investment market in most regions is dominated by institutional investors (87%), there is growing interest from retail investors (13%) globally.

In Asia, socially responsible investment has grown by 32% over this period. However, it still only represents a small proportion of total managed assets (0.8%). This indicates there is large potential for sustainable investment and investors are showing an increasing concern for environmental and social challenges. In a survey of asset owners and asset managers in Asia, there were no respondents that stated that ESG risks have little or no impact on financial performance. They noted that barriers to further adoption are likely to be resource driven or technical (e.g. lack of disclosure) as opposed to stemming from a belief that ESG risks do not matter.

Sustainability-related Indices

We are also seeing an increasing number of sustainability indices developed under the Dow Jones Sustainability Indexes series (“DJSI”), FTSE4Good, Ethibel Sustainability Index and MSCI Environment, Social and Governance Indices series in many countries.The DJSI are the first global indices established to track the financial performance of sustainability-driven companies. Sustainability portfolios are managed using reliable and objective benchmarks based on the cooperation between the Dow Jones indices, STOXX Limited and Sustainable Asset Management. At present, the DJSI has launched the DJSI Asia Pacific, DJSI Asia Pacific 40 and DJSI Japan 40, DJSI Korea, and the DJSI Korea 20 in Asia.

The FTSE4Good Indices were launched in 2001 and these indices are established within FTSE's responsible investment range. Companies are selected based on how well they manage their environmental and social risks, using criteria that incorporate globally recognised sustainability standards. For further information on the criteria, please refer to FTSE4Good Bursa Malaysia Index.

Stock Exchanges' Efforts in Promoting Sustainability Reporting

Globally, disclosures on sustainability have been strongly driven by legislation as well as the efforts of stock exchanges. Several stock exchanges have been requiring or encouraging their listed issuers to provide sustainability-related disclosures.

The Sustainable Stock Exchanges (SSE) is an initiative aimed at exploring how exchanges can work together with investors, regulators, and companies to enhance corporate transparency, and ultimately performance, on economic, environmental and governance issues and encourage responsible long-term approaches to investment. The SSE is co-organised by the United Nations Conference on Trade and Development, the United Nations Global Compact Office, the United Nations-supported Principles for Responsible Investment and the United Nations Environment Programme Finance Initiative.

Bursa Malaysia joined the SSE as a partner exchange in May 2015.

WEF Global Risks Map