Hopes Malaysia can lead in ESG investments in the region
Malaysia targets increasing renewable energy capacity from 25% to 40% by 2035
The Malaysian Research Accelerator for Technology and Innovation (Mranti) announced its commitment to being the country’s first carbon-neutral innovation park by 2035. At the organisation’s flagship I-Nation conference, Chang Lih Kang, minister…Continue Reading
Lakme Fashion WeekAt last month’s Lakmé Fashion Week in India, conversations about making fashion more sustainable took centre-stage. But are the country’s designers ready for this?
The four-day event – organised jointly by beauty company Lakmé, billionaire Mukesh Ambani’s Reliance Brands and the Fashion Design Council of India (FDCI) – is one of Indian fashion’s biggest highlights.
While it had all the essential ingredients – glittering catwalks, clinking wine glasses and fashionistas in the front row – what grabbed eyeballs was a competition encouraging young designers to use eco-friendly materials to create outfits.
The event is part of a wider ambition among Indian designers aiming to make sustainability the driving factor of their businesses.
Many say they are trying to shrink their brands’ environmental footprint – some are completely shifting to reusable materials, experimenting with fabrics made from used carpet or agricultural waste and eco-prints of plants and flowers. But experts say a lot more needs to be done, given the magnitude of the challenge.
India’s fashion industry is expected to grow at a staggering rate to reach $115-125bn by 2025, making it an important player on the global stage. Like elsewhere, it’s the fast fashion market which is blamed for incurring maximum damage but experts say some of the responsibility also lies with the luxury segment.
More so since this segment has been growing rapidly in recent years, propelled by an emerging crop of young Indians with higher disposable incomes.
“Big designers have fashion shows every year and new collections every season, which means they too are creating clothes at a constant pace,” says Pooja Singh, fashion and luxury editor at Mint Lounge newspaper.
So increasingly, the industry is facing repeated allegations of hypocrisy – of causing too much damage and doing very little to combat it. Critics say Indian designers sometimes use terms such as sustainability and eco-friendly for marketing campaigns without actually practising what they preach. Some designers reject the accusation, but other industry insiders agree it is a serious challenge.
Jaspreet Chandok, group vice-president of Reliance Brands which has invested heavily in the luxury market in recent years, says there’s no simple answer to how luxury fashion can tackle climate change because everything is “work in progress”.
“But what we do bring to the table are innovative materials and technologies to bridge the gap between luxury and sustainability,” he says.
Implementing these changes, he says, will take time, and the solution cannot be to ask people to stop making or buying new things. “After all, the industry allows people to express themselves and brings so much joy. It also provides employment to millions of workers.”
While sustainability is often seen as only related to the environment, in the Indian context, it should also include improving the working conditions of artisans who form the backbone of the fashion market. Some of the biggest names on the runways of Paris and Milan quietly rely on these highly-skilled workers to produce their fabulous hand-made outfits and India is one of the largest exporters of garments and textiles at $44.4bn.
But there have been allegations that they work in exploitative conditions, a trend which critics say has continued under Indian labels. In 2020, The New York Times reported that one of India’s best-known designers was facing legal action from workers over unpaid wages.
Mr Chandok, however, says that a lot has been done to tackle the problem and workers are receiving better pay and opportunities. But labour unions have said that there is still a long way to go before fair working conditions are achieved.
Ms Singh says that making fashion sustainable is a complicated process and there are no straight answers for the best way to achieve it. “The simple solution would be to produce less but in the end, it’s a business with jobs of millions tied into it.”
Using eco-friendly clothing is also not a silver-bullet solution. Fabrics like recycled polyester and those made from wood pulp have a lower carbon footprint, but they too have an environmental cost as their production could lead to deforestation, Ms Singh says.
The onus, she says, also lies on consumers to make mindful choices.
Things have changed a little after the Covid-19 pandemic with more people becoming mindful of protecting the environment and making sustainable choices, including when it comes to fashion.
The industry has already started responding to this changing trend – FDCI chairperson Sunil Sethi says many designers are choosing to focus on one collection a year instead of seasonal ones. Even celebrities are embracing the idea of pre-loved clothing and repeating outfits.
The process is slow but, he says, every step is a way forward.
Mr Sethi says that designers have also found new ways of defining luxury, where the focus is not on creating more but less.
He calls it “slow luxury”, or garments that are crafted by hand, slowly and methodically, to create ensembles that outlive seasonal trends, almost like an heirloom that can be handed down from one generation to another.
That’s exactly the sort of fashion that renowned Indian designers Abraham and Thakore are known for.
Called the “quiet revolutionaries” of the fashion world, the designers are credited with reinventing Indian couture by experimenting with eco-friendly fabrics, while staying rooted in traditional textiles and crafts.
“It’s simple – short-term trend is just not the solution to anything,” Mr Thakore told the BBC.
“When you create something unique and signature, it automatically becomes non-disposable. And it’s not just fashion, it applies to everything.”
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Impact investing is gaining in popularity across the globe, but a lack of harmonised environmental, social and governance (ESG) data, regulations and standards pose barriers to its development in Asia, a BNP Paribas survey suggested.
“Asia Pacific (Apac) is behind Europe, which has already integrated broader ESG topics such as inequalities and biodiversity. But it is ahead of North America which is highly fragmented over this topic,” Jules Bottlaender, Apac head of sustainable finance at BNP Paribas (securities services), told FinanceAsia.
So far 41% of global investors recognise a net zero commitment as their priority, while in Apac, 43% have set a due date to achieve net zero targets, according to the survey.
The global survey, titled Institutional investors’ progress on the path to sustainability, looked into how institutional investors across the globe are integrating their ESG commitments into implementation.
It gathered data from 420 global hedge funds, private capital firms, asset owners and asset managers between April and July 2023. Among them, 120 (28.6%) are from Asia Pacific (Apac) markets including China, Hong Kong, Singapore and Australia.
Impact investing
Impact investing, a strategy investing in companies, organisations and funds generating social and environmental benefits, in addition to financial returns, is a global trend that in the next few years, is set to overtake ESG integration as the most popular ESG strategy, the report revealed.
Globally, ESG integration dominates 70% of investors’ ESG investment strategies, but the proportion is expected to drop by 18% to 52% over the next two years. In contrast, 54% of respondents reported a plan to incorporate impact investing as their primary strategy by that time.
European investors have the greatest momentum in adopting impact investing at present, with 52% employing impact investing. While in the four markets in Apac, the proportion stood at 38%.
Negative screening took a lead as a major strategy of 62% investors surveyed in Apac. In the next two years, the figure is set to shrink to 47%, overtaken by 58% estimating to commit to impact investing.
“Impact investing is a rather new concept for most people [in Asia]. It is driven by the need to have a clear and tangible positive impact,” Bottlaender said.
An analysis from Invesco in March 2023 pointed out that while impact assessment is key to a measurable outcome of such investments, clear and consistent frameworks are required to avoid greenwashing acts.
“There is no singular standard for impact assessment,” the article noted. On the regulatory side, specific labelling or disclosure requirements dedicated to impact investing have yet to come in Asia.
Private markets, including private debt, private equity and real assets, will take up a more sizeable share of impact investing assets under management (AUM), it added.
Bottlaender echoed this view, saying that current regulatory pressure in Asia “is almost all about climate”. As a result, Asian investors’ ESG commitments are mostly around climate issues such as including net zero pledges and coal divestment. These are coming before stronger taxonomies and broader ESG regulations which are set to be finalised over the next few years.
Data shortage
A lack of ESG data is one of the greatest barriers to investors’ commitments, as respondents to the survey reported challenges from inconsistent and incomplete data. The concern is shared by 73% of respondents across Apac, slightly higher than a global average of 71%.
Bottlaender explained that although mandatory reporting of climate data is adopted in certain regulations, a majority of ESG data is submitted voluntarily.
This leads to a fragmentation and inconsistency of sources based on the various reporting standards they adhere to. Moreover, the absence of third-party verification results weighs on the accuracy and reliability of the data provided, he continued.
He shared that investors are either engaging directly with companies to encourage standardised reporting practices, or relying on data providers, or leveraging technology to carry out quality control to address the lack of ESG data.
But “significant gaps persist, especially concerning private companies and aspects like scope 3 emissions.”
“As a result, investors must be extremely cautious when advancing any ESG claim or commitment,” he warned.
¬ Haymarket Media Limited. All rights reserved.
Impact investing is gaining in popularity across the globe, but a lack of harmonised environmental, social and governance (ESG) data, regulations and standards pose barriers to its development in Asia, a BNP Paribas survey suggested.
“Asia Pacific (Apac) is behind Europe, which has already integrated broader ESG topics such as inequalities and biodiversity. But it is ahead of North America which is highly fragmented over this topic,” Jules Bottlaender, Apac head of sustainable finance at BNP Paribas, told FinanceAsia.
So far 41% of global investors recognise a net zero commitment as their priority, while in Apac, 43% have set a due date to achieve net zero targets, according to the survey.
The global survey, titled Institutional investors’ progress on the path to sustainability, looked into how institutional investors across the globe are integrating their ESG commitments into implementation.
It gathered data from 420 global hedge funds, private capital firms, asset owners and asset managers between April and July 2023. Among them, 120 (28.6%) are from Asia Pacific (Apac) markets including China, Hong Kong, Singapore and Australia.
Impact investing
Impact investing, a strategy investing in companies, organisations and funds generating social and environmental benefits, in addition to financial returns, is a global trend that in the next few years, is set to overtake ESG integration as the most popular ESG strategy, the report revealed.
Globally, ESG integration dominates 70% of investors’ ESG investment strategies, but the proportion is expected to drop by 18% to 52% over the next two years. In contrast, 54% of respondents reported a plan to incorporate impact investing as their primary strategy by that time.
European investors have the greatest momentum in adopting impact investing at present, with 52% employing impact investing. While in the four markets in Apac, the proportion stood at 38%.
Negative screening took a lead as a major strategy of 62% investors surveyed in Apac. In the next two years, the figure is set to shrink to 47%, overtaken by 58% estimating to commit to impact investing.
“Impact investing is a rather new concept for most people [in Asia]. It is driven by the need to have a clear and tangible positive impact,” Bottlaender said.
An analysis from Invesco in March 2023 pointed out that while impact assessment is key to a measurable outcome of such investments, clear and consistent frameworks are required to avoid greenwashing acts.
“There is no singular standard for impact assessment,” the article noted. On the regulatory side, specific labelling or disclosure requirements dedicated to impact investing have yet to come in Asia.
Private markets, including private debt, private equity and real assets, will take up more sizeable share of impact investing asset under management (AUM), it added.
Bottlaender echoed this view, saying that current regulatory pressure in Asia “is almost all about climate”. As a result, Asian investors’ ESG commitments are mostly around climate issues such as including net zero pledges and coal divestment, before stronger taxonomies and broader ESG regulations which are set to be finalised over the next few years.
Data shortage
A lack of ESG data is one of the greatest barriers to investors’ commitments, as respondents to the survey reported challenges from inconsistent and incomplete data. The concern is shared by 73% of respondents across Apac, slightly higher than a global average of 71%.
Bottlaender explained that although mandatory reporting of climate data is adopted in certain regulations, a majority of ESG data is submitted voluntarily.
This leads to a fragmentation and inconsistency of sources based on the various reporting standards they adhere to. Moreover, the absence of third-party verification results weighs on the accuracy and reliability of the data provided, he continued.
He shared that investors are either engaging directly with companies to encourage standardised reporting practices, or relying on data providers, or leveraging technology to carry out quality control to address the lack of ESG data.
But “significant gaps persist, especially concerning private companies and aspects like scope 3 emissions.”
“As a result, investors must be extremely cautious when advancing any ESG claim or commitment,” he warned.
¬ Haymarket Media Limited. All rights reserved.
The Joint Committee on Climate Change ( JC3 ) of Malaysia met last month to discuss working together to improve the financial sector’s ability to develop climate resilience. & nbsp,
According to a spokesperson for Bank Negara Malaysia( BNM ),” sustainable assets are gaining momentum in Malaysia with key investment styles built around the need for accelerating sectoral transition and climate resilience, such as energy transition, circular economy, food security, and freedom change.”
The JC3 board was established in September 2019 to ensure a cogent approach to ESG initiatives, with its founding serving as” great testimony” to how proponents of Malaysia’s capital markets intend to work closely to improve sustainability practices in Malaysia, according to Angelia Chin – Sharpe, CEO of BNP Paribas Asset Management, which operates in Southeast Asia.
Its members include representatives of the market’s central bank, BNM, capital markets regulator, Securities Commission Malaysia ( SC ), stock exchange, Bursa Malaysia, and 21 other financial industry players, including Chin-Shawni at BNP AM, insurance companies Allianz, Swiss Re and Zurich, as well as banks like RHB Islamic and CIMB.
The committee outlined five initiatives at the meeting that” emphasise the crucial part of the banking sector in enabling a lasting plan” with the goal of expediting the economy’s low-carbon practices. A pilot project to switch industrial parks and their operational infrastructure to low-carbon practices was one of these, along with three data-related initiatives and a RM1 billion($ 0.210 million ) guarantee to provide funding to smaller market players to support their ESG agendas. & nbsp,
The BNM spokesperson stated to FA that one of the goals of” Ekonomi Madani” is to encourage Malaysia’s green growth in the direction of climate resilience. This goal aims to put Malaysia on a strong development path by realizing and addressing key national issues.
There are numerous opportunities for industry players, including international investors, to achieve the National Energy Transition Roadmap ( NETR ) targets set for 2050, she said.
Energy efficiency( EE ), renewable energy( RE ), hydrogen, bioenergy, and green mobility and carbon capture, utilisation and storage( CCUS ) are the six energy transition levers that Malaysia’s NETR identifies as its ten flagship projects. These are anticipated to catalyze and quicken the market’s energy transition, reduce greenhouse gas ( GHG ) emissions by at least 10 metric tons of carbon dioxide equivalent ( MtCO2eq ) annually, create 23, 000 high-impact job opportunities, and improve corporate ecosystem growth opportunities with benefits to society.
According to the BNM touch, their powerful supply necessitates investments in infrastructure, engineering, and human capital totaling between RM1.2 trillion and Rs1.3 trillion up to 2050. In addition to & nbsp,
While Malaysia’s administrative society is capable of reviewing such an option and is aware of the significance of incorporating ESG into purchase technique,” there is still a need to teach” smaller scale investors on the opportunities and risks associated with sustainability strategies, according to Chin-Sharpe, BNP Paribas AM.
Having said that, she added,” Most banks in Malaysia are committed to playing a more active role to align and help their clients understand the[ relevant ] Malaysian taxonomies.”
Purchase and regulation
The five new initiatives have been included in the government’s budget for 2024 and” complement other policies such as the NETR, the New Industrial Master Plan ( NIMP ) 2030 and the Mid-Term Review of the 12th Malaysia Plan ( MTR – 12MP ,” according to YB Nik Nazmi Nk Ahmad, minister of Natural Resources, Environment, and Climate Change.
All governing events, including JC3 users, Malaysia’s Corporate Guarantee Corporation, and pertinent ministries, are committed to putting the tasks into action, the BNM representative confirmed with FA.
The regulatory environment in Malaysia keeps up with the country’s continued energy transition and the funding needed to make it happen. To obtain conservation and environment goals, the money market should be prepared to help finance raising and investments. Since 2011, when Sustainable and Responsible Investment ( SRI ) has been included as a crucial growth strategy in the Capital Market Masterplan CMP2, the SC has paved the way for sustainability, according to Dato ‘ Seri Dr. Awang Adek Hussin, its chairman.
A Climate Chance and Principle-based Taxonomy was published by BNM in 2021. In December 2022, SC unveiled a Principles-Based SRI Taxony for the Malaysian Capital Market. This year, in June of this year. SC also established the International Sustainability Standards Board’s ( ISSB ). & nbsp,
Meanwhile, the BNM spokesperson emphasized last month’s Energy Efficiency and Conservation legislation as having the potential to significantly lower energy use by 2050 — by 2, 017 million gigajoules, or RM97 billion in savings— and to” create new jobs in energy management and auditing ,” she said.
According to Adrian Wong, mind of jobs and director at the Singapore-based law firm Prolegis, which has a formal legal ally with Herbert Smith Freehills( HSF ),” investment has increased in Malaysia in part because the regulatory environment has done more to promote appetite in renewables.”
Large-scale solar auctions in Malaysia’s peninsular and projects along the Sarawak Corridor of Renewable Energy ( Score) are two of the renewable infrastructure projects his team is helping clients with.
The transport industry is anticipated to play a significant role in the demand for renewable energy, with electric vehicle ( EV ) usage expected to reach 80 % of the car market in 2050.
However, he informed FA that the greatest possibility is present in projects involving solar, water, and biofuel. In 2040, it is anticipated that all three sources will increase and account for roughly 17 % of Malaysia’s total energy mix.
a files travel
Data and the potential of emerging technologies to support Malaysia’s conservation plan are the three activities that were announced at the event.
The first builds on the accomplishments of JC3’s Greening Value Chain ( GVC ) pilot program, which began in 2022 and has so far assisted 80 small and medium enterprises( SMEs ) in tracking and reporting greenhouse gas ( GHG ) emissions across the length of their supply chains. In order to provide public listed companies( PLCs ) capacity-building support, reporting tools, and additional financing facilities, which the BNM spokesperson said could be accessed” at competitive rates via the Low Carbon Transition Facility( LCTF ), the updated plan connects Bursa Malaysia’s sustainability data platform with the GVC program.
Access to an” ESG jump-start portal,” through which Malay businesses can obtain useful information on ESG-related capacity-building programs, certification, as well as financial and opportunity methods, and the introduction of a Green AgriTech program to promote the adoption of green technology and sustainable agriculture techniques among local producers, are additional data related initiatives.
According to the BNM director,” Green AgriTech offers substantial potential for Malaysia’s agricultural field by opening up new possibilities and addressing vital difficulties.”
Wong concurred that emerging technology has the potential to modernize and alter Malaysia’s ESG strategy, particularly in the agricultural industry. From ensuring a sustainable supply of food sources to raising general health and environmental criteria, he mentioned the potential for positive effects.
To ensure that farmers may conduct their financial transactions online, he suggested the Malaysia Digital Economy Corporation’s project, which linked small farmers to online marketplaces offering bright warehouse facilities, supply, and farming solutions.
Through a thorough approach to alternative solutions, this catalytic pilot program encourages farmers to use technologies and follow greener and ecological practices. Participating farmers can obtain grants and LCTF to purchase natural systems, the BNM spokesperson added.
” Technology use may improve produce stability and quality while also assisting in the resolution of food safety issues.”
maintaining speed
The efforts to enlist input from all parts of Malaysia’s market, both the public sector and the private sector, is at the core of the country as it transitions. The BNM spokesperson informed FA that” efforts to level public-private partnerships are even continuing, with fresh initiatives.”
She stated that the GVC program is an excellent illustration of a cutting-edge blended financing initiative in Malaysia that supports the country’s move toward enlightenment.
BNM continues to support private institutions’ participation in the government’s loan offerings, the call emphasized,” BNM also supports such attempts by facilitating the release of Government of Malaysia Sustainable Sukuk for registration by both domestic and foreign investors.”
According to SC chairman Hussin at the conference, the SRI-linked Sukuk Framework was introduced last year, giving the Indonesian capital market access to a full range of frameworks to assist businesses in financing transitional projects as well as alternative, social, and sustainability initiatives.
Fitch recently released an ESG document that showed a steadfast global appetite for the sukuk. The data shows that by the end of 3Q23, ESG sukuk issuance had increased by 66 % year over year( YoY ) to reach$ 33.3 billion worldwide.
Due to built-in sharia filters, there is a cross between Islamic funding and ESG principles, according to the ratings agent’s research. & nbsp,
Over the moderate name,” Fitch Ratings anticipates more rise.” According to the review, the company’s growth is largely driven by governments’ sustainability initiatives and issuers’ funding diversification goals toward both sharia and ESG-sensitive investors.
” ESG sukuk could receive an awareness and issuance boost ,” said Bashar Al-Natoor, Fitch’s global head of Islamic Finance, with the United Arab Emirates( UAE) hosting the Conference of Parties( COP ) 28 this year.
It is motivating to see the Indonesian government adopting a” full of state” approach to addressing the impact of climate change on economic conservation, Hussin said at the conference’s conclusion. The nation’s interests and sustainable development methods are outlined in roadmaps and masterplans that have been made available by the relevant ministries.
I want to say it again:” Our planet is facing an unprecedented problem, one that necessitates immediate and coordinated effort from all countries, sectors, and individuals.”
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