Inovatif

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  • Driving The Development Of ESG With Sukuk

    Driving The Development Of ESG With Sukuk

    A sukuk contract is simply defined as a debt arrangement agreed between the sukuk holders and sukuk issuer to engage in Shariah-compliant activities. Let’s look at how we can drive the development of ESG with sukuk.

    But first, what are Shariah-compliant activities?

    They are activities that are permissible as disclosed by the Shariah Advisory Council (SAC) of the Securities Commission Malaysia(SC). For example, this includes any activities that are not involved in gambling, prohibited entertainment, riba’-based transactions, tobacco, weapons, and others. When a sukuk holder invests in a sukuk, he basically has the ownership of the given assets and the sukuk is the certificate evidencing the ownership.

    When sukuk holders have the ownership, it gives them the ‘financial rights’ (remember, it is a debt arrangement) stated in the terms and conditions of the sukuk. The sukuk holders are entitled to the returns generated with the underlying Shariah-compliant transactions structured and disclosed in sukuk contracts.

    A sukuk contract consist of various transactions contracts which form a foundation and has different implications, such as profit sharing, leasing and sale and buyback. There are few structures commonly applied to name a few: ijarah, musharakah, mudharabah, murabahah and wakalah.

    In terms of sukuk structures, features and participants there is generally a difference between the international and domestic sukuk markets hence the requirements and popularity of various sukuk financing structures also differs between the two markets. The hybrid structured sukuk is the most common structure issued representing 48% in 2021 by Sovereign Sukuk Issuers, followed by ijarah (31%) and wakalah (20%).

    As far as the international sukuk market is concerned, sukuk wakalah has been the most popular structure for some time now. Malaysia on the other hand is popular with the commodity murabahah. Based on the International Islamic Financial Market 2022 Sukuk Report, sukuk issuances in the past ten years has been growing. As of 2021 the market stands at US$188.12 billion.

    Throughout the past ten years, however, sukuk issuances were not in constant trajectory. The lowest decline was in 2015 due to a strategic move by Bank Negara Malaysia (BNM) to halt issuing short-term investment sukuk.

    So how then we can drive the development of ESG with sukuk?

    Read: The Islamic Sustainability Approach In ESG

    Total Global Sukuk Issuances In USD Millions

    The US$188.12 billion comprised of international sukuk issuances stood at US$49.43 billion whilst US$138.69 billion represents the domestic sukuk issued in respective countries. Malaysia issued 735 domestic sukuk issuances in 2021 totalling to US$61.045 million representing 44% of total domestic issuances globally.

    Main factors for this improvement in sukuk issuances despite the global pandemic was due to continuation of economic stimulus measures implemented by respective countries coupled with rising commodity prices including oil (IIFM Sukuk 2022 Report).

    Source: IIFM Sukuk Database

    Sukuk issuance had a stronger than usual start to the year, based on the considerable momentum it had built up in 2021. Total sukuk issuance reached a total of US$51.6 billion in Q1 2022, compared to US$43.4 billion issued in Q1 2021 (Source: Refinitiv).

    Referring to Q4 2021 research by Moody’s, Malaysia and Saudi Arabia continued to dominate the sukuk issuance market with 37% and 29% of total issuances, respectively. However, in Q1 2022, a boost came from sukuk issued by Saudi-based entities, which amounted to US$17.9 billion, outpacing issuances from Malaysia (a market leader) for the first time. Sukuk issuance from Saudi Arabia nearly doubled from US$9.3 billion in Q1 2021.

    The Saudi government ramped up issuances through its domestic sukuk programme despite higher oil prices that reached their highest level since the global financial crisis of 2008, amid rising demand for debt from highly rated issuers. The sovereign raised US$14 billion during Q1 2022, up from US$3.7 billion during the same period in 2021.

    This included a US$7 billion in sukuk in March 2022, issued with the purpose of consolidating domestic public debt under the sukuk program.

    Moody’s expects the outlook for sukuk issuance in 2022 to remain divergent. It is expected that the burst in issuance momentum will wind down over the rest of the year as the Gulf Countries Corporation’s (GCC) government funding needs may reduce in the short-term.

    Refinitiv’s Sukuk Perceptions and Forecast Study 2022 also echoed Moody’s forecast stating “whilst the Global sukuk issuance reached US$100.9 billion in H1 2022, issuance momentum is slowing as oil prices are elevated and the Fed leads a global monetary tightening cycle which reduces government borrowing.”

    Read: 4 Things That You Should Know About ESG In Malaysia

    Driving The Development Of ESG With Sukuk

    Nevertheless, just like what was stated in Moody’s and Refinitiv’s report, sukuk is safely being perceived as a viable source of financing for corporate and financial institutions. This includes general purpose requirements, capital adequacies, project financing, budgetary and fiscal requirements, and of liquidity management purposes. ESG with sukuk sure can get along nicely.

    In addition, the integration of ESG considerations into investment mandates is also driving the development of green, sustainable and Social Responsibility Investment (SRI) purposes, which would be attractive to sukuk investors and ultimately embodies the true concept of maqasid al-Shariah. That’s how we can drive the development of ESG with sukuk.

    Read: ESG Investing And The 3 Steps To Build An ESG Portfolio

    About the Author

    Established IFRAC Sdn Bhd in March 2022, Baizurah, a certified HRDC trainer has 15 years of Sukuk experience. Throughout her tenure in the financial industry, she was responsible for various dealings related to Debt and Islamic Capital Market, Project Financing and Financial Advisory. Her achievements include arranging the first aviation Sukuk Musyarakah, global Sukuk Ijarah and a pioneer in financial guarantee structures relating to the plantation and real estate industry.

  • Prioritising The Hereafter, Conventional VS Islamic

    Prioritising The Hereafter, Conventional VS Islamic

    In 2017, as I was just about to leave recital class, my ustazah asked a random question: “Aisya, what kind of funds do your clients invest in?”

    Back then I was still a unit trust agent and didn’t really thought about it thoroughly between conventional vs Islamic. So I told my ustazah that it was a combination between conventional and Islamic funds.

    “Perhaps you should only focus on Islamic funds,” she replied. That question sat with me, but I chose not to dwell on it. Not too long after that, I went to perform umrah (mini pilgrimage) and happened to be in the hotel room instead of with the entourage. I spent my time browsing through the Quran. Fate had it that the page I randomly flipped to was a verse about riba (interest).

    Then it hit me: what was the message I was supposed to comprehend, here at the Holy land about conventional vs Islamic? That was when my curiosity was piqued.

    After the trip, I sat for my CFP and IFP exams within a year. Unfortunately, as much as the modules had taught us theories about riba, gharar and usury, there wasn’t a chapter about here and hereafter implications on financial planners for offering conventional products instead of Islamic products to our clients.

    We are what we eat, right? In Islam, we are what we earn, too. As the years went by, I had accumulated endless burning questions that nobody could answer. Finally, in early 2021, I had the opportunity to consult a reputable Shariah scholar. After our consultation, I finally saw light at the end of the tunnel.

    These are some of the changes I have embedded into my life, including paradigm shifts that I have also been sharing with my clients, and now with you.

    Conventional VS Islamic Are The Same

    Let’s address the elephant in the room. If Islamic banks, Islamic asset management companies and takaful providers are all leveraging on its conventional arms’ back-end offices, systems and talents, then their Islamic arms cannot be that halal, can they?

    Well, if we dig deeper, one additional step required for the Islamic arms would be to get mutual consensus from their internal Shariah Committee before each Islamic product is submitted to regulators and its Shariah Advisory Council for approval.

    Imagine this: if chicken rice can have different recipes and ingredients from different sellers, how do you make a decision as to which chicken rice shop to buy from? The main ingredient is still chicken; isn’t chicken halal?

    Choosing halal doesn’t mean it will be risk-free. It just removes the risks that you have yet to see. For those who resonate with this, if we insist on consuming halal meals when we are abroad or at home, don’t you think we should be doing the same for banking and investing?

    Conventional VS Islamic: Converting To Shariah EPF

    For Muslim readers, have you shifted your conventional EPF to Shariah EPF? If you are thinking: “But I can pay zakat for the profits received from conventional EPF, right?”

    I’m here to tell you that that’s a misconception. Zakat can only be paid when your source of income is free from riba, gharar and usury.

    Incorporating Islamic Solutions Into Your Everyday Life

    There are limited Islamic credit cards with good perks in the market. But there is one worth mentioning. If you are currently using a Maybank credit card, Maybank allows you to switch to Maybank Islamic without affecting your credit limit and credit score. The migration is free and you will still have access to the Treats Points facility.

    A good reason to shift even though you may be paying your credit card in full every month is because riba still exists in all of your conventional cards’ transactions, under what is known as merchant fees. Next, what about your current and savings accounts? Your children’s? Your CDS accounts? What about crypto? The answer is to shift, shift and shift.

    Limitations In The Financial Technology Sector

    There are still many fintech and do-it-yourself platforms out there offering many one-size-fits-all types of accounts. What MIDF Invest has done right is to offer both conventional and Islamic accounts to its investors. This feature is fantastic because the app will only list Shariah-compliant foreign stocks and ETFs for investors who opt for Islamic accounts.

    This shows that it is possible for fintech providers to provide an option for Islamic accounts despite leaning on conventional structures, like how MIDF Invest leans on Saxo Bank.

    Conventional VS Islamic: The Pricing Battle Between Insurance And Takaful

    Until we solve this supply and demand saga, takaful providers will struggle in reducing their pricing to compete with their insurance peers. The cost of takaful plans can sometimes be twice the premium of insurance for the same amount of coverage.

    I see my clients struggling between choosing what is right for their faith versus affordability. Let’s face it, everyone needs sufficient coverage, but how do we guide our clients to choose what is best for them if pricing can sometimes get in the way?

    Islamic Finance Is For All

    One misconception I often come across is the belief that Islamic finance is only for Muslims. One of the strengths of Islamic finance is that it reduces and eliminates exposure to gambling, alcohol, entertainment, banking, companies with high gearing and more in its product mix.

    It forces you to go back to your risk appetite: what do you envision having in your investment portfolio and ultimately, everything else in life?

    Going Above And Beyond Our IFP Certification

    At the current time of writing, there are only 363 Islamic Financial Adviser Representatives registered under Bank Negara Malaysia (BNM). We are still a minority in the market. Here’s something I’d like my fellow colleagues to ponder upon:

    “How are we upholding our IFP certification and license?”

    See, the IFP mark isn’t just a mark on our names and business cards. It isn’t just about providing Islamic financing, Islamic funds and takaful to our clients. For me, Islamic financial planning is a way of life. We uphold the practice here, pave the way for our clients to pursue the same so that it becomes part of our hereafter and theirs.

    Conventional VS Islamic: There Is More To Life Than Just Dollars And Cents

    There are certain things in life that we cannot quantify. There are decisions that we have to make that go beyond the usual tangible ROI. Make the intangible ROI your compass, and see what kind of blessings come knocking on your door.

    I want to call upon those who serve from your hearts, to be the light to those around you. In a world where things are about revenues and returns, how do we draw the line between what’s right for us, our clients and our Creator?

    “Life is about making choices, so why not make our financial choices a win-win for our journey here, as well as in the hereafter?”

    Hope we all now have a greater conscience when it comes to conventional vs Islamic, especially if you are a Muslim.

    About the Author

    Aisya is an Approved Financial Adviser from Harveston Financial Group as well as a HRD Corp Registered Training Provider. She shares financial literacy content on her Instagram @aisyarahman.advisory daily on a variety of financial topics. Aisya can be reached at aisya@aisyarahman.com.

  • AOB: Audit Committees Must Ensure Integrity of Financial Reporting

    AOB: Audit Committees Must Ensure Integrity of Financial Reporting

    The Securities Commission Malaysia’s (SC) Audit Oversight Board (AOB) has called for Audit Committees of public listed companies (PLCs) to create and maintain an environment that supports and upholds auditors’ independence and high audit quality to ensure that reliable audited financial information is made available to facilitate informed decision by users.

    At a recent virtual dialogue series with 823 Audit Committee members from 723 PLCs, the AOB reminded that members of the Audit Committee are instrumental in setting the right tone for the company’s financial reporting process and enabling a close working relationship between the Audit Committee and the independent auditors. It further emphasised that effective oversight by strong, knowledgeable, and independent Audit Committees shall further enhance audit quality in the marketplace.

    Recognising this, the AOB regularly engages with Audit Committees to ensure that they are adequately informed and kept abreast with the relevant information to effectively carry out their oversight responsibilities. This year’s dialogue series also saw the AOB sharing the result of its survey on ‘Transparency Reporting by Audit Firms’, which is based on the responses of 151 Audit Committee members.

    Introduced in December 2019, the Transparency Reports are issued by certain registered audit firms who meet the mandatory reporting criteria as stipulated by the AOB. The Transparency Reports provide information on a firm’s legal and governance structure, measures taken by the firm to uphold audit quality and manage its risks, as well as
    information on the firm’s measurement of audit quality indicators.

    The AOB noted that while 89% of the survey respondents are aware of the requirement for audit firms to produce Transparency Reports, only 68% of the respondents have read the Transparency Reports.

    The AOB strongly encourages Audit Committee members to read the reports in view that 94% of the survey respondents who have done so have found the information disclosed to be useful to facilitate a more effective selection and assessment towards appointment (including re-appointment) of the external auditors. For good corporate governance, the decision for the appointment or re-appointment of auditors shall be made by the Audit
    Committees and not management.

    The recently concluded dialogue series, held on 17 November and 6 December 2022, reflects the SC’s efforts to improve corporate governance in PLCs as well as strengthen the ecosystem for audit quality and increase investors’ confidence in the quality and reliability of audited financial statements.

    It also provides a platform for Audit Committees to raise any issues with respect to their oversight function and to share good practices in supporting audit quality.

    About the Securities Commission Malaysia:

    The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Malaysia Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.

    About the Audit Oversight Board:

    The Audit Oversight Board (AOB) is established under the Securities Commission Malaysia Act 1993 which came into force on 1 April 2010 to promote and develop an effective audit oversight framework and to promote confidence in the quality and reliability of audited financial statements in Malaysia. More information about the AOB is available at www.sc.com.my.

  • Memorandum of Understanding Signed By Sijil Teknologi Sdn Bhd And The Digital Internet Association Of Malaysia

    Memorandum of Understanding Signed By Sijil Teknologi Sdn Bhd And The Digital Internet Association Of Malaysia

    Sijil Teknologi Sdn. Bhd. (Sijil) has successfully inked a Memorandum of Understand (MOU) with the Digital Internet Association of Malaysia (iaM) to use its Certificate Management System in iaMs’ national as well as international training programs and hackathons. Sijil was represented by its Chief Operating Officer, Mazlan Abu Bakar while iaM was represented by its Chairman, Ts. K Nantha.

    Established in early 2022, Sijil was invested in developing a one stop solution in effectively managing the certification system in Malaysia. To achieve this, the solution had to take into account numerous stakeholders of the system such as government agencies, institutions, training providers, students as well as prospective employers.

    This Certificate Management System helps alleviate common problems faced by both students and training providers such as lost certificates, fake certificates, lost training records as well as participants data mismanagement. On top of that, this eco-friendly, integrated solution eliminates most tedious and repetitive tasks by being able to automatically display the participants details with unique QR and serial numbers on each certificate.

    The QR can be used to scan and verify its legitimacy and henceforth prevent duplicate certificates. In addition, the system incorporates end-to-end solution by being able to generate thousands of individual certificates from an uploaded template, store participants and training providers data, and finally is also able to retrieve the aforementioned certificates with a click of a button from virtually anywhere in the world. This system would also be able to handle multiple templates for different types of attendees for the same event such as volunteers, advisors, judges, sponsors, technicians and not forgetting the participants themselves.

    Aptly, the MOU was exchanged during the Malaysia Techlympics event at Axiata Arena Bukit Jalil, where iaM set up their iaM Digital Xperience booth showcasing numerous Augmented Reality and Virtual Reality solutions for the modern classroom. Participants to this booth were presented with a digital certificate of participation generated autonomously by Sijil upon successful visit to 3 stations within the booth itself. This certificate was said to be a significant reason for the record number of visitors to the booth as the students visiting the booth would be awarded 17 PAJSK points for participating in a national level event and that aforementioned certificate would be proof of attending such an event.

    A serial user of the system, Fatin Amirah, the program coordinator for iaM stands by the efficiency of the system as she has now fully transitioned to automated certificate generation for thousands of her hackathon participants. She says that she is now able to automate and complete days of dull and time-consuming task of creating individual certificates within a few minutes of uploading the participants list, saving her precious time to be utilised productively elsewhere, such as preparing better training materials.

    Sijil has also been providing certificates to Incepsion Group of companies since it’s early days to automate certificates for their company wide usage. Ir. Selvem Raman, owner of the Incepsion Group of companies, including the offices in Malaysia and Singapore, has adopted the solution for its’ internal as well as external training and certification purposes. He has confirmed that Sijil has helped save hours of manpower in preparation and distribution of certificates, all while doing it in a sustainable manner using this intervention.

    For more information regarding the certificate management system or to book a demo, Sijil can be contacted via email at info@sijil.online while their website can be accessed at www.sijil.online.

    About Sijil Teknologi Sdn Bhd (Sijil)

    Sijil was established in 2022 for the sole purpose of creating a one stop, fully online, certification management system for all stakeholders including participants, training providers, and government agencies. This green, paperless initiative is able to easily generate certificates with unique serial number and QR codes within minutes while assisting in eliminating duplicate certificates as well as fake training programs.

  • SC Unveils Principles-Based Sustainable And Responsible Investment Taxonomy For The Malaysian Capital Market

    SC Unveils Principles-Based Sustainable And Responsible Investment Taxonomy For The Malaysian Capital Market

    The Securities Commission Malaysia (SC) today unveiled the Principles-Based Sustainable and Responsible Investment Taxonomy for the Malaysian Capital Market (SRI Taxonomy) to help advance the nation’s climate and sustainability agenda.

    The SRI Taxonomy provides universal guiding principles for the classification of economic activities that qualify for sustainable investment.

    It aims to give clarity towards enabling proper and consistent identification and classification of various types of economic activities as well as the definition of sustainable investments. It also seeks to address concerns on the need to mitigate
    and manage the risks of greenwashing.

    “The global expansion of sustainable investments has created demand for additional clarity and assistance for market players in identifying economic activities that are aligned with environmental, social and sustainability objectives,” said the SC Chairman
    Dato’ Seri Dr. Awang Adek Hussin.

    “The SRI Taxonomy adopts a principles-based approach to enhance the standardisation and comparability of sustainable investment assets,” he said. “This was done after considering the state of readiness of the wider Malaysian capital
    market, as the capital market constituents are at different maturity levels in their sustainability journey.”

    Given Malaysia’s strong position in Islamic finance and the alignment of the underlying principles of Islamic finance with sustainability, particularly from the social and ethical investing perspectives, the SRI Taxonomy also includes a social component, in addition to the environmental component.

    The development of the SRI Taxonomy was undertaken by the SC, in collaboration with the industry through an Industry Working Group (IWG). The IWG comprises the World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia as the Lead Technical Expert, and representatives from Bursa Malaysia, asset and fund management companies, investment banks, asset owners and other sustainable finance specialists.

    The World Bank Country Manager for Malaysia Yasuhiko Matsuda said, “We are grateful for this opportunity to have supported the SC in developing a framework to aid in unlocking capital for sustainable development priorities. This taxonomy can also assist other countries facing similar challenges in shifting or transitioning towards socially responsible investments and a just climate transition.”

    The SC also issued a Public Response Paper today following the issuance of the Public Consultation Paper No.1/2021 on the Principles-Based Sustainable and Responsible Investment Taxonomy for the Malaysian Capital Market in December 2021.

    Both the SRI Taxonomy and the Public Response Paper can be found at the SC website at https://www.sc.com.my/development/sri.

    About the Securities Commission Malaysia:

    The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Malaysia Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about
    the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.

  • Reevaluating ESG And Cryptocurrency In The Context Of Modern Money

    Reevaluating ESG And Cryptocurrency In The Context Of Modern Money

    Environmental, Social, Governance (ESG) refers to the purpose of environmental, social, and governance aspects to measure how far along businesses and nations are with sustainability. The question is, does ESG and cryptocurrency align?

    Last year, Bloomberg Intelligence predicted that Global ESG assets are on track to hit USD53 trillion by 2025 (a third of total Global Assets Under Management). Approach to social and environmental issues offers a particularly compelling picture of how ESG analysis may aid to improve currency investment and understanding of ESG and cryptocurrency in the area of modern money.

    Deutsche Bank analyst provide an explanation on how ESG can be further understood in this area particularly regarding Fiat money and Crypto to being the possible ESG assets. It was observed that Fiat money is known to have issues towards the environment and can be considered to have a far greater but much subtle problem.

    In addition, the influence of national policymakers to manufacture money through quantitative easing made central bank-backed currencies as the ultimate tool in bringing forward consumption from tomorrow to today, which also made it unreasonable to be accepted as ESG asset.

    Similarly, there are considerable dangers associated with cryptocurrencies, particularly for prudent investors. The usage of virtual currency for illegal purposes is nevertheless widespread. According to Chainalysis, a Cryptocurrency monitoring firm, despite its transparent and traceable architecture, Bitcoin is still appealing to criminals because of its pseudonymous nature and the simplicity which enables users to move money immediately anywhere in the world.

    Read: Be Wary Of Crypto Scams In Malaysia

    Can ESG And Cryptocurrency Align?

    As cryptocurrencies become more popular, some people are becoming concerned with the conflict of values between ESG and cryptocurrency especially regarding how much energy is being used in the mining process. The analysis report from Betterment estimates that just Bitcoin mining alone uses more power than several nations consumption.

    The energy required to mine cryptocurrencies is tied to fossil fuels, which might increase greenhouse gas emissions. However, some might think otherwise as carbon impact of bitcoin mining is also decreasing particularly since China this year outlawed private coins and shut down massive mining operations.

    Newer blockchains might even reduce the energy requirements of conventional central payment systems, providing encouragement that distributed ledger technology may help to effectively tackle climate change. For instance, the Crypto Climate Accord seeks to decarbonize the cryptocurrency industry by 2030.

    Jan Kregel, Director of research at the Levy Economics Institute at Bard College in New York pointed out that a worse disaster than the subprime crisis might result from the Cryptocurrency market. According to him, although Crypto is not suitable in the ESG asset portfolio, the underlying technology (blockchain) is most likely to be accepted as ESG asset.

    With all of these obstacles, in the context of ESG and cryptocurrency especially Bitcoin is doomed. This is due to its energy-heavy proof-of-work model. However, investors are told to be cautious in putting cryptocurrencies on par with fiat money, though both are dreadful on the ESG side.

    Read: Crypto Investment: A Very High Risk Game, Are You Sure You’re Up To It?

    ESG And Fiat Versus ESG And Cryptocurrency

    Some of the ESG arguments against cryptocurrency could also be said of fiat money. For example, Scott Eichler of Standing Oak Financial, argue that 80% to 90% of fiat money has traces of cocaine on it. On the other hand, Coinshare’s 2019 analysis of the energy used by the bitcoin network suggested that 74.1% of the electricity it used then came from renewable sources.

    The average lifetime of USD5 and USD10 Fiat money notes, according to the Fed, is thought to be five years. In addition to electricity, the production of fresh banknotes and coins requires water, wood pulp, cotton, different metals, linen, and other natural resources.

    Hence, how effective are ESG reporting since ESG sometimes seems to contradict itself, especially in relation to virtual assets such as cryptocurrency?

    Fossil Fuel And Cigarette Company Tops In ESG Ranking?

    Source: Twitter

    Back in May 2022, Co-founder of Tesla and SpaceX owner Elon Musk, claimed ESG is a fraud according to his Twitter. Both the oil behemoth Exxon and the corporation Philip Morris that is heavily involved in the cigarette business are included in ESG funds. Due to the variety of ESG grading systems, the reality of ESG investment can become even more perplexing.

    Similar to this, Damodaran, a Professor of Finance at the Stern School of Business at New York University- agreed with Musk. He argues that ESG is not just an error that will cost businesses and investors’ money, while also making the world a poorer place. He added that it does more harm to society than benefit.

    “Why is ESG being marketed so vigorously? Because of the ESG gravy train, which is funded by investors and taxpayers, includes accountants, measurement services, fund managers, and consultants. Corporate CEOs are embracing ESG because it liberates them from all required responsibility”, according to Damodaran.

    Damodaran statements appears somewhat true when an online survey done by Betterment, who hired 1,000 individuals who own taxable investments to participate in a survey to determine who is and who is not investing in ESG and why. The findings show ESG investors also hold cryptocurrencies, which have also raised environmental concerns due to energy consumption.

    80% respondents of those who hold ESG-themed investments also hold crypto investments. In comparison, just 22% of those without ESG-themed investments have crypto in their portfolio.

    In recent years, the popularity of sustainable investment have increased in part due to climate emergency and the present public health crisis. Be mindful although many would favour ESG due to the idea, trend, or the benefit it would bring, we must remember when there are financial parameter or indicators being established, there are always possible ethical drawbacks especially when it runs behind human actions.

    Therefore, ensuring ESG being managed and used properly and honestly practice is a must. And that’s why there’s a need to reevaluate ESG and cryptocurrency in the context of modern money.

    Read: Crypto And Digital Asset, Learn Before You Earn

    About the Author

    Azah Atikah Binti Anwar Batcha has an Accounting, Finance, Auditing, and Islamic Finance background. She has worked with two of the Big four firms prior to pursuing her postgraduate studies at University of Technology Malaysia (UTM), Kuala Lumpur. She can be contacted at aaabwrite@gmail.com

  • Save RM1 Million On Your Own Or Do It By Buying A Property?

    Save RM1 Million On Your Own Or Do It By Buying A Property?

    What could a single RM50 note could buy today is often used to demonstrate how ‘small’ money has become versus having the same RM50, 10 years, 20 years and 30 years ago. This is also known as inflation and no one could run away from it no matter which country one is living today.

    Today we will be taking a closer look at whether we can save RM1 million on our own, or we can save that much by buying a property?

    Read: Is Malaysia Property Still Worth To Invest In?

    The Goal Is To Save RM1 Million

    A point to ponder is this. Are we doing something about it? Are we doing our best to counter the inflation and ensure that our money continue to rise so that the value we could buy does not reduce?

    Please remember that if we want to buy the same number of things today versus many years ago, we could not do it with the same RM50. We need to have RM100 or maybe more.

    This is the same as property price. The price of RM500,000 today may just be equivalent to RM300,000 value 10 years ago, maybe. Meanwhile, RM800,000 10 years later may just be equivalent to the value of RM500,000 today.

    The next question is this one. ‘Could we buy a RM300,000 property 10 years ago or RM500,000 today so that 10 years later, that same property becomes a hedge against inflation?’

    Read: Double-Up Your Property Investment With These Rules!

    Think And Decide About That RM500,000 Savings

    In 2003, I bought my first property, an apartment for RM123,000. I sold it for RM238,000 many years later. I checked and the price is closer to RM300,000 today. When inflation continue to push up prices of everything, the price would continue to rise.

    Source: propertyguru.com.my dated 18th October 2022

    Could we save instead of buying a property then?

    My question is a simple one. Could you save RM200,000 during that 10 years that property prices rose from RM300,000 to RM500,000?

    If you could, then there is no need to buy the property. Save the time, effort and the potential to buy the wrong one. Just save up the money. Save diligently, save consistently to achieve the RM200,000 without needing to buy the RM300,000 property.

    It’s the same question to those who say to save RM1 million in the future is just like RM500,000 today. Well, could we start saving now and reach RM500,000 in maybe 20 years followed by it becoming RM1,000,000 when we retire?

    The inflation would have eaten up the value of that RM1,000,000 property to be closer to RM500,000 instead. Could we save RM500,000 without buying a property and having it appreciate simply due to inflation? If you could, then you can forget about property investment.

    Read: 10 Ways to Spot Property Investment in Malaysia – A Property Investment Guide

    Why Need To Save RM1 Million?

    Malaysians live up to the age of 75 or even 80 based on the latest life expectancy for Malaysians. Life expectancy is going higher because of access to better healthcare, more awareness etc. We could choose to retire anytime but let’s assume we retire at 60.

    Assuming we are very healthy and the company wants us to continue until 65? Before 60, because we have a job, we can pay rental if we did not own a property. After 60… when salary stops… we STILL HAVE to pay rental.

    As a home owner who’s renting out my property, I have no wish to tell my tenant to stop paying me rental after the tenant has paid me consistent rental for the last 30 years yeah.

    How much would rental actually be in the future? (we assume conservatively)

    Rental for a small apartment could be RM2,000. (In the future, this RM2,000 is more like RM1,200 of today)

    Living from 60 to 75 years old is 15 years and 15 years x 12 months is a total of 180 months.

    180 months x RM2,000 is RM360,000. By the way, this is just for the rental and this also assumes that the owner is a very nice person and does not increase the rental at all for the next 15 years.

    Sorry, I will increase the rental every other year. Will not increase a lot but will increase a little every other year. 

    What if we have RM500,000 savings by then? (I assume we did not buy a property…)

    So, if we have RM500,000 by then we need to save RM360,000 for rental as per above calculation. After allocating RM360,000 for rental, we still have RM140,000 for food. (RM500,000 minus RM360,000 for rental)

    How much is RM140,000 for 15 years? That’s RM25 per day… Oops…It means that every day, we have RM25 for three meals.

    That’s RM8+/- per meal. I am very sure we could still afford roti canai and the tarik at that time with RM8 right?

    This is why the title of this article says RM1,000,000.

    With RM1,000,000 savings, after allocating RM360,000 for rental (which is very conservative), one would have RM640,000 left for food and whatever other things which you like to do. What if we allocate RM50 for meals every day?

    That is RM50 x 30 (days) x 12 (months) x 15 (years) equal to RM270,000.

    RM640,000 (leftover after rental) minus RM270,000 (for meals) means we still have RM370,000 for our spending on things we love from the time when we celebrate our 60th birthday to the time when we celebrate our 75th birthday yeah.

    Let’s not debate on whether RM370,000 is enough or not enough by then. Heck, even you managed to save RM1 million, who would know whether it would be enough by then.

    Read: Property Investing In A Post-Pandemic World, 4 Things To Consider

    Conclusion

    Let’s take note that if we decided NOT to buy and pay for a RM500,000 home today, we will need to save RM1 million so that our life will be more secure when we retire. Would you rather buy a property today and forced to pay mortgages or being forced to save RM1 million when we retire at 60?

    There you have it, either you can save RM1 million on your own. Or you can save RM1 million by buying a property.

    About the Author

    Charles is the Founder of kopiandproperty.com (a leading independent property blog in Malaysia). His articles and views have appeared in national newspapers, magazines and property listing portals. He is also a judge for property awards including for iProperty.com Agents Advertising Awards and PropertyGuru Asia Property Awards (Malaysia). 

  • True Friend Dilemma, Declaration Trust Coming To The Rescue

    True Friend Dilemma, Declaration Trust Coming To The Rescue

    The following story is based on an actual series of events with some names and circumstances fictionalised and any similarity to the name, character or history of any person is entirely coincidental and unintentional. Let’s look at how a declaration trust can help your friend, as they rightly mentioned “A friend in need, is a friend indeed”.

    True friends like Seng are hard to come by. But little did he know that being Donald’s true friend would put him in such a pickle.

    Seng found his pool of savings that he reserved for his old age depleting by the day. It had already been more than a year that since he alone shouldered the responsibility to meet the medical expenses of his buddy Donald after the latter fell into a coma.

    Donald, who is single and with no family members, has a successful interior design business where he is able to own a few properties and have a sizeable investment portfolio with a licensed fund manager. Donald have been procrastinating to get a medical and hospitalisation insurance policy because of the regular income he is getting from the property rental and dividends from the investments.

    He was diagnosed with severe case of Crohn’s disease last year which requires regular treatment and this year had to be hospitalised several times due to kidney failure. Seng has been footing his medical bill since whenever Donald had problems redeeming some of his investment to pay for his hospitalisation bills.

    A childhood friend, Seng, had been just a phone call away especially in recent years when Donald became sickly.

    In their childhood and adolescence years, they were dubbed as the village Siamese twins as they were rarely seen apart. Seng and Donald shared a very special bond. Even the separation during the years that Donald was studying in England did not see them go their separate ways after Donald returned.

    While they took different career paths and Seng eventually found the love of his life and married, the Siamese twins were still inseparable right through their old age.

    It became a routine for Seng to drop by Donald’s apartment every other day and also accompany him on visits to the doctor as his health deteriorated. When Donald was well enough, he redeemed some of his investment to pay Seng back for medical and hospitalisation expenses Seng paid for him.

    When Donald did not answer his phone call one afternoon, Seng rushed over and found his buddy unconscious. He rushed him to hospital and Donald had since then not woken up from the coma.

    As days and months went by, Seng became more worried for Donald. He was also weighed down by the mounting expenses he would have to continue to bear on Donald’s behalf. A dilemma one would not wish upon a true friend.

    Seng would not be in such a predicament had Donald had the foresight to plan for such eventualities. One estate planning tool that serves to take care of one’s affairs when incapacitated and not leave one in the quandary without financial support is the Declaration Trust.

    Read: Planning Is Important, Things Can Turn Ugly In An Instant

    What Is Declaration Trust?

    Conceived by Rockwills Trustee Berhad, one can set up a Declaration Trust, place certain assets in the Trust and appoint himself as the Trustee and have a licensed trust company like Rockwills Trustee as substitute Trustee.

    The Declaration Trust works in the event of specified triggers such as total and permanent disability, critical illness, disappearance for a period of time or death. Setting up the Declaration Trust, the settlor prepares a trust deed which are instructions for his wishes to be carried out when certain trigger events take place.

    Unlike the Will which only comes into effect upon death, the Declaration Trust allows the settlor to retain control of his assets while still alive and facilitates the drawdown of funds from the assets when he is, for example, incapacitated.

    Read: Hard Facts About The Executor Of A Will In Malaysia

    Donald as Settlor can in the Trust Deed include his investments and monies in his bank accounts as well as name himself as a beneficiary while alive. In the Trust Deed, he can name a trust company as the substitute Trustee, to have access to investments and funds to utilise them in the manner as he so wishes. He can also name beneficiaries to benefit from any balance of trust assets unutilised upon his demise.

    The Trust Deed will include a Power of Attorney for the substitute Trustee, which would be a Trust Company as it operates in perpetuity, to step in to administer the assets according to the Settlor’s wishes.

    The Declaration Trust has the advantage of distribution of assets to the beneficiaries without any delay when any one of specified triggering events occur and also the benefit of flexibility in safeguarding one’s interest pertaining to access to funds which otherwise could be locked down until death occurs or grant of probate in the instance if there is only a Will.

    Read: The Importance Of Estate Planning, Avoid Last Rites Drama

    About Rockwills International Group

    Rockwills International Group, now in its 27th year, pioneered professional will writing in 1995 and has since evolved into the leading estate planning specialist in the country. It is today the largest provider of solutions and support services in the areas of trusts, succession, management and distribution of wealth. It has shareholders’ funds exceeding RM50 million. It has done over 280,000 wills and 15,000 trusts and hold more than RM25 billion in assets under trust.

  • Survey Finds Malaysians Are Struggling Financially From the Pandemic

    As the world braces itself for a recession and continued inflation in 2023, Malaysians are in their worst-ever financial position to prepare for it. Data from the RinggitPlus Malaysian Financial Literacy Survey (RMFLS) 2022 revealed various painful truths about the current financial state of the rakyat, including depleted savings, cash flow issues, and other worrying trends.

    Malaysians are still struggling from the financial impacts of the pandemic

    Malaysians from all walks of life are now facing severe financial challenges that leave them vulnerable to financial shocks, as various financial aids reduced the impact in 2020 and 2021. 70% of respondents indicated that they save less than RM500/month or do not manage to save at all. This is the worst-ever result tracked by the RMFLS in 5 years.

    At the other end of the spectrum, the amount of Malaysians who manage to save more than RM1,500 per month has also dropped significantly. From 20% in 2020, the figure has dropped four times lower to just 5% in 2022.

    The RMFLS 2022 results also indicate that more Malaysians are struggling with less savings in hand, as 63% of respondents stated that they can survive for 3 months or less with only their savings (52% last year). A similar pattern is also seen where 55% of Malaysians spent exactly or more than what they earned each month (44% last year), essentially living paycheck-to-paycheck.

    With depleted savings and higher cost of goods, the survey also highlighted a worrying trend where more credit cardholders are not paying off their bills in full – just 55% in 2022 compared to 70% last year.

    Hann Liew RinggitPlus Survey

    Forgoing long-term security and wealth generation for short-term relief

    With the challenges in cash flow and savings, the survey results show that Malaysians are choosing short-term monetary relief over long-term financial stability. A staggering 66% of respondents above 21 stated that they will consider applying for more Employees’ Provident Fund (EPF) withdrawals if the government allows it.

    In addition, the survey also found that 52% of Malaysians above the age of 18 have not started investing. Meanwhile, a majority of those who are investing have low-risk appetites but medium-term investment horizons which is not optimal – though these may be influenced by current financial challenges and global economic outlooks.

    Current trends are a wake-up call to all parties to take action

    “The financial effects of the pandemic have been devastating and our survey findings this year reaffirm that Malaysians have real financial challenges to address. It is a harsh reality not only for the rakyat, but also for policymakers and industry players – this is a generational issue that requires long-term solutions with sustained and concerted support from all parties. We cannot leave anyone behind,” said Hann Liew, co-founder and director of RinggitPlus.

    In line with this, RinggitPlus recently introduced a new section to its Savings vertical on RinggitPlus.com that highlights the various cash management solutions in the market as it aims to encourage Malaysians to save and earn best-in-class returns.

    “The new section on the Savings vertical at RinggitPlus.com is timely as it highlights a relatively new product line in the industry, and will help those looking to research and compare for the best savings products in the market. Meanwhile, offering our content in Bahasa Malaysia is part of our mission to extend our range of services to other languages and thus reach out to more Malaysians,” said Liew.

    Financial literacy continues to be a major step towards helping Malaysians overcome financial challenges and take control of their financial health. As RMFLS celebrated its 5th anniversary, the annual survey continues to highlight the importance of financial literacy among Malaysians and provides data points that have been used by various organizations, education bodies, and governmental sectors towards guiding Malaysians to take control of their financial health.

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  • SC Issues New Guidelines and Technical Note to Enhance the Quality and Diversity of Investment Advisory

    SC Issues New Guidelines and Technical Note to Enhance the Quality and Diversity of Investment Advisory

    The Securities Commission Malaysia (SC) today released new Guidelines to strengthen the role of investment analyst firms and their analysts as a reliable source of investment information for the public.

    The SC also issued a Technical Note to provide details on the licensing requirements for those providing digital investment advice. This is in line with the SC’s agenda to create a digitally inclusive ecosystem for the capital market.

    Both developments support a key thrust of the Capital Market Masterplan 3 to provide investors with better and greater access to quality investment advice and increased diversity to meet their emerging needs through a more digitally inclusive ecosystem.

    “Investment advisers play an important role in the capital market by providing valuable insight and information for investors to assess investment opportunities. That is why the SC expects them to exercise reasonable care and diligence in providing research-related services,” said the SC Chairman, Dato’ Seri Dr. Awang Adek Hussin.

    “The SC is also cognisant of the shift in the investment advisory landscape. The emergence of digital advisory models that combine technology and investment expertise is expected to further strengthen the provision of accessible and quality advice to investors,” he added.

    Guidelines on Market Conduct and Business Practices for Investment Analysts and Their Analysts (IA Guidelines)

    The IA Guidelines outline the core principles and minimum standards that must be observed by holders of a Capital Markets Service License (CMSL) and a Capital Markets Service Representative’s License (CMSRL) who issue or promulgate research reports in carrying out the regulated activity of providing investment advice.

    Investment analyst firms and their analysts are expected to have high standards of integrity and competence in providing research-related services to ensure the objectivity and quality of their research reports and recommendations.

    They will be given a six-month period to familiarise themselves with the IA Guidelines, which take effect on 8 June 2023.

    Enabling Digital Advisory Business Models

    The SC is facilitating applicants seeking to carry out the business of investment advice through the use of automated, algorithm-based tools to meet the different needs of investors.

    With the release of the Technical Note today, a party proposing to undertake digital investment advisory services and requiring dispensation or waiver of certain licensing requirements, which include minimum financial requirements and competency thresholds, can submit an application for waiver to the SC.

    In considering such an application, the applicants are required to demonstrate how their digital innovations can benefit their targeted investors while possessing the requisite technological capabilities.

    Both the IA Guidelines and the Technical Note are available on the SC website at https://www.sc.com.my/regulation/guidelines/investment-advisers.

    About the Securities Commission Malaysia:

    The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Malaysia Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.