Inovatif

Category: ESG

  • Steering The Malaysia’s ESG Landscape

    As we step into 2024, let’s explore the evolving world of investing, where the buzz around ESG (Environmental, Social, and Governance) principles is gaining momentum. Malaysia is at the forefront, setting ambitious goals for carbon neutrality by 2050. Join us on a journey to discover practical tips for everyday investors to align their portfolios with responsible spending.

    MALAYSIA’S ESG PROGRESS

    Malaysia’s commitment to ESG is evident through its ambitious plans. The nation’s focus on renewable energy, sustainable cities, and a green economy showcases dedication to environmental stewardship. Keep a keen eye on these trends as they can significantly influence your portfolio’s performance.

    GREEN ENERGY AND SUSTAINABLE CITIES

    Major companies in Malaysia are actively adopting green energy, with local giants opting for electricity from renewable sources. Initiatives like the Green Electricity Tariff and the Net Energy Metering Nova program demonstrate a robust commitment to sustainable practices. To support these efforts, Malaysia incentivizes electric vehicles, targets 31% renewable energy in its capacity mix by 2025, and aims for carbon neutrality by 2050. Investors should consider the potential growth of companies aligning with these green initiatives.

    SUSTAINABLE FINANCING

    Malaysia stands out globally in sustainable financing, issuing the world’s first sovereign US-denominated sustainability sukuk. With a focus on eligible social and environmentally friendly projects, the government plans to issue up to RM10 billion of sustainable sukuk in Budget 2022. This move creates unique investment opportunities for those looking to support socially responsible projects. The PwC report on “ESG Deals Creation and Impact Investing in Malaysia” emphasizes how companies listed in FTSE4Good Bursa Malaysia (F4GBM) Index, demonstrating strong ESG business practices, have been able to deliver higher valuation multiples and investment returns.

    CORPORATE ESG PERFORMANCE

    Public-listed companies in Malaysia are outperforming in ESG metrics compared to their ASEAN counterparts. Ranking second on the MSCI All Country Index ESG Leaders Index, Malaysia’s companies demonstrate a commitment to sustainable practices. The FTSE4Good Bursa Index and the FTSE4Good Bursa Malaysia Shariah Index provide valuable insights into companies leading in ESG and Shariah-compliant solutions. Investors can leverage these indices to make informed decisions aligned with their values.

    SECURITIES COMMISSION INITIATIVES

    The Securities Commission (SC) Malaysia is taking significant steps to foster sustainable practices. The introduction of the Leading for Impact Programme and the Principles-Based SRI Taxonomy public consultation paper in 2021 are clear indications of Malaysia’s commitment to advancing ESG principles. The SC’s focus on sustainability risk management, disclosures, and the development of the sustainability index showcases Malaysia’s advanced stage in policy and regulatory actions related to ESG.

    BUDGET 2024: SHAPING THE FUTURE OF ESG

    Budget 2024 is a game-changer for the ESG space in Malaysia. Sustainability is now integrated into economic policies, reflecting the government’s commitment to making Malaysia an investment destination while achieving carbon neutrality by 2050. The budget allocates RM2 billion for the National Energy Transition Roadmap (NETR) and a RM200 million startup fund for the New Industrial Master Plan (NIMP) 2030, reinforcing Malaysia’s dedication to a low-carbon economy. A RM900 million loan fund for SMEs to enhance business productivity through automation and digitalization demonstrates a focus on long-term sustainability through resource optimization and waste reduction. Guarantee funds of up to RM20 billion for SME entrepreneurs, especially in the green economy, technology, and halal fields, further boost investor confidence. Putrajaya’s transformation into Malaysia’s low-carbon city, utilizing solar panels and electric vehicles, sets a benchmark for sustainability, influencing ESG from an investment category to a mainstream strategy.

    EXPERT INSIGHTS ON BUDGET 2024

    Experts highlight Budget 2024’s emphasis on promoting domestic direct investments and attracting venture capital for high-innovation start-ups and green growth. The allocation of funds towards Malaysia’s National Energy Transition Facility (NETF) and encouraging financial institutions to provide up to RM200 billion in financing fosters a favourable environment for foreign climate investors. The focus on green investments is expected to stimulate both local and foreign investments in the renewable energy sector, propelling Malaysia towards a low[1]carbon economy. This aligns with global trends where investments in low-carbon energy technology reached a record level of USD1.1 trillion in 2022.

    ENSURING LONG-TERM SUSTAINABILITY

    Budget 2024 takes mid-term steps to encourage sustainable economic instruments through tax exemptions and deductions up to 2027. This includes tax deductions for companies participating in the voluntary carbon market and increased funding for Ecological Fiscal Transfer for Biodiversity Conservation (EPT). The emphasis on impact investing, supported by tax exemptions for social enterprises, aligns with Malaysia’s goal of becoming a prominent regional SRI hub. These measures aim to drive long-term ESG programs and initiatives.

    BALANCING IMMEDIATE NEEDS AND FUTURE SUSTAINABILITY

    While Budget 2024 focuses on promoting investments into conservation and the transition to a low-carbon economy, there are concerns about capacity enhancement needs and legal infrastructural gaps. Awareness needs to be raised among SMEs about the importance of sound ESG management. The budget lays the groundwork for economic instruments to facilitate Malaysia’s transition towards a low-carbon economy, but there is room for a broader focus on ESG factors to ensure long-term success.

    BLOOMBERG FIRESIDE CHAT – MALAYSIA’S ESG ACCELERATION

    In a recent Bloomberg fireside chat, Muhamad Umar Swift, Bursa Malaysia’s CEO, discussed how COVID-19 has spurred ESG adoption in Asia. Umar shared insights into Malaysia’s sustainability journey, highlighting Bursa Malaysia’s ESG initiation in 2010 with a vision to be ASEAN’s leading sustainable marketplace. ESG evolution in ASEAN focuses on education and Bursa Malaysia’s role in setting ESG transparency standards. Attracting global assets is a priority, aligning with local sustainability mandates and exploring avenues for sustainable investment. Regulatory influences, inspired by the E.U.’s Taxonomy, play a crucial role in attracting capital. Looking forward, public awareness is key to fostering a positive cycle. Bursa Malaysia actively encourages sustainable investment, aspiring to embed ESG values into the broader culture and society.

    GLOBAL COMPARISON

    Compared to ESG-focused budgets in neighbouring countries, Malaysia’s Budget 2024 takes commendable steps. However, lessons from Australia and Singapore highlight the importance of waste management, community education programs, and industry regulation for cohesive ESG practices.

    PRACTICAL TIPS FOR EVERYDAY INVESTORS

    Now, let’s translate these developments into practical tips for everyday investors: 1. Diversify with ESG Funds: Consider allocating a portion of your portfolio to ESG-focused funds. These funds invest in companies meeting high ESG standards. 2. Stay Informed: Regularly check ESG ratings of companies in your portfolio. Websites like FTSE Russell ESG ratings can be valuable resources for this information. 3. Explore Sustainable Sukuk: Keep an eye on opportunities in sustainable sukuk. These investments not only provide financial returns but also contribute to socially and environmentally responsible projects. 4. Engage in Sustainable Initiatives: Support companies actively involved in green initiatives. As consumers, your choices can influence corporate behaviour. 5. Long-Term Vision: Remember, ESG investing is a journey, not a destination. Companies embracing sustainable practices today may offer long-term value.

    LOOKING AHEAD

    As Malaysia advances in its ESG journey, there are exciting prospects for responsible investors. The upcoming trends in energy transition, food security, circular economy, and mobility transformation offer avenues for sustainable investments. Keep an eye on these developments to stay ahead in the evolving landscape of responsible investing. In conclusion, ESG is not just a financial trend; it’s a collective effort to create a better future. As you navigate the world of investments, consider the impact your choices can have on the environment, society, and corporate governance. Together, let’s shape a future where responsible spending is not just a choice but a way of life. Happy investing!

    (Sources: Bloomberg, The Star, PwC)

    This story is a contribution from Sajesh Kumar Paramasivam – Senior Partner at TorchBearer Consulting, a wealth management company that specializes in family wealth building through expert guidance.

  • Invest Johor’s Vision Unveiled

    Invest Johor sets its sights on a future where the state stands as a prominent global player, extending its economic reach beyond traditional sectors to embrace new frontiers that will shape the global economic landscape in the coming decade. The focus of these efforts spans a diverse array of industries, ranging from technology and innovation hubs to renewable energy, biotechnology, logistics, tourism, and smart city development. The strategic intent is clear – Johor aims to create an economic landscape that not only attracts global investments but also nurtures sustainable and inclusive growth within the state.

    In the realm of technology and innovation, Johor is positioning itself to become a hub that attracts investments in research and development, technology parks, and startup incubators. The global push towards sustainability is not lost on Johor, as it actively seeks investments in renewable energy, emphasizing solar, wind, and other green technologies as significant drivers of economic growth. With advancements in biotechnology and an ageing global population, investments in healthcare and biotech industries, including research facilities and pharmaceutical manufacturing, are gaining prominence.

    The rise of e-commerce has reshaped supply chain dynamics, and Johor, with its well-developed logistics networks, is poised to attract investments in efficient logistics and distribution centres. Additionally, the state’s strategic location and natural attractions make it an attractive destination for tourism and hospitality investments, including hotels, resorts, and infrastructure development to support the burgeoning tourism industry.

    Education and training facilities are not overlooked in Johor’s economic vision. Recognizing the long-term benefits of a skilled workforce, the state is actively investing in universities, vocational training centres, and programs that align with emerging industries. The concept of smart cities, integrating technology to enhance the quality of life for residents, is also part of Johor’s forward-thinking approach, focusing on sustainability, connectivity, and efficient resource management.

    As technology continues to reshape the financial industry globally, Johor is not lagging. Investments in financial services and fintech are seen as drivers of economic growth, encompassing the establishment of fintech hubs, support for startups, and the adoption of digital financial solutions. Sustainable agriculture practices and agribusiness investments are also part of Johor’s strategy for economic diversification, involving precision farming, agro-processing, and the development of agricultural technology.

    However, the success of these visionary investments depends on various factors, including government policies, infrastructure development, regulatory frameworks, and the ability to attract and retain talent. Johor recognizes the need to create an environment that fosters innovation, collaboration, and sustainable practices to ensure the realization of its economic aspirations.

    “The concept of Invest Johor is rooted in creating a dynamic economic landscape that not only attracts investors but also nurtures sustainable and inclusive growth in the state.”

    Beyond the strategic economic initiatives, Invest Johor is keenly focused on leveraging the state’s rich heritage. From a historical gateway to a modern economic powerhouse, Johor’s journey reflects resilience and adaptation. Invest Johor places a strong emphasis on strategic infrastructure development, enhancing transportation networks, logistics hubs, and technology parks to attract businesses involved in cutting-edge industries.

    Facilitating collaboration between industries and creating specialized clusters is another strategy to enhance competitiveness. The idea is to build ecosystems where companies, research institutions, and startups can collaborate and benefit from each other’s expertise. To attract investments in disruptive technologies, Invest Johor, in collaboration with MIDA, offers targeted incentives for companies involved in sectors such as biotechnology, information technology, and advanced manufacturing. These incentives may include tax breaks, grants, and other financial incentives to encourage businesses to establish and expand their operations in Johor.

    Talent development and retention play a crucial role in sustaining Johor’s economic momentum. Invest Johor collaborates with Unit Modal Insan Negeri Johor to focus on developing and retaining a skilled workforce. This involves collaborating with educational institutions to ensure that the local workforce is equipped with the necessary skills for emerging industries. The establishment of training programs and partnerships with universities and vocational schools is part of this long-term vision.

    Digital transformation is recognized as a key driver for staying at the forefront of economic development. Invest Johor supports businesses in adopting digital transformation strategies, including e-commerce, Industry 4.0 technologies, and smart city initiatives. This commitment to embracing digital technologies aligns with the global trend towards Industry 4.0 and the increasing reliance on digital solutions across various sectors.

    Sustainable development is a core principle guiding Invest Johor’s initiatives. The organization actively promotes sustainable practices in industries such as renewable energy, eco-tourism, and green infrastructure development. This commitment aligns with the region’s dedication to responsible and future-oriented economic growth. The emphasis on sustainability reflects a global shift towards environmentally conscious practices and resonates with investors who prioritize Environmental, Social, and Governance (ESG) factors in their decision-making.

    Invest Johor’s efforts extend beyond economic growth to actively engaging with the younger generation and entrepreneurs. The emphasis on attracting young talent and fostering a thriving millennial ecosystem is seen as a critical component of Johor’s economic strategy. Concrete examples of successful initiatives and stories showcase how the state leverages the dynamism of the youth to fuel economic growth and innovation.

    The responsible investor of today prioritizes ESG factors, and Invest Johor recognizes this shift. The organization takes measures to ensure that development in Johor is sustainable and environmentally responsible. This includes prioritizing green infrastructure development, supporting renewable energy initiatives, and ensuring compliance with environmental regulations. The role of investors in contributing to a green and equitable future is highlighted, encouraging them to be part of the sustainability journey in Johor.

    Johor’s embrace of disruptive technologies like AI and biotech positions it as an attractive destination for global tech giants and innovative startups. The article highlights some of the most exciting tech-driven projects or initiatives that are drawing attention from the global tech community. It also provides insights into how investors can contribute to building Johor’s tech ecosystem and harness its potential for future growth.

    The human element is not overlooked in this economic narrative. Real-life success stories of local entrepreneurs and foreign investors who found their dreams and profits in Johor are shared. These stories serve to resonate with readers, offering tangible examples of the opportunities and support provided by Invest Johor. The inclusion of investors’ testimonial videos adds a personal touch to the narrative, bringing the success stories to life.

    Invest Johor’s commitment to “Building a Better Johor Together” emphasizes active engagement with local communities. The organization recognizes the importance of inclusive and equitable growth, and this involves understanding the unique needs, challenges, and aspirations of the local community. The article provides insights into how investors can actively engage with local communities, building partnerships, measuring, and reporting impact, seeking input and feedback, and committing to long-term collaboration.

    To differentiate itself from other regional investment hubs like Singapore or Vietnam, Invest Johor leverages specific strengths, advantages, and strategic initiatives. The strategic location and connectivity of Johor, particularly its proximity to Singapore, provide a significant advantage. The focus on enhancing transportation and logistics infrastructure enhances connectivity and facilitates the movement of goods and people. Cost-competitiveness is highlighted as a key proposition, with lower operational costs compared to Singapore being an attractive factor for investors.

    Invest Johor further distinguishes itself through the development of special economic zones and industrial parks with tailored incentives for specific industries. The organization promotes a diversified approach, highlighting specific industries or sectors where Johor has a competitive advantage or is experiencing rapid growth. The focus on innovation and technology, with the promotion of research and development centres, technology parks, and partnerships with tech-focused organizations, positions Johor as a forward-thinking investment destination.

    “Johor’s economic strength lies in its strategic location, cost-competitiveness, and a diversified approach to industries. We envision a future where Johor stands out as a hub for innovation, sustainability, and vibrant economic activity, contributing significantly to Malaysia’s overall growth.”

    Sustainable development and a commitment to ESG factors are emphasized as differentiators for Johor. The integration of sustainable practices, including green infrastructure, renewable energy initiatives, and compliance with environmental regulations, aligns with the global trend towards responsible business practices. The ease of doing business and a supportive regulatory environment, along with a skilled workforce and education initiatives, are additional factors that contribute to Johor’s appeal as an investment destination.

    Looking ahead, Invest Johor envisions bold and audacious possibilities for Johor’s economic landscape in the next 5-10 years. While predicting the future is inherently challenging, envisioning transformative trends involves considering visionary scenarios. These include the emergence of Johor as a global innovation hub, a sustainable smart city with green infrastructure, a biotech and healthcare hub, a pioneer in renewable energy, a digital transformation epicentre, a global logistics and trade hub, a cultural and creative economy hub, and an integrated sustainable tourism destination.

    To prepare for disruptions and unexpected developments, Invest Johor outlines strategic measures to ensure adaptability and resilience. These include scenario planning, diversification of industries, maintaining an agile policy framework, investment in education and skills, international collaboration, digital infrastructure resilience, community engagement, environmental stewardship, crisis preparedness and response, and regular stakeholder consultation.

    Invest Johor’s vision for the future is comprehensive, spanning a diverse range of industries and focusing on sustainability, innovation, and inclusivity. The organization’s strategic initiatives and collaborative approach position Johor as a dynamic and forward-thinking investment destination. As the state navigates the complexities of a changing global landscape, Invest Johor remains committed to building a better future for Johor and contributing significantly to Malaysia’s overall economic growth.

  • ESG Evolution: COP27 to Carbon Stocks Insights

    In an era defined by mounting environmental concerns, social responsibility, and ethical governance, the rise of Environmental, Social, and Governance (ESG) principles has been nothing short of transformative. As the world grapples with the urgent need to address climate change and promote sustainable practices, ESG has emerged as a critical framework guiding both businesses and governments towards a greener and more equitable future.

    THE GENESIS OF ESG: PAVING THE PATH TO COP27
    The inception of ESG can be traced back to the mounting awareness about the consequences of unchecked environmental degradation and social inequality. ESG’s roots lie in the early sustainability movements that championed the need for responsible business practices, community engagement, and ethical corporate governance. At COP27, the trajectory reached a significant milestone, where nations congregated to address the accelerating climate crisis. COP27 heralded a renewed commitment to curbing greenhouse gas emissions, with a growing emphasis on collaborative global eff orts. This conference placed ESG’s relevance on the international stage, with environmental stewardship, social equity, and transparent governance at the forefront of policy discussions.

    ESG INTEGRATION IN MALAYSIAN BUSINESSES
    ESG’s imprint extends far beyond policy considerations, effectively permeating and reshaping the
    entire business landscape in Malaysia. Companies of all scales, ranging from industry giants to small enterprises, have astutely recognised that embracing and integrating ESG practices goes beyond aligning with global imperatives—it becomes a strategic decision that significantly influences
    brand reputation, financial performance, and long-term sustainability.

    In a study conducted by the Malaysia Institute for Supply Chain Innovation, it was revealed that businesses that prioritise ESG principles tend to outperform their peers in terms of financial performance. Notably, companies that demonstrated robust environmental and social practices experienced an average of 25% higher return on equity (ROE) compared to their counterparts who did not prioritise ESG considerations.

    Furthermore, a survey conducted by the Malaysia Business Ethics Institute (MBEI) disclosed that over 80% of consumers in Malaysia consider a company’s commitment to environmental and social responsibility when making purchasing decisions. This consumer sentiment highlights the pivotal role ESG plays in shaping brand perception and influencing consumer choices.

    Large corporations in Malaysia, such as Petronas, have proactively integrated ESG into their business strategies. Petronas’ initiatives to reduce carbon emissions through energy-efficient practices not only contribute to environmental goals but have also resulted in significant cost savings. The company’s investments in renewable energy and sustainable technology have not only earned it recognition as a responsible corporate citizen but have also attracted eco-conscious investors.

    In the realm of small and medium-sized enterprises (SMEs), a survey by the Sustainable Energy Development Authority Malaysia (SEDA) unveiled that over 70% of SMEs are actively seeking to enhance energy efficiency and adopt cleaner technologies. These efforts not only reduce the carbon footprint but also position SMEs as forward-thinking entities aligned with global sustainability trends.

    The Malaysian government’s efforts to incentivise ESG practices have also bolstered the integration of these principles. The introduction of tax incentives and grants for businesses engaged in eco-friendly
    initiatives has garnered increased interest and engagement from the corporate sector. This intersection of government support and business initiative demonstrates the growing recognition of ESG’s impact on
    long-term profitability.

    In essence, ESG integration in Malaysia transcends being a superficial trend, resonating deeply with both consumer preferences and financial realities. The data and statistics outlined above indicate that companies embracing ESG practices are not only meeting global ethical standards but are also carving a competitive edge in the market. As businesses continue to navigate an ever-evolving landscape, the significance of ESG in enhancing brand reputation, financial performance, and overall sustainability becomes irrefutable.

    MALAYSIA’S ESG JOURNEY: A PARADIGM SHIFT FOR SUSTAINABILITY
    Malaysia’s stride towards COP27 was marked by a series of proactive measures to align its policies and industries with ESG principles. A notable endeavour was the launch of the Bursa Carbon Exchange (BCX), Malaysia’s voluntary carbon market exchange. BCX not only embodies the nation’s commitment to net-zero emissions by 2050 but also symbolises Malaysia’s emergence as a key player in the global carbon credit ecosystem.

    According to Tan Sri Abdul Wahid Omar, Chairman of Bursa Malaysia Berhad, “The launch of Bursa Carbon Exchange is momentous as it will play a significant role in supporting the nation’s, and indeed the world’s, voluntary carbon market ecosystem.” This initiative positions Malaysia at the forefront of sustainable finance, marrying its role as a global Islamic financial marketplace with innovative carbon credit offerings.

    INVESTING IN CARBON STOCKS: NAVIGATING PROFITABLE SUSTAINABILITY
    Investing in carbon stocks has emerged as a compelling avenue for both environmentally conscious investors and those seeking lucrative opportunities. As the global drive towards sustainability gains momentum, carbon stocks present a unique convergence of responsible investing and financial growth. These stocks offer investors the chance to not only contribute to carbon reduction initiatives but also to reap potential financial rewards. Below, we delve into the top-performing carbon stocks of 2023 that exemplify the blend of sustainability and profitability.

    1. Carbon Streaming Corporation (NETZ.NEO and OFSTF.OTC)
    Carbon Streaming Corporation stands as a trailblazer in the carbon credit landscape, focusing on offset credits and securing high-quality carbon credits due to its early-mover advantage. Trading on the
    NEO exchange in Canada and the OTC market in the U.S., the company’s vision extends to listing on the NASDAQ in the near future. Analysts from institutions like TD, Bank of Nova Scotia, BMO, and H.C. Wainwright have endorsed Carbon Streaming’s potential, with an average price target of around US$4.50. Carbon Streaming’s strategic approach highlights its role as a leveraged play on the increasing demand and value of carbon credits within the voluntary carbon market.

    2. DevvStream (DESG.NEO)
    DevvStream, a new entrant in the arena, offers financing for green projects in exchange for carbon credit rights. Partnering with its parent company, Devvio, DevvStream leverages an advanced blockchain-based ESG platform. This B2B service provides a framework for global-scale enterprise management, ensuring regulatory-compliant transaction management, ESG reporting, and recordkeeping. DevvStream’s unique positioning within the ESG ecosystem makes it a compelling player with access to an expanding market.

    3. Base Carbon (BCBN.NEO)
    Base Carbon, akin to Carbon Streaming Corp., channels its efforts into financing carbon projects generating voluntary carbon credits. The company’s executed project agreements are poised to generate an estimated 34 million carbon credits, equivalent to approximately 3 million tonnes annually at full production. With a commitment of US$29.6 million for projects in Rwanda and Vietnam, Base Carbon tackles household energy inefficiencies through initiatives like fuel-efficient cookstoves and safe-drinking water purifiers. The company’s robust balance sheet, strong cash position, and strategic partnerships position it favourably for the projected growth in the voluntary carbon market.

    4. Brookfield Renewable Partners (BEP)
    Brookfield Renewable Partners stands out as a global leader in renewable energy and decarbonisation technologies. With an exclusive focus on clean energy, BEP’s portfolio comprises hydroelectric plants, wind farms, solar power plants, and other sustainable energy solutions. Their development pipeline, targeting a 46% increase in power capacity over three years, showcases their dedication to renewable expansion. BEP’s proven track record, stable business model, and extensive global presence make it a go-to choice for investors seeking exposure to carbon markets. With a strong dividend yield, consistent growth in distributions, and an emphasis on clean energy, BEP aligns seamlessly with the growing trend toward responsible investing.

    CARBON STOCKS ARE PAVING THE WAY TO A SUSTAINABLE FUTURE
    As more and more public companies declare their net-zero ambitions and disclose their carbon emissions, responsible investing is becoming a hot topic in financial markets. Big money is pouring into renewable energy and offsetting emissions using carbon credits. Meta, Apple, and Netflix are among the tech giants leading the charge towards net-zero targets by 2030. Meanwhile, major mining companies
    like Barrick and Newmont, as well as energy giants like Saudi Aramco, Exxon, and Shell, are also making similar commitments.

    These developments will likely increase investor interest in all things carbon-related in 2023 and beyond. And as 2030 draw closer, we can expect this trend to accelerate even further. Carbon stocks could prove a valuable addition to an investor’s portfolio as the world heads towards net-zero targets.

    ANTICIPATING COP28 AND BEYOND: A SUSTAINABLE TRAJECTORY
    As COP28 approaches, the world is poised to build upon the achievements of COP27. The momentum created by ESG initiatives, including the rise of carbon stocks, will likely shape discussions and actions at COP28. The success of these endeavours hinges on the concerted efforts of governments, businesses, and individuals to embrace ESG as an integral part of their strategies.

    The evolution of ESG from a concept to a driving force shaping sustainability and responsible governance is painting a promising picture of a world that acknowledges its responsibilities. With that, it is also taking proactive steps towards a greener, more equitable future.

  • 8 In 10 Malaysians Are Alarmed & Concerned About Climate Change In Malaysia

    8 In 10 Malaysians Are Alarmed & Concerned About Climate Change In Malaysia

    Right now, world leaders, climate scientists, and policymakers from across the globe are in Sharm El Sheikh, Egypt, for the Conference of Parties (COP 27). This is the largest climate change conference in the world, and it coincides with a Monash University Malaysia survey led by Dr Azliyana Azhari from the Monash Climate Change Communication Research Hub (MCCCRH) that has shown that 8 in 10 Malaysians are either alarmed or concerned about climate change.

    This survey is the first of its kind in Malaysia and saw over 1000 respondents. According to Dr Azhari the “survey aims to gauge Malaysia’s public perception and understanding on climate change and climate change impacts, alongside understanding the Malaysian audience’s behavioural responses towards climate change issues.”

    Dr Azliyana Azhari, Monash Climate Change Communication Research Hub (MCCCRH)

    Here’s what the takeaway messages are about what the Malaysian public knows about climate change and climate action. According to the survey, 97% of Malaysians are aware of climate change and understand it is happening. 82% know that human activities cause climate change. 32% believe climate change is presently causing harm to our daily lives, and 35% believe that climate change will cause harm to the Malaysian population within the next decade.

    The survey also noted individual actions and the willingness to change.

    • 65% bring their own shopping bags when buying groceries.
    • 63% have switched to environmentally friendly products.
    • 79% turn off electrical appliances and lights when not in use to reduce home energy.
    • The most common waste management behaviours are recycling (67%) and not openly burning trash (68%).

    The behaviours with the most significant proportion of people open to change are taking part in an environmental/climate change campaign (63% would like to or are planning to do this), installing household solar hot water or panels (79% would like to or are planning to do this), and composting kitchen waste (51% would like to or are planning to do this).

    With the growing occurrence of extreme weather events resulting from climate change, such as storms, floods, and droughts, at least 60% of Malaysians say that they have been affected directly or indirectly by these events, which leads to affecting their daily lives, health and economic well-being. It is not surprising that Malaysians are getting concerned and alarmed. These findings are stark and timely as the Malaysian delegation meets world leaders at COP 27 to work towards the reduction of Malaysia’s carbon emissions.

    About Monash University Malaysia

    Established in 1998, Monash University Malaysia is the third-largest campus of Australia’s largest University and the first foreign university campus in Malaysia. Monash University is a premier research-intensive Australian University ranked 44th in the world by the prestigious Times Higher education World University Rankings 2023. A self-accrediting university, the campus offers a distinctly international and culturally rich environment with approximately 9,400 students from 78 different countries.

    Monash Climate Change Communication Research Node

    The Monash Climate Change Communication Research Hub (MCCCRH) Malaysia Node was established in 2021. It is led by the School of Arts and Social Sciences (SASS) at Monash University Malaysia in collaboration with the Monash Climate Change Communication Research Hub (MCCCRH). It is dedicated to researching climate communications in Southeast Asia. The node brings together expertise in SASS with collaborators in the School of Science in Malaysia campus and the existing team in MCCCRH.

  • Why The Best Investment On Earth Is Earth Itself?

    Why The Best Investment On Earth Is Earth Itself?

    Raw land is a “Hands-off” investment. In fact, land is the ‘raw material’ for just about every property development. As a budding investor, you need to know just what kind of land is needed for an upcoming project:

    Is it the right size? The project may not be big enough to meet demand around the area. The individual unit size may or may not meet the demands of the demographic it is attempting to serve.

    Is it the right type? Is the land fit for agricultural projects, or is it better suited for industrial ones? Are there any environmental factors that may hinder project growth? If it’s a residential project, does it connect well with surrounding facilities (public transport, hospitals, etc)?

    Buying land is usually significantly cheaper while it is underdeveloped than land that has a useable structure constructed on it. It is clear that land is the raw material of any property development. Thus, the saying “the best investment on earth is earth (land)”.

    Might be a good read : 4 Tips To Invest For Long Term

    Land is always a scarce resource as it is non-produceable. Hence, developers are constantly on the lookout to increase their land banks.

    Acquiring the right type of land (agriculture, industrial, residential, commercial, etc) and the right size (density, plot ratio, type of usage and development, individual unit size, etc) will ultimately help decide the potential value of the land.

    Right Location?

    investment

    Is it at the right location? The area could already be matured, which could lead to a steady interest. If it’s an upcoming developing location, there may be a spike in valuation over time.

    Our strategy includes land acquisition for property development in Hong Kong (HK), probably one of the most challenging markets in the world. Population density, land scarcity, and off-the-charts growth make it an extremely complex one.

    However, we have managed to gain a foothold with a strategy of land bank acquisition, i.e., acquiring small tracts of land with an eye to future development, taking into consideration the political, social, environmental and cultural realities of HK. 

    When we were first introduced to land acquisition opportunity in HK, we felt excited to explore more and eventually got involved due to HK properties which are ranked among the most expensive in the world. And with land scarcity, it all boils down to capitalising on demand and supply.

    Below are some key indicators that will be used to decide if the stipulated land will be suitable for this strategy.

    As a rule of thumb: Islands with scarce build-able land and high population density with high PPP or FDI will never go wrong.

    Please keep in mind the information below is an example to help you understand details on a new level and I would like to remind you that every opportunity is different. You must always do your own research before you commit anything.

    Location, Political System And Economy

    investment

    With a landmass of 1,104km2 and a population of over seven million people, HK is one of the most densely populated areas in the world. As of 2018, HK’s gross national income (GNI) per capita is US$67,810 Purchasing Power Parity (PPP) dollars and its gross domestic product (GDP) per capita is US$64,597 PPP, according to the World Bank.

    Under the principle of “One Country, Two Systems”, HK has a different political system from mainland China. The law of HK is based on the rule of law and the independence of the judiciary where the constitutional framework is provided by the HK Basic Law. 

    The Lands Department in HK is practicing the British system, which is common law and familiar to us when we invest.

    Hong Kong has a free market economy and it is highly dependent on international trade and finance.

    Alternative To Land Acquisition

    investment

    One of the alternative proposals to land acquisition is leasing the land from landowners for a certain lease period. Leasing land may also support sustainable project development since the lands need to be returned to the landowners at the end of the lease period in a condition similar to its original form without considerable environmental degradation.

    When the land is leased then anybody who has to otherwise give up land or livelihood will be compensated for its growing valuation over time. In this model, the landowner lends her land to the government for a steadily-increasing rent, or through an annuity-based system.

    In any case, how do we contrast this with what we are doing in Malaysia?

    Despite having already established viable businesses in more than 10 countries, and being able to show healthy profits in most of them, I am still bullish about the place I call as home. I believe there are many areas where both local and foreign investors can invest their funds for very healthy returns on investment.

    We tend to believe that we need a lot of money to invest, but it’s not always true. But it can be done.

    You have to be able to make different kinds of investment, like investing time in doing proper research and learning about markets, that will help you make well-informed decisions and taking a calculated risk. Be consistent. Your attitude towards small things should be the same as your attitude towards big ones.

    Some “good” and “bad” qualities vary from one community to another. If the investor knows the local community, they could know better which parts of the land or town are less or more desirable.

    It is always smart to rent in a new community before committing to purchase a land for investment. Sometimes, renting allows the investor to become familiar with the location.

    “Location, Location, Location” Makes All The Difference

    “If you are avalanched by adversity, hold on. Don’t give up; rebuild. Make decisions and stick to them.”

    About the Author

    Max Shangkar is group CEO of Max Capital Management Holding Ltd and an expert in global project management consultancy. He is also the author of the best-selling book Investment Strategies for Global Real Estate.

    He propounded the market-proven investment strategies of Property Investment Life Cycle and Business Investment Life Cycle that educated over 6,000 Global Investment Community members to invest in property projects and businesses in over 10 countries.

  • Wisdom Of Investing In Passive Environmental Design

    Wisdom Of Investing In Passive Environmental Design

    Our KL Petronas Towers do not even feature in the top 10 tallest buildings in the world today (Well, maybe Merdeka 118 is on the list now). The Burj Khalifa, at 828m, which sits in the 2 sq km Downtown Dubai Development holds the current highest record.

    Most of these ultra modern glistening towers comes with a massive urban township development. The Jeddah Tower, which is on hold currently, is threatening to be the next tallest surpassing 1km in height. 

    These large developments hundreds of acres in size involves high finances, entrepreneurship and high technology. All of it carries a heavy physical demand on the land it sits on to cater to the desired lifestyle. High technology is then sold as the solution to meet these modern lifestyles boasting of innovation where there is a control for everything from climate to commode.

    This is a sign of the times we live in – where there is a headlong rush into this technological frenzy which is then touted as being green and environmentally friendly. There are even brownie points given for technology promoted in green buildings.

    However, there has not been enough consideration of the impact of producing these man-made products. Some of these materials are potentially hazardous and unwittingly, we are increasing the consumption of these resources. So the costs of making green buildings may not be so green after all. 

    We are unfamiliar with substances like tetrachloride, cadmium telluride, or flourinated hydrocarbon. Some of these toxic materials used in building technology products are yet to be fully ascertained on its long term environmental impact.

    Also, all technology products have a lifespan and it is getting shorter as the technology itself changes. In many instances, the reliance on technology demands active energy to maintain a comfortable living environment.

    These are the running costs involved, not to mention replacement costs which is all great for the tech business but not so for a sustainable lifestyle. We need to revisit our senses and sensibility on the possible over reliance on technology. 

    Harnesting The Earth’s Energy

    Investing passive enviromental design

    Alternatively, consider this, we can draw from nature by responding to reproduce the natural passive environment by harnessing the earth’s energy for an urban solution. For instance, mimic nature and create a green canopy cover to provide shade.

    Shading under a tree provides protection to shield against the harsh tropical sun and how remarkably comfortable and safe it feels like a sensation.  These shading over the exposed hard road and structural surface areas will minimize and reduce heat gain, which reduces further warming in the tropical heat.      

    The ancient Chinese practice of practical Feng Shui, not the mystical one, has a lot of environmental wisdom in carefully positioning the built form on the land as a response to nature. Orientate the built form to be sensitive to the microclimate to draw the prevailing wind into the created spaces. The system relies on the wind to force exterior air already cool under the green canopies into the building.

    It uses the differential air pressures to be directed as cross ventilation. This wind cooled form harnesses the dynamics of natural air flow to mimic a condition similar to resting below a tree canopy. The practical significance is to replace air conditioned spaces with natural ventilation and less energy is required to cool the ones that has less heat gain.

    Natural lighting is another fundamental consideration in passive environmental design. The shading must not be misunderstood as the omission of sunlight but the direct light and glare redirection.  Natural light has an emotional and therapeutic feel-good effect on human beings. Designs that allow natural light to permeate the spaces create a desirable habitable environment.  It will eliminate the need for artificial lighting.

    The default mode of reliance on technology has allowed too many deep sterile and practical spaces to exist—many of these spaces house working people who psychologically do not know if it’s night or day.  

    Do Not Idolise Technology

    investing technology

    The natural environment is a greater ally if you harness its natural potential.  Do not idolize technology to dominate your mindset. There is a place where technology does matter when it does more good than bad.  Technology is there to supplement and facilitate. No greenhouse gas emissions are released into the atmosphere when solar power is used to create electricity. 

    Converting waste into power generation is another worthy technological advancement which will reduce the by product of the urban lifestyles. Electric transport systems supplanting fuel cars within urban developments also reduce fuel consumption and carbon emission.

    The passive environmental design prioritizes the optimization of nature’s forces over our human determination to compel the physical environment to bend to our will.  When we learn to work with nature, we run faster because the background can look after itself better.

    Empty your mind, be formless, shapeless – be like water.

    The legendary Bruce Lee had quoted with the wisdom of the oriental martial arts.

    It is a philosophy to borrow someone else’s energy to work in your favor. It would help if you took your mind to understand how to yield to the forces of the natural environment to work for you. If you invest wisely, you create a living environment that draws from nature to cost you less.

    About the author

    Ng Wai Keong is the principal director of NWKA Architects Sdn Bhd, a boutique architectural design house which focuses on his passion to conceptualise the idea that success is a process of design excellence.

  • ESG Resilience: Is Green the New Gold?

    ESG Resilience: Is Green the New Gold?

    As the COVID-19 pandemic continues to dampen financial markets, funds with Environmental, Social and Governance (ESG) strategies have seen their fortunes rise.

    In fact, major ESG funds have outperformed classic indices like the S&P 500 during the first weeks of the pandemic, and several ESG funds were able to soften the blow to loss in value as compared to standard non-ESG benchmarks.

    This is bolstered by the fact that worldwide investors had poured US$45.6 bil into ESG funds in the first quarter of 2020 as compared to outflows of US$384.7 bil for the overall fund universe, according to research firm Morningstar.

    To capitalise on this growing demand for ESG funds, Affin Hwang Asset Management Bhd recently unveiled the Affin Hwang World Series – Global Sustainability Fund (the fund). Launched on 14 September, it feeds into the Allianz Global Sustainability Fund (Target Fund).

    As a feeder fund, it will invest at least 80% of its net asset value (NAV) into its collaborating partner’s Allianz Global Sustainability Fund with the remaining 20% of its NAV into money market instruments, deposits and/or cash. The Target Fund is a Luxembourg domiciled fund managed by Allianz Global Investors.

    For context, ESG funds are portfolios of equities and/or bonds for which environmental, social and governance factors have been integrated into the investment process.

    Changing Demographics and Trends

    Affin Hwang Asset Management chief marketing & distribution officer Chan Ai Mei says the new ESG fund provides an avenue for investors to buy into global quality stocks with sustainable growth, whilst investing according to their own principles and beliefs.

    “Changing demographics and trends, coupled with the unprecedented impact of the Covid-19 pandemic, have only accelerated the adoption of ESG by both businesses and the investing community in their decision-making.

    “Our belief is that good governance ultimately leads to better financial performance, with industry research showing positive correlation between ESG and stronger returns over the long-term,” Chan adds.

    The base currency of the fund is the US dollar. The fund is offered in four currency classes, namely USD Class, MYR-Hedged Class, SGD-Hedged Class and AUD Hedged-Class. The minimum investment amount is $5,000 for all listed currency classes.

    Commenting on how the ESG space has fared in the aftermath of the coronavirus-related financial crisis, Allianz Global Sustainability Fund lead portfolio manager Paul Schofield says the pandemic in and of itself may not have huge issues on ESG investing. Rather, it may highlight some areas and downplay others.

    “The trend for ESG has long been established and has been increasing year on year. ESG is just one tool in the toolbox that investors may use when analysing companies. We do not believe Covid-19 will change that; the trend was already in place and it is only going one way,” he tells Smart Investor.

    “I have been told again and again by people on the other side of the table that ‘ESG is a bull market phenomenon’ and ‘no one will care when markets are under stress’. Hence, the year 2020 has certainly been a good opportunity to test those theories!”

    Shifting the Focus to ESG

    Despite the existing trends surrounding ESG investing, there is no doubt that the focus has shifted a little in the face of the pandemic.

    According to Schofield, the governance element of ESG was always the easiest one to talk about, as everyone understood this and was  comfortable that good corporate governance is a ‘good thing’.

    However, in the past few years, the clear focus of ESG was the ‘E’ – the environmental benefits. In particular, climate change was the area that clients had a particular connection with. The ‘S’ – the social part of the equation – has always been the difficult one to discuss with people, and the pandemic has helped to highlight some of the social factors a little more, he adds.

    “The need to get the economy back and firing means working conditions, for example, will need to be managed closely all around the world. Companies will have to convince its employees, trade unions and regulators that workers will be kept safe.

    “This will be much discussed going forward, and topics will include healthcare, access to medicine, education, and health and safety – all of which were areas that were less discussed pre-pandemic,” Schofield explains.

    The Investment Strategy

    The Allianz Global Sustainability strategy invests in a diversified mix of companies on the global stock market that aims to generate long-term out-performance and a positive, measurable impact on society.

    The investment process is a collaborative effort consisting of four stages: SRI Ratings; Idea Generation; Team Stock Selection; and Portfolio Construction.

    The strategy takes a ‘Best in Class’ approach to SRI, seeking to own companies which outperform sector peers on ESG criteria. ESG performance is assessed using AllianzGI’s proprietary SRI Ratings model.

    The strategy also aims to avoid stocks with reputational risks, excluding stocks with significant revenues from coal, tobacco, alcohol, weapons, gambling and/or pornography.

    The model ranks stocks as Best in Class, Average or Worst in Class. Thereafter, using bottom-up fundamental analysis, the portfolio managers construct a concentrated, diversified and long-only portfolio of c.50 stocks with superior financial and ESG performance.

    The team analyses all potential investments from the bottom up, considering stocks in terms of their quality, growth and valuation characteristics. The focus is on high quality companies generating returns sustainably above the cost of capital, with a clear growth trajectory, on reasonable valuations.

    These stocks tend to be excellent franchises, operating in sectors with low competitive intensity and high barriers to entry. The valuation discipline is based on reverse discounted cash-flow analysis.

    “The strategy invests primarily (at least 75% of portfolios) in companies that are considered ‘Best in Class’ according to our SRI ratings. It can also invest up to 25% of the portfolio in ‘Average’ rated stocks that have demonstrated a commitment to improving ESG performance,” explains Schofield.

    This flexibility incentivises the portfolio managers to engage with investee company managements to press for continued ESG improvements.

    “We believe that superior ESG performance may ultimately translate into share price appreciation. As a result, this mechanism is an important source of alpha for the strategy, as well as positive, societal impact. The strategy cannot hold any worst-in-class rated names.”

    By Bernie Yeo

     

    This article was first published in the November-December 2020 issue of Smart Investor.