ESG News | July 2024 Roundup
As the landscape of Environmental, Social, and Governance (ESG) regulations continues to evolve, staying abreast of the latest ESG news is crucial for Malaysian Small and Medium-sized Enterprises (SMEs). July 2024 brought a wave of local and global news that SMEs cannot afford to overlook.
This post aims to dissect the latest ESG updates, offering actionable insights and advice to help Malaysian SMEs navigate changes effectively.
Local ESG News
Joint Committee on Climate Change meet to form new strategies
The Bank Negara Malaysia and Securities Commission Malaysia's Joint Committee on Climate Change (JC3) held its thirteenth meeting on 23 July 2024, focusing on progress and new strategies. Key initiatives discussed included developing national emissions factors for key industries through government-financial sector collaboration and reducing reporting burdens on companies by standardising templates and sharing information among financial institutions with consent.
Additionally, JC3 agreed to establish the Climate Finance Innovation Lab, led by Bank Pembangunan Malaysia Berhad, to accelerate decarbonisation through innovative financial solutions, support pilot projects, and expand green financing opportunities. The updated JC3 Climate Data Catalogue, to be published in December 2024, will feature new data items on biodiversity and nature-related financial risks.
The meeting also addressed finalising the National Sustainability Reporting Framework following public consultation on using International Sustainability Standards Board (ISSB) standards. They emphasised the importance of gathering stakeholder feedback to ensure consistent and reliable sustainability disclosures.
Supporting SMEs in climate transition remains a priority, with ongoing ESG awareness workshops and financing facilities like the High Tech and Green Facility (HTG) and Low Carbon Transition Facility (LCTF). Efforts continue to enhance the ESG Jumpstart Portal for SMEs. J
C3, in collaboration with the Ministry of Economy, organised an engagement session on the National Energy Transition Roadmap (NETR) to increase visibility on catalyst projects and funding needs.
The second JC3 Upskilling Sustainability Training (JUST) series will launch on 6 August 2024, focusing on integrating climate risk assessment into strategic risk management.
Carbon Credit Fraud Targeted By Malaysian Government
Malaysia is advocating for an ASEAN-wide standard for carbon projects to ensure credibility and prevent fraud in the carbon credit market. The Natural Resources and Environmental Sustainability Minister, Nik Nazmi Nik Ahmad, presented this proposal at the Unlocking Capital for Sustainability conference. The call for a regional framework aims to enhance the effectiveness of carbon credits by establishing high standards and facilitating regional cooperation.
This initiative coincides with Malaysia launching its first nature-based carbon credits on the Bursa Carbon Exchange. The Kuamut Rainforest Conservation Project, spanning 83,381 hectares in Sabah, was highlighted as a significant milestone, emphasising the need for a unified ASEAN approach to support similar future projects and achieve collective climate goals.
Experts outline the importance of ESG practices for Malaysian SMEs
At Hong Leong Bank Bhd's 11th Sustainability Roundtable, experts highlighted the need for Malaysian SMEs and mid-cap companies to proactively engage with environmental, social, and governance (ESG) practices to prepare for the European Union's Carbon Border Adjustment Mechanism (CBAM), set to take effect in 2026. CBAM will impose a carbon price on imported goods into the EU, adding costs to Malaysian exports unless the country adopts its own carbon pricing system.
Ong Kian Meng from Taylor's University emphasised that SMEs should aim to be Scope 3-compliant, collecting and providing data on the carbon footprint of their goods to stay competitive and gain market share.
The roundtable, themed "Greening the supply chain: The Malaysian corporate sector and the global sustainability revolution: A win-win convergence," stressed the importance of having the right tools to measure and report greenhouse gas emissions. Richard Baker from PwC underscored the need for companies to educate their teams on tracking and monitoring emissions.
The steel sector faces significant challenges due to its high carbon intensity. Datuk Seri Tai Hean Leng of Malaysia Steel Works highlighted the sector's need for greener technologies, noting his company's switch to lower-emission induction furnaces.
Speakers also urged businesses to view ESG as a competitive advantage rather than merely a compliance requirement. Ong suggested that a long-term energy plan and continuous digitalisation could help optimise energy use.
By aligning with national, regional, and global trends, companies can make ESG a compelling value proposition. They mentioned Bursa Malaysia's central sustainability intelligence (CSI) platform as a tool to help listed and unlisted companies collect and report sustainability data seamlessly, thus integrating into the broader ESG ecosystem and gaining a foothold in new markets like the EU. MyGreenlight ESG reporting software also offers a comprehensive and easy-to-use way to create necessary reports.
Petronas steps up its ESG commitments with carbon capture plant
Petroliam Nasional Bhd (Petronas) has signed a land rental agreement with Kuantan Port Consortium Sdn Bhd to establish a carbon capture and storage (CCS) hub in Pahang. The financial details and specific location were not disclosed, but Petronas' subsidiary, Petronas CCS Solutions Sdn Bhd (PCCSS), was behind the agreement.
The Southern Carbon Capture and Storage Hub will likely commence its first injection by 2029. This hub aims to significantly reduce carbon emissions for hard-to-abate industries both locally and internationally, such as steel, chemical, cement, power generation, and petrochemical sectors in Pahang.
The CCS hub will enhance Malaysia's energy transition and decarbonisation efforts, connecting industrial areas in the west of Peninsular Malaysia and the Asia Pacific. The collaboration will also facilitate knowledge transfer between Petronas and Kuantan Port, leveraging the port's expertise in handling diverse cargo and fostering regional trade growth.
Concurrently, Petronas is developing its first CCS project in the Kasawari gas field offshore Sarawak, with the first carbon dioxide injection planned for late 2026. The company has partnered with ExxonMobil and Shell Malaysia to explore additional CCS projects. It aims to allocate 20% of its annual capital expenditure from 2022 to 2026 towards decarbonisation efforts. These initiatives align with Petronas's commitment to achieving Net Zero Carbon Emissions by 2050, advancing CCS as a critical solution for emissions reduction in the Asia Pacific region.
Low ESG commitment in Malaysia
According to Bernama News, Bursa Malaysia reported that only 18% of companies across 13 sectors have been assigned Environmental, Social, and Governance (ESG) scores. This low percentage reflects the ongoing challenges and the need for greater efforts in sustainability reporting and transparency among publicly listed companies.
The exchange emphasises the importance of ESG practices, urging more companies to adopt these standards to enhance their sustainability and attractiveness to global investors.
Malaysia's New ESG-focused news platform
The introduction of ESGNewslytics.AI, a platform by the PR tech start-up publiCT.io, has significantly enhanced Malaysia's ESG narrative. This platform leverages AI to improve the analysis of news coverage related to Environmental, Social, and Governance (ESG) topics, thereby providing companies with deeper insights into their ESG performance and public perception.
This development aligns with Malaysia's broader strategy to boost its ESG initiatives and attract global investments. The platform's advanced analytics tools will aid companies in understanding and improving their ESG practices, ultimately supporting the country's sustainability goals and enhancing its competitiveness in the global market.
Rail project's ESG objectives
The East Coast Rail Link (ECRL) project in Malaysia, constructed by China Communications Construction Company Ltd. (CCCC), is poised to enhance the country's logistics connectivity and support its environmental goals. The ECRL aims to reduce carbon emissions and promote sustainable development by transitioning freight transport from trucks to electrified trains.
This project aligns with Malaysia's ESG (Environmental, Social, and Governance) objectives, contributing to green transformation efforts while also improving the efficiency and capacity of the nation's transportation infrastructure.
Sharia-focused ESG framework launched
In partnership with INCEIF University, Ficus Capital has introduced the ESG-i framework, which integrates Environmental, Social, and Governance (ESG) principles with Islamic values. They designed this framework to assist micro, small, and medium enterprises (MSMEs) in expanding their markets and attract investment by enhancing their governance and sustainability practices.
Abdullah Hidayat Mohamad, co-founder of Ficus Capital, emphasises that companies adhering to good governance and shariah principles tend to be more sustainable and successful, with significant overlap between shariah and ESG principles.
The ESG-i framework considers the quadruple bottom line (QBL) concept, encompassing four pillars: people, planet, profit, and principle. The principle pillar focuses on governance and Shariah compliance. MSMEs can assess their ESG-i compliance via an online portal and receive a report that details their scores in each pillar.
This initial assessment is free, but a more detailed report is available for a fee. INCEIF University has simplified the questionnaire to make ESG concepts accessible to MSMEs, aiming to increase awareness and adoption of ESG practices among SMEs, which currently stands at a low 3%.
Plans for the framework include further development and collaboration with Islamic financial institutions to enhance data and depth. Marjan Muhammad from INCEIF University hopes the framework will significantly boost MSMEs' readiness and sustainability practices, marking the beginning of a broader initiative to integrate ESG and Islamic principles in business practices.
Global ESG Trends Impacting Malaysia
Thailand investing in ESG
The Thai government has approved measures to enhance investments in Environmental, Social, and Governance (ESG) performances. These steps include tax incentives, subsidies, and regulatory support to encourage businesses to adopt sustainable practices. The initiatives are part of Thailand's broader strategy to attract more ESG-focused investments and bolster its commitment to sustainable development.
This move should improve the country's environmental sustainability, social responsibility, and governance standards, positioning Thailand as a regional leader in ESG investments.
United States delays ESG disclosures release until October 2024
As reported in June's news review, the United States is working on introducing new climate risk disclosure requirements through the Securities and Exchange Commission (SEC). The SEC has delayed implementing new rules on environmental, social, and governance (ESG) disclosures until October, which will push back the enforcement of regulations designed to combat greenwashing.
The proposed rules aim to increase transparency by requiring companies to disclose detailed information about their human capital management practices, including workforce diversity and turnover rates. This move is part of the SEC's broader effort to ensure that companies' ESG claims are accurate and substantiated.
The postponement reflects ongoing debate and concerns among businesses and stakeholders about the impact and practicality of these new disclosure requirements. The SEC seeks to balance the need for comprehensive ESG reporting with the practicalities of compliance for companies, especially smaller ones. The additional time will allow for further discussions and adjustments to ensure the final rules are effective and manageable.
Compliance with these international standards is crucial for maintaining market access and investor confidence. Consequently, Malaysian SMEs should consider collaborating with international consultants to understand and implement these complex requirements. Staying proactive in adapting to global ESG trends can enhance competitiveness and open up new markets for growth.
ESG at the Olympics
As a premier global sporting event, the Olympics influence environmental, social, and governance (ESG) principles. Integrating ESG considerations into the Games is essential for promoting sustainability, ethical governance, and social inclusion. Key ESG topics addressed by the Olympics include environmental sustainability in infrastructure, climate change mitigation, and water conservation.
For example, the Tokyo 2020 Olympics used sustainable timber for stadium construction, and the Paris 2024 Games aims to halve previous games’ carbon emissions through various green practices. Additionally, the Olympics focus on reducing water usage and managing waste effectively, setting benchmarks for future events.
Other important ESG aspects involve biodiversity conservation, human rights, and labour standards. The Paris Olympics planning included efforts to ensure that venue construction does not harm local ecosystems and that the Games uphold fair labour practices and promote inclusivity. Community involvement is also a key focus, with initiatives to create lasting benefits for local populations through job creation and infrastructure improvements.
Transparency and anti-corruption measures are crucial to maintaining trust and integrity in the Games. By addressing these topics, the Olympics strive to be a model of sustainable and ethical global sporting excellence, inspiring similar practices in other international events.
Challenges facing EU companies with new European Sustainability Reporting Standards
The European Financial Reporting Advisory Group (EFRAG) report reveals both challenges and progress in implementing the European Sustainability Reporting Standards (ESRS) among EU companies. The report highlights that while companies are making strides in integrating ESG (Environmental, Social, and Governance) factors into their reporting practices, they face significant hurdles. These challenges include difficulties in gathering and verifying data, adapting to complex reporting requirements, and aligning with diverse stakeholder expectations.
Despite these issues, the report underscores positive developments, such as increased awareness and commitment to sustainability reporting. Companies are progressively improving their ESG disclosures and integrating sustainability into their strategic planning. EFRAG's findings suggest that while the transition to ESRS is still evolving, current efforts are laying a foundation for more robust and transparent sustainability reporting in the future.
The ongoing adjustments and enhancements will be crucial for meeting regulatory expectations and fostering greater accountability in ESG practices. Malaysian companies doing business with the EU must watch this story to stay caught up on the ESG metrics required.
Upcoming ESG/Sustainability Events
Malaysia:
Transform Your Business for a Sustainable Future
August 13 1-5 pm
ELM Graduate School, Jalan Semantan Kuala Lumpur, Federal Territory of Kuala Lumpur 50490
Renewable Energy & ESG Conference 2024
September 9 & September 10
Sime Darby Convention Centre, 1A Jalan Bukit Kiara 1 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur 60000
Online/Global:
GRI-ESRS Linkage Service: making transition easier for GRI reporters
July 25 (2 sessions: 3:30 pm or 11 pm)
Online
3rd Annual Global ESG and Sustainability Summit
September 19 & 20
Pullman, 19 Rue Du Commandant René Mouchotte, Paris, France
Certified Sustainability ESG Practitioner Program, Leadership Edition 2024, with Live Zoom Sessions
September 27 10:00 am EDT & October 1 @ 1:30 pm EDT
Online
Related Blog Posts:
ESG News | June 2024 Roundup
From Carbon Footprints to Governance: Understanding ESG Reporting Terminology
