EPF committed to adopting ESG investment and practices

KUALA LUMPUR – The move by Malaysia’s Employees Provident Fund (EPF) to fully adopt Environmental, Social and Governance (ESG) investing and reinforcing its commitment will benefit many.

Finance Minister Tengku Datuk Seri Zafrul Aziz remarked that the institutionalising ESG practices in EPF’s investments will have its benefits go down the value chain of Malaysia’s capital markets, that would ultimately benefit citizens.

EPF is the country’s largest institutional investor that is also a pension fund. It is currently committed to two overarching sustainable investment goals which are ESG compliance by 2030 as well as having a climate-neutral portfolio by 2050.

The fund has the Sustainable Investment Policy, Priority Issues Policies, and Priority Sector Policies in place to guide them towards its sustainable investment goals.

EPF is also incorporating more climate-resilient, socially responsible practices and sound corporate governance in more of its investees.

Recently, 16 of EPF’s external managers had pledge to incorporate ESG considerations before making investment decisions. They are also collaborating with EPF to further promote the ESG agenda.

During the launch of EPF’s sustainable investment policy, Tengku Zafrul lauded the pledge as a great starting point. He then said that although these policies must be holding high global standards with its frameworks, its principles and approach should be more tailored to local needs and requirements as well as national objectives.

He added that it is to ascertain a fair and equitable transition that recognises each country’s unique strengths, characteristics and challenges when it comes to realising these objectives.

ESG can set labour standards

Tengku Zafrul also said that the government is confident that EPF’s workers’ wellbeing policy will be an example of the country’s commitment to achieving better wellbeing for workers. This comes as labour standards are getting globally scrutinised.

Malaysia is already facing scrutiny due to its treatment of foreign labour by the nation’s corporate society to which he said that these issues have a tangible effect to business profitability and also the country’s reputation.

He added that this is why sustainable or ESG investments is becoming more important and not limited to already developed countries.

Bloomberg Intelligence previously noted that global ESG assets are currently on the path to exceed over US$53 trillion by 2025. This value accounts for more than a third of the expected total assets under management of US$140.5 trillion.

For this reason, Malaysia’s hasty foray into ESG assets is expected due to the predicted long-term gains. The MSCI Malaysia ESG Leaders index, for example, clearly beat the MSCI Malaysia Index across three, five, and ten years.

Aside from that, Tengku Zafrul stated that the Ministry of Finance is in the midst of budget-tagging measures in order to make sure that ministries spend in line with their sustainability goals

In other developments, Tengku Zafrul said the Ministry of Finance (MOF) has already begun budget-tagging specific measures to ensure that various ministries spend in accordance with their sustainability expectations.

“To maintain the momentum of this mainstreaming process, institutional investors must share key data on how each industry in their ecosystem has ‘shaped up’ in terms of sustainability,” he added.

As a result, future policies can be adjusted to strengthen Malaysia’s climate adaption and crisis mitigation plans as quickly as possible.

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