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How ESG metrics are integrated into financial reporting for Malaysian companies?

The integration of ESG metrics into financial reporting for Malaysian public listed companies (PLCs) is driven by several key regulatory frameworks and initiatives:

 

 

Bursa Malaysia Sustainability Reporting Framework:

- This framework requires PLCs to disclose their material ESG risks, opportunities, management approaches, and performance data.

- It emphasizes the importance of integrating ESG considerations into the company's overall strategy and decision-making processes.

 

2. Integrated Reporting:

- The Bursa Malaysia Corporate Governance Guide encourages PLCs to adopt integrated reporting, which links a company's financial and non-financial (ESG) information.

- Integrated reporting helps companies better articulate their value creation story and the connectivity between their strategy, resources, and performance.

 

However, Malaysian companies face several key challenges in the integration of ESG metrics into financial reporting:

 

1. Data availability and quality:

- Collecting, verifying, and reporting accurate ESG data can be a significant challenge, especially for smaller companies with limited resources.

- Inconsistent reporting standards and the lack of a centralized ESG data repository can also hinder data comparability.

 

2. Lack of internal expertise:

- Many companies lack the in-house expertise and skills to effectively identify, measure, and manage material ESG risks and opportunities.

- This can make it difficult to integrate ESG considerations into financial decision-making and reporting.

 

3. Complexity of ESG issues:

- The breadth and complexity of ESG topics, such as climate change, human rights, and supply chain management, can make it challenging for companies to determine the most relevant and material issues to report on.

 

4. Resistance to change:

- Integrating ESG into financial reporting often requires a shift in mindset and organizational culture, which can be met with resistance from some stakeholders.

- Overcoming siloed thinking and aligning different departments and business units can be a significant challenge.

 

To address these challenges, Malaysian companies are increasingly seeking support from ESG advisory firms, utilizing integrated reporting frameworks, and leveraging technology-based solutions to streamline their ESG data collection, analysis, and reporting processes.

 

Overall, the integration of ESG metrics into financial reporting is a crucial step for Malaysian companies to demonstrate their commitment to sustainable development and enhance their long-term value creation for stakeholders.