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What are the primary methodologies or frameworks used for assessing and benchmarking ESG performance?

The key frameworks and standards utilized by Malaysian companies and investors for ESG assessment and benchmarking include:

 

1. Bursa Malaysia Sustainability Reporting Guide:

- This is the primary regulatory framework mandated by Bursa Malaysia for listed companies to report on their ESG performance and practices.

- It provides guidance on material sustainability matters, reporting principles, and disclosures.

 

2. Global Reporting Initiative (GRI) Standards:

- Many Malaysian companies adopt the internationally recognized GRI Standards for their ESG reporting.

- The GRI framework covers a comprehensive set of economic, environmental, and social indicators.

 

3. Task Force on Climate-Related Financial Disclosures (TCFD)

 

- Is a framework that focuses on improving and increasing reporting of climate-related financial information, including risks and opportunities related to rising temperatures, climate policies, and emerging technologies.

- Within Bursa Malaysia’s enhanced sustainability practices and disclosures, by 2025 it is compulsory for Main Market-listed issuers to report based on the TCFD, while in the year after, that is 2026, this will be extended to the ACE market-listed issuers.

4. FTSE4Good Bursa Malaysia Index:

- This index, developed by FTSE Russell in collaboration with Bursa Malaysia, assesses and tracks the performance of companies demonstrating strong ESG practices.

- It serves as a benchmark for investors to identify well-managed and sustainable Malaysian companies.

- What Bursa Malaysia does is that it has introduced an ESG Grading Band system where a PLC is rated 1 to 4 stars, with 4 stars meaning that they rank among the Top 25% of ESG rating based on the FTSE4Good Bursa Malaysia Index. These ratings are publicly available, and Bursa Malaysia has moved to cover all PLCs in the Main Market meaning that they will be issued FTSE4Good scores, and soon this process will include companies in the ACE Market as well.

- In other words, this is one of the key means of how companies are accessed/benchmarked in Malaysia.

 

5. CDP (formerly Carbon Disclosure Project):

- Some Malaysian companies participate in the CDP, which provides a global platform for disclosing environmental impact, including climate change, water security, and deforestation.

 

The ESG frameworks and methodologies used in Malaysia are generally aligned with international best practices. However, there is still room for improvement in terms of the depth and breadth of ESG disclosures, as well as the level of assurance and verification of reported information.

 

Regulatory bodies in Malaysia, such as Bursa Malaysia and Bank Negara Malaysia (BNM), have been proactive in driving the adoption of ESG practices and reporting. For example, BNM's Climate Change and Principle-based Taxonomy (CCPT) provides a standardized classification system for climate-related exposures, further strengthening the ESG landscape in the country.

 

Overall, the ESG assessment and benchmarking frameworks used in Malaysia are evolving to meet global standards, but there is still ongoing work to enhance the quality, comparability, and reliability of ESG data and disclosures by Malaysian companies.