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The importance of ESG to the future prosperity of Malaysia

Environmental, social, and governance (ESG) factors are increasingly important for companies, investors, and governments around the world. In Malaysia, ESG is playing a growing role in the economy, as businesses and policymakers look for ways to reduce environmental impact, improve social welfare, and strengthen corporate governance.

There are several reasons for the growing importance of ESG in Malaysia. First, the country is facing several environmental challenges, including air pollution, water scarcity, and climate change. These challenges are having a negative impact on the economy and public health, and they are also making it more difficult for businesses to operate.

Second, there is a growing demand from consumers and investors for companies to be more sustainable. Consumers are increasingly looking to buy products and services from companies that are committed to protecting the environment and social welfare. Investors are also looking to invest in companies that have strong ESG practices, as these companies are seen as being more resilient to long-term risks.

Third, the Malaysian government is taking steps to promote ESG. The government has set several ambitious environmental targets, and it is working to develop a more sustainable economy. The government is also encouraging businesses to adopt ESG practices, and it is providing financial incentives for companies that do so.

The growing importance of ESG is creating new opportunities for businesses in Malaysia. Companies that are able to adopt sustainable practices and improve their ESG performance will be well-positioned to attract customers, investors, and government support.

Emerging statutory ESG disclosures, company ESG ratings and regulations by Bank Negara and Bursa Malaysia will have far-reaching compliance implications for business and the society at large from Dec 2023 onwards. However, there is major challenge for Malaysia which is the availability of staff that have experience and training in developing and delivering ESG initiatives that can demonstrate tangible outcomes for companies and society at Large.  This is leading to confusion and operational challenges for businesses trying to meet the new regulatory ESG demands placed upon them.

The growing importance of ESG is creating a new landscape for businesses in Malaysia as it aims to become the most attractive investment destination in SE Asia. Companies that have a clear understanding of its ESG goals and can adopt sustainable practices and improve their ESG performance will be well-positioned to attract customers, investors, and government support.

IFRS Sustainability Disclosure Standards, S1 and S2, will become effective starting January 2024. Given sustainability disclosure is new for many companies globally, the ISSB will introduce programmes that support those applying its Standards as market infrastructure and capacity is built.

The decision on effective date is answering the strong demand from investors for companies globally to disclose comprehensive, consistent and comparable sustainability-related information.

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