Rising ESG Investing Trends and Opportunities in Malaysia
Environmental, Social, and Governance (ESG) investing has become a cornerstone of sustainable finance, where the pursuit of positive returns is matched by a commitment to creating measurable environmental and social impact. Globally, ESG investing has shifted from being a niche interest to a mainstream strategy embraced by institutional investors, retail investors, and corporations alike.
In Malaysia, ESG investing is rapidly gaining momentum, with policymakers, businesses, and investors aligning to drive sustainable development. This guide explores the trends, opportunities, and key drivers shaping ESG investing in Malaysia, providing insights for those looking to navigate this transformative space.
What is Sustainable Investing?
Sustainable investing integrates financial objectives with long-term environmental, social, and governance considerations. Unlike traditional investing, where decisions are primarily driven by profit, sustainable investing evaluates how businesses impact people, the planet, and their governance structures.
Key approaches to sustainable investing include:
- ESG Integration: Incorporating ESG criteria into financial analysis and investment decisions to assess risks and opportunities.
- Thematic Investing: Focusing on themes such as renewable energy, climate resilience, or social equity.
- Impact Investing: Directing capital to projects or companies that create measurable positive environmental and social impacts.
- Screening: Using filters to exclude investments in industries such as tobacco, fossil fuels, or unethical labour practices.
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ESG Investing: How Companies Can Benefit from the Sustainable Investment Trends
ESG Investing in Malaysia: A Regional Powerhouse
Malaysia is positioning itself as a leader in ESG investing, leveraging its role as a key player in ASEAN. With a regional capital market of over US$4 trillion in assets under management, the potential for ESG investing in Malaysia is immense.
1. Government and Regulatory Support
Malaysia’s government has taken significant steps to embed ESG practices within its financial ecosystem, setting the stage for long-term growth in sustainable investments. In 2015, the country issued the world’s first social impact sukuk worth RM1 billion, aimed at funding educational initiatives. By 2016, Bursa Malaysia introduced sustainability reporting requirements and published a Sustainability Reporting Guide, which set clear expectations for ESG disclosures among listed companies.
The momentum continued in 2018 with the launch of the Green SRI Sukuk Grant Scheme, providing RM6 million to incentivise the issuance of green bonds. This initiative expanded in 2021 into the SRI Sukuk and Bond Grant Scheme, broadening its scope and reinforcing Malaysia’s leadership in green financing. In addition, the Securities Commission Malaysia (SC) released the Sustainable and Responsible Investment Roadmap in 2019, which outlined strategies to strengthen the ESG landscape. That same year, the Joint Committee on Climate Change was formed by SC and Bank Negara Malaysia to further integrate sustainability into Malaysia’s financial framework. These regulatory measures, alongside updates to the Malaysian Code on Corporate Governance (MCCG) in 2021, have made ESG adoption more robust and systematic across the corporate sector.
2. Private Sector Involvement
Far-sighted corporates in Malaysia are reshaping their strategies to align with ESG principles, driven by:
- Investor Preferences: Growing demand from investors for businesses with leading ESG practices.
- Consumer Trends: A surge in eco-conscious consumers favouring brands committed to sustainability.
- Market Opportunities: The rise of green, social, and sustainable bonds in ASEAN reflects an appetite for financing projects with environmental and social benefits.
ESG Investing Trends in Malaysia
Globally, investors are increasingly integrating ESG factors into their decision-making processes, moving beyond compliance to seek strategies that drive both impact and returns. In Malaysia, the rise of green bonds, sustainability-themed investments, and heightened regulatory requirements has created a dynamic environment for ESG-aligned opportunities. Understanding these trends is essential for businesses and investors looking to capitalise on this momentum.
1. Growth in ESG Integration
ESG integration is now the dominant strategy in sustainable investing, accounting for over US$25 trillion in assets globally by 2020. This approach embeds ESG factors into investment analysis to mitigate risks and uncover opportunities, making it particularly attractive to institutional investors.
2. Thematic and Impact Investing
While still developing, thematic investing and impact investing are experiencing rapid growth. Between 2016 and 2020, sustainability-themed investments grew at a 63% CAGR, reaching nearly US$1.9 trillion in assets. These strategies align closely with Malaysia’s priorities, including renewable energy (RE) development, green financing, and the circular economy.
3. Regulatory Momentum
Regulations mandating ESG transparency are becoming a key driver. Bursa Malaysia now requires listed companies to disclose their ESG performance, a shift that not only ensures compliance but also enhances market competitiveness. Companies that fail to comply risk reputational damage and limited investor interest.
4. Investor Appetite for ESG-Aligned Assets
According to the Standard Chartered Sustainable Banking Report 2022, Malaysian investors increasingly prioritise climate change, carbon emissions, and pollution management. ESG-aligned investments are no longer limited to high-net-worth individuals; broader access to public markets is making these opportunities available to retail investors.
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Challenges in ESG Investing
Despite the growth in ESG investing, challenges remain:
- Access to Sustainable Investments: Many products, such as green bonds, are available only through specialised platforms, limiting accessibility.
- Comparative Difficulty: Investors often struggle to compare sustainable opportunities within the same asset class due to inconsistent standards.
- Volatility Concerns: Short-term fluctuations in ESG investment performance deter some investors from fully committing.
Addressing these barriers is crucial for unlocking the full potential of ESG investing in Malaysia.
Key Opportunities in ESG Investing in Malaysia
Malaysia’s ESG investment space is brimming with opportunities for those prepared to act strategically. Green and sustainable bonds are gaining traction, supported by government incentives like the SRI Sukuk and Bond Grant Scheme. Renewable energy investments are another promising area, aligning with the 12th Malaysia Plan’s focus on sustainability.
1. Green and Sustainable Bonds
The ASEAN region is witnessing a surge in green, social, and sustainable bonds. Malaysia’s SRI Sukuk and Bond Grant Scheme further incentivises issuers to tap into these growing markets, making it an ideal time for corporates to explore green financing options.
2. Renewable Energy Investments
With renewable energy identified as a priority under the 12th Malaysia Plan, opportunities abound for investments in solar, wind, and other sustainable energy projects. Companies and investors aligned with these themes can expect long-term growth and support from green financing initiatives.
3. Technological Platforms for Sustainable Investing
Platforms like Standard Chartered’s SmartDirect make ESG investments more accessible to retail investors, offering tools to identify and compare sustainable opportunities. These innovations are expanding the ESG investment landscape in Malaysia.
Also Read:
Bursa Malaysia’s Updates on Sustainability Reporting Framework for Listed Companies
The Future of ESG Investing in Malaysia
ESG investing in Malaysia is at a pivotal moment, driven by regulatory support, shifting consumer trends, and growing investor demand. As the government and private sector align to promote sustainability, opportunities for businesses and investors continue to expand.
For those looking to enter this space, the key lies in embracing ESG principles, understanding the trends shaping sustainable finance, and addressing the challenges head-on. Whether through green bonds, renewable energy projects, or technology-driven investment solutions, the potential for growth in Malaysia’s ESG landscape is enormous. Now is the time to act—and invest in a future that balances profit with purpose. Elite Asia’s ESG solutions are designed to support organisations and companies at every stage of this journey—from consultation and strategy development to comprehensive reporting. With our help, you can align your investments with ESG priorities, strengthen your market position, and make a meaningful contribution to a sustainable future. It’s time to invest in progress—profitably and responsibly.
