Malaysian life insurers see ESG plays amid regulatory hurdles
As local regulations on environmental, social and governance (ESG) standards get increasingly sophisticated, Malaysian life insurers believe that the focus of these standards will reveal new and attractive investment opportunities.
Speaking at AsianInvestor’s Malaysia Global Investment Forum in Kuala Lumpur on November 7, Amar Ramachandran, director and head of investment at Manulife Insurance Malaysia said that while sectors that support and promote ESG standards will blossom, the push will most likely start in the life insurers’ preferred asset class first - fixed income.
“Given the hype about ESG now and in the foreseeable future, I think there will be more ESG-compliant issuances that will come to market. We will probably see more in the fixed income side first, and then hopefully some very interesting equity listings will come to Bursa Malaysia that we can look at,” he said.
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At Generali Life, ESG is also a factor it considers when making investment decisions, and will be a part of the company's risk assessment to improve selecting future investments.
“As ESG is one of the agendas of the government’s policy going forward, there should be ample opportunities for us to explore those sectors like renewable energy and EVs (electric vehicles). Another theme will be technology advancements that follow the ESG agenda,” said Alex Chin, head of investment, Generali Life Insurance Malaysia.
AMBITIOUS REGULATIONS
While Manulife is based in Canada and Generali in Italy, their Malaysian units must both comply with group-wide ESG guidelines, as well as guidelines from the Malaysian central bank and regulator - Bank Negara Malaysia (BNM).
In April 2021, BNM issued the Climate Change and Principle-based Taxonomy guidance document and then it lauched the the Policy Document on Climate Risk Management and Scenario Analysis in November 2022.
“These two guidelines demonstrate that the regulator put climate change and ESG at the top of the agenda of the regulator as a driving force. We will be focusing on being aligned with the group and Malaysia as a whole,” Chin said.
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Manulife’s Ramachandran shared anecdotally that when the Malaysia business presented the Policy Document on Climate Risk Management and Scenario Analysis at a group level, the new regulations were received with surprise as it is seen as an ambitious set of guidelines to meet.
“The guidelines include some abstract elements to handle, but thankfully BNM has given us clear deadlines. For some it is 2023, while others like the scenario analysis are in 2024. We are working on meeting that,” Ramachandran said.
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