KWAP, Prudential say institutions driving EM green development
Malaysian institutional investors have played an increasingly important role in shaping the country's sustainable development agenda, going beyond traditional investment functions to actively engage policymakers and participate in national sustainability initiatives, according leading Malaysian pension fund Kumpulan Wang Persaraan (KWAP).
KWAP has been at the forefront of this movement, Idora Baharudin, vice president of enterprise sustainability, said at AsianInvestor's 3rd Malaysia Global Investment Forum in Kuala Lumpur on October 8.
KWAP
"We work closely with policymakers, participating in councils and frameworks like the National Sustainability Reporting Framework and the upcoming Energy Transition Framework," she said.
Engagement often extends beyond mere participation, as KWAP actively contributes to shaping policies that align with both global sustainability standards as well as Malaysia's specific needs.
The $40 billion pension fund's approach to sustainable investing involves a careful balance between its investment mandates and sustainability goals, she said.
"We understand the need for a transition from brown to green investments, ensuring it's economically viable and sustainable for the government, energy security, job creation, and long-term value for our stakeholders," Baharudin explained.
"As a retirement fund, we have a fiduciary duty to ensure returns for our members. At the same time, we recognise our responsibility to contribute to Malaysia's sustainable development," she said, illustrating the balance that is needed as KWAP navigates its role as both a retirement fund and a catalyst for sustainable development.
PRESSING CONCERNS
In support of Malaysia's aspirations of becoming a high-income economy while promoting sustainability, KWAP has been exploring more innovative investment strategies.
"We're allocating funds to invest in venture capital and private equity, which may seem atypical for a retirement fund, but we see economic value in that segment," said Baharudin.
KWAP's efforts align with broader regional trends in sustainable investing.
Prudential
Speaking on the same panel, Liza Jansen, head of responsible investments at Prudential Plc, highlighted some unique considerations for sustainable investing in emerging markets.
"We need to consider the interplay between climate action and social development," said Jansen. "Many communities are more concerned with immediate needs like food security and access to electricity. Our challenge is to drive sustainable development while addressing these pressing social concerns."
COLLABORATIVE EFFORTS
According to Baharudin, the Institutional Investors Council (IIC) of Malaysia has emerged as a powerful platform for coordinated action on sustainability issues in the country.
"The Institutional Investors Council is very active in advocating for environmental, social, and governance issues," she said. "We also participate in collective efforts through the IIC to engage with companies that have ESG concerns."
While the push for sustainable investing is gaining momentum, Baharudin acknowledged that challenges remain, particularly in implementation.
"One of the main challenges we face is the lack of standardised sustainability data and reporting from companies. This makes it difficult to accurately assess the ESG performance of potential investments," she said.
To address this, KWAP has been working closely with regulators and industry partners to promote more robust and standardised ESG reporting frameworks.
LOOKING AHEAD
As institutional investors continue to expand their influence beyond traditional investment roles, their impact on the sustainable development trajectory in Asia’s emerging markets is set to grow, said Prudential's Jansen.
"We're seeing a shift towards more active engagement in sustainability issues across the region," Jansen said. "Institutional investors are increasingly recognising their power to drive positive change, not just in their portfolios, but in the broader economic and social landscape."
KWAP's Baharudin noted an observable shift in how institutional investors approach sustainability in her country: "It's no longer just about risk management, it's about actively contributing to Malaysia's sustainable future."
The challenge now lies in maintaining this momentum and ensuring that the collaborative efforts between institutional investors, policymakers, and corporations continue to drive Malaysia towards its sustainability targets and high-income status aspirations, said Baharudin.