Malaysian firms that ignore ESG could go the way of dinosaurs: panellists
MALAYSIAN companies will lose out on contracts and investment opportunities if they fail to keep up with environmental, social and governance (ESG) requirements, panellists at an ESG discussion organised by the Malaysian Investment Development Authority said on Tuesday (Aug 2).
Patrick Tay, the firm’s economics and policy deals partner, said on the sidelines that multinational companies and big Malaysian corporations are reviewing their supply chains to account for carbon emissions in their production processes. Suppliers that cannot contribute to those companies’ decarbonisation efforts are likely to be left out of contracts. These scenarios no longer look hypothetical, he noted.
“The effects were felt on the ground,” Tay said. “Any business that thinks ESG is a marketing gimmick and not taking proactive action on adopting ESG will become dinosaurs and eventually become obsolete.”
Investors are also reviewing their portfolio and avoiding investments in companies that are not participating in sustainable activities, said Tay. “According to Investopedia’s survey in 2021, 67 per cent of respondents have expressed interest to buy more shares of ESG-focused companies,” he added, noting that this is not purely for doing good to the environment but also to protect their investments from ESG-related risks.
Shanta Helena Dwarkasing, programme director at United Nations Global Compact (UNGC) Malaysia and Brunei, urged small and medium enterprises (SMEs) that are looking at expanding their business or exporting their products to start adopting ESG strategy. That is because close to 70 per cent of Malaysia’s exports are to countries that have announced net-zero commitments, she said, referring to pledges to lower emissions to levels that can limit the effects of climate change.
She added that the government and private sectors have various incentives to help SMEs begin their ESG journey. For example, UNGC Malaysia has collaborated with Alliance Bank on an ESG Screener programme that rewards SMEs that have met ESG thresholds with loan discounts.
The panellists agreed that the focus and demand for ESG will not reduce despite growing concerns about a global recession. “People might reduce their appetite for investment but not on ESG,” Tay said during the discussion. “They are taking a pause to relook their strategy for long-term sustainability based on ESG. Increase their productivity, reduce reliance on foreign labour, and ways to achieve cost savings.”
William Chua, corporate manager of Ramatex Textiles Industrial, said its shareholders have become convinced about the value of ESG. The textile company embarked on its ESG journey in 2007 with various ESG initiatives, such as replacing fossil fuels with biomass waste to generate electricity, recycling waste water from textile factories, and installing solar photovoltaic systems. All these efforts have resulted in at least RM44 million ($13.6 million) of cost savings a year, he said. The company posted turnover of RM1.2 billion in 2021, compared to RM300 million in 2010.
Masni Muhammad, executive director of investment policy advocacy for manufacturing at Mida, said the agency has approved 889 green technology projects with a total investment value of RM3.7 billion in 2021. Mida chief executive officer Arham Abdul Rahman declined to disclose investment targets, but noted that the interest for green projects remained strong. From 2001 to March 2022, Mida’s approved ESG-related investments totalled RM35.5 billion for 3,186 projects.
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