Sustainable Capitalism in South East Asia: Developments in Responsible Investing and Green Financing

On Friday 22 March, Capital Markets Malaysia hosted the “Sustainable Capitalism in South East Asia: Developments in Responsible Investing and Green Financing” forum at the Institute of Directors HQ in London. The forum focused on the symbiotic relationship between Islamic finance and sustainable finance and the unique position of Malaysia to bring the two together. 

The opening address was delivered by the Deputy Chief Executive of Securities Commission Malaysia, Zainal Izlan Zainal Abidin, who set the tone of the morning by showcasing how the alignment of Islamic finance and sustainable and responsible investment and green finance (collectively referred to as “SRI” in Malaysia) was Malaysia’s value-add proposition.  He highlighted an impressive list of recent SRI Islamic capital market transactions which directly supported UN Sustainable Development Goals (SDGs): the issuance of green sukuk (SDG 7 “Affordable and Clean Energy”); issuance of the world’s first waqf IPO for the upgrade of Larkin Sentral, the main transportation terminal in Johor Bahru (SDG 10 “reduced inequalities”); the IFFIm sukuk to support Gavi vaccine alliance (SDG 3 “Good Health and Well Being”); and the financing of Trust Schools in Malaysia through Sukuk Ihsan (SDG 4 “quality education”). 

The second key note was given by PwC Partner for Sustainability and Climate Change, Jon Williams, who focused on how global trends in sustainable investment might influence the growth of Asian financial markets.  Mr Williams suggested that despite certain barriers to entry in Asia (for example, the need for increased investor education), significant opportunity exists for the Asian financial markets, particularly Malaysia. An increased awareness and focus on SRI will require the industry to prepare for governments and regulators to take these factors into account but given the current sentiment in the marketplace, Mr Williams is confident that governments and regulators will likely choose to take action soon and demand corporate disclosure of environmental factors which will impact investments and investors.  Encouragingly, when looking at EBITDA, Mr Williams has seen a strong correlation between a company’s climate leadership and profits owing to better operational performance and better cash flows. 

The half day event concluded with two impactful panel sessions entitled “The Demand and Supply Conundrum in Sustainable Investment” and “ESG, SRI and Islamic Funds; Will Alignment Further Contribute to this thriving asset class” which included participants from Nomura, KWAP, HSBC, UN PRI, UNDP, Maybank Islamic and Capital Markets Malaysia. Speakers across the two panels agreed that whilst there is significant potential for the convergence of Islamic and SRI finance in Malaysia, a great deal of further work will be required for that full potential to be realised.

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