21 March 2023, Kuala Lumpur – The Global ESG Monitor (GEM), a research initiative that examines ESG transparency in non-financial reporting of the largest companies in the world, revealed that Malaysian companies used internationally recognised frameworks, standards, and strategic tools in their Environmental, Social and Governance (ESG) reporting but lacked the appropriate content and level of detail needed for optimal transparency, thus ranking in the midfield amongst global and regional peers.

The GEM 2022 analysed the transparency of non-financial ESG data of 625 ESG reports from 350 companies listed on 10 of the world’s largest stock market indices on four (4) continents. The ranking is based on the degree of transparency in reporting on ESG strategy, materiality, and disclosure of indicators and not their overall performance on such metrics. The GEM Malaysia Regional Report 2022 marks the first time Malaysia was included in the benchmarking report, assessing the 30 companies listed on the FTSE Bursa Malaysia KLCI (FBMKLCI).

“Malaysia’s FBMKLCI inclusion in GEM 2022 reflects the country’s commitment to transparency and sustainable business practices. With an average score of 54 out of 100 points, the Malaysian index ranks joint fifth place alongside the Dow Jones among the ten indices surveyed. This positions the FBMKLCI ahead of the S&P 50 USA (53 points), ASX 50 (53 points), WIG 20 (51 points), and BET 20 (41 points). Above FBMKLCI rank S&P Asia (56 points), Hang Seng (57 points), EUROSTOXX (66 points) and DAX (68 points),” said Michael Diegelmann, Co-founder of the GEM.

“The FBMKLCI’s ranking showcases progress in sustainability, but also highlights the need for deeper, more detailed ESG reporting in Malaysia,” he added.

The Report’s findings were revealed today at a thought leadership event, ‘Sustainability Perspectives’, hosted by Perspective Strategies, the Malaysian Regional Partner of the Global ESG Monitor. The event featured insightful discussions led by speakers Michael Diegelmann and Ariane Hofstetter, both co-founders of the GEM, Dr. Nurmazilah Mahzan, Member of IFRS Foundation Integrated Reporting and Connectivity Council (IRCC), and Ir. Dr. Mohd Fadzil Bin Mohd Siam, Head of Corporate Strategy & Sustainability, Tenaga Nasional Berhad (TNB), which topped the leader board of Malaysia’s FBMKLCI companies with the highest transparency score. The discussion highlighted areas where the index is already performing well, identified opportunities for improvement, discussed ESG transparency issues in Malaysia, and showcased best practices in ESG reporting.

“We are delighted to bring together corporate leaders who are committed to sustainability and communications. The event was made possible by our sponsor, U Mobile Sdn Bhd (U Mobile) and partner, bzBee Consult. We believe this is just the first step as we strive towards highlighting the importance of ESG Transparency in sustainability reporting. The premise is that Sustainability and ESG do not work without transparency,” said Andy See, Managing Director of Perspective Strategies, the Global ESG Monitor’s Regional Partner.

The transparency scores of the top 10 FBMKLCI companies based on the Global ESG Monitor are:

Rank	Company	GEM ASSAYTM SCORE
1	PRESS METAL ALUMINIUM HOLDINGS BERHAD	72
	TENAGA NASIONAL BHD	72
3	PETRONAS CHEMICALS GROUP BHD	71
4	RHB BANK BERHAD	66
5	DIGI.COM BHD	65
6	SIME DARBY PLANTATION BERHAD	63
7	AXIATA GROUP BERHAD	59
	CIMB GROUP HOLDINGS BERHAD	59
	PETRONAS DAGANGAN BHD	59
	PPB GROUP BHD	59

Note: The criteria for measuring transparency in the Global ESG Monitor are based on six (6) interdependent dimensions, balance, comparability, accuracy, timeliness, reliability and relevance.

Other key findings of the Global ESG Monitor Malaysia Regional Report include:

• The FBMKLCI demonstrates a commitment to international frameworks, with 90% of companies referencing the Sustainable Development Goals (SDGs), 87% following the Global Reporting Initiative (GRI), and 67% aligning with the Task Force on Climate-Related Financial Disclosures (TCFD).
• The Malaysian Code on Corporate Governance (2021) specifies that there should be at least 30% “women directors” on the boards of Malaysian companies. FBMKLCI is already in a good position in this respect, as mixed boards have already been identified for 80% of the companies surveyed.
• In the reports themselves, however, the companies are more cautious in this respect: only 77% report the total percentage of their employees by gender. The descriptions in the FBMKLCI are also rather restrained when it comes to the topic of age split (67%) or ethnicity (43%).
• Significant transparency gaps exist in Environment, Social, and Governance (ESG) reporting, with scores of 55%, 39%, and 54% in each respective category.
• The top performing companies namely Tenaga Nasional Berhad and Press Metal Aluminium Holdings Berhad tied for first place at 72 points.
• A lack of detail in reporting has resulted in a poor overall ESG transparency score. For example, 90% of Malaysian companies report that a materiality analysis was completed but only 20% provide background information on the year of data collection and how the data was collected. In addition, 67% of companies list their stakeholders but only 37% provide information on how the stakeholders were determined.

Ariane Hofstetter, the GEM’s Co-Founder and Head of Research added, “While Malaysian companies excel in adhering to international frameworks, it’s crucial they provide more comprehensive information on environmental, social, and governance aspects to truly embrace sustainability.”

“We must realise that the transparency of our ESG reporting is critical to inform and engage stakeholders. After all, sustainability reporting has been mandatory for all Malaysian public-listed companies since 2016. Whilst there are still many hurdles for Malaysian companies to overcome when it comes to transparency, overall, this is good news for investors and other stakeholders as we are moving towards the right direction,” concluded Andy See, Managing Director of Perspective Strategies.

Click here to download the Inaugural Global ESG Monitor Malaysia Regional Report 2022 that was unveiled at Sustainability Perspectives earlier today.

In case you missed it, you can watch the full event below: