SC: There is an increasing proliferation of disclosure standards and ESG requirements being imposed at an international and domestic level, all of which require compliance and attention from corporates
KUALA LUMPUR: 75 per cent of Malaysia’s exports to the European Union (EU) will be impacted by the EU’s Carbon Border Adjustment Mechanism (CBAM), albeit collectively accounting for only about eight per cent of Malaysia’s total exports in 2021 to 2023.
The Securities Commission Malaysia (SC) said in its Capital Market Stability Review 2023, released today, that more climate and environmental, social, and governance (ESG)-related policies, like CBAM, particularly from entities like the EU and advanced economies, have the potential to affect Malaysian firms through multiple channels.
"There is an increasing proliferation of disclosure standards and ESG requirements being imposed at an international and domestic level, all of which require compliance and attention from corporates,” it said.
Against this backdrop, the SC embarked on a thematic study assessing the risk exposure of Malaysian public-listed companies (PLCs) to sustainability factors to emphasise the importance of looking at business strategy and sustainability to incorporate transition plans, given their potential impact on PLCs.
"To this end, the SC chairs the advisory committee on sustainability reporting, which works to identify enablers that will facilitate the use of the International Sustainability Standards Board (ISSB) Standards in Malaysia, build assurance frameworks, and facilitate capacity building towards addressing the need and demand for comparable and reliable sustainability-related information.
"This is part of the SC’s efforts to customise ESG reporting standards to align with local requirements, while gearing firms towards achieving international practices and ensuring sustainability becomes an integral part of Malaysian PLCs,” it said.
The thematic study determined that PLCs’ exposure to risks arising from sustainability factors can be delineated into two primary channels -- environmental and social triggers.
"The environmental trigger arises from the fact that firms engaged in traditionally carbon-intensive sectors or those with the highest carbon emissions may face the highest costs and risks of stranded assets during any adjustment by investors or clients alike to reduce the carbon intensity of their business activities.
"The social trigger analyses PLCs in sectors with a higher proportion of foreign labour, which may be more likely to face increased scrutiny of labour practices, and thus be subject to trade restrictions should there be reputational concerns and no appropriate remedial or preventive actions in place,” it added. - Bernama
