Second Finance Minister Senator Datuk Seri Amir Hamzah Azizan.
KUALA LUMPUR: The launch of the National Sustainability Reporting Framework (NSRF) is expected to keep Malaysian capital markets competitive in terms of sustaining them as a destination for fund inflows.
The NSRF, which was launched by the Securities Commission (SC) yesterday, will eventually cover both the Main Market and the ACE Market companies of Bursa Malaysia by 2027.
The framework is set to enhance the state of sustainability disclosures in Malaysia and is based on the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB) as the baseline for companies in Malaysia.
Perceived climate change due to greenhouse gas emissions is the key motivating factor for this move.
“We can observe from the news about the increasing number of droughts, fires, floods and winds resulting from climate change, from all round the world.
“Nearer to home, the intensity of our rainstorms and frequency of floods, particularly those recently in the northern states, can also be seen,” said SC chairman Datuk Mohammad Faiz Azmi.
Pursuant to this, Bursa Malaysia had issued a consultation paper seeking public feedback on the proposed sustainability reporting enhancements to the Main Market and ACE Market listing requirements, in line with the envisioned adoption of the NSRF.
Bursa Malaysia is proposing to require a listed issuer to prepare its sustainability statement in accordance with the ISSB standards, complemented by relevant existing disclosures in the sustainability reporting framework that was introduced in September 2022.
The bourse regulator said it welcomes views and feedback from the public on the proposed amendments and they are invited to submit their comments by October 25, 2024.
Second Finance Minister Senator Datuk Seri Amir Hamzah Azizan, who was at the launch yesterday, said the NSRF was developed by the Advisory Committee on Sustainability Reporting which was formed last year with the support of the Finance Ministry.
“The committee, which is chaired by the SC and comprises the Audit Oversight Board, Bank Negara, Bursa Malaysia, Companies Commission of Malaysia and the Financial Reporting Foundation, had developed the framework after careful consideration of various factors, including companies’ and ecosystem readiness, as well as the support required for implementation,” Amir Hamzah said.
“With the recent introduction and use of the IFRS S1 and IFRS S2 standards, issued by the ISSB, we have had to assess use of these standards in the sustainability disclosure arena in Malaysia,” Faiz said.
He noted the IFRS S1 provides a general framework for disclosures on sustainability risks and opportunities and the IFRS S2 focuses specifically on climate-related disclosures including greenhouse gasses emissions.
“This is the reason why we want to share our thinking on this third pillar and why we have taken the decisions we have,” he said.
Under the NSRF, the large listed issuers on the Main Market, which totals to about 130 companies now, will have to comply with IFRS S1 and IFRS S2 in 2025, with a focus on climate-disclosures and the first report will be due in 2026, Faiz said.
“These are the ones with significant impact to the capital markets and represent over 80% of market capitalisation on Bursa Malaysia,” he added.
The remaining listed issuers on the Main Market will adopt these standards starting 2026, while the listed issuers on the ACE Market as well as large non-listed companies will do so in 2027.
“These companies will all start with a focus on climate disclosures, then cover other sustainability topics as per the standards later,” Faiz said.
He also highlighted the importance of these changes due to Malaysia’s trading economy which has an important role in the global supply chain.
“This also makes us more rather than less likely to meet purchaser requirements in the global supply chain given the increasing focus on sustainability,” he noted.
