Malaysia evolving into SRI hub, says RAM Ratings

Moody's also does not expect the current stagnation of the green bond market in 2018 to represent a long-term trend.

KUALA LUMPUR: RAM Ratings sees Malaysia evolving into a sustainable responsible investment (SRI) hub, supported by its prominent global presence in Islamic finance. 

The rating agency said on Tuesday the proactive efforts and strong commitment of Bank Negara Malaysia, Securities Commission  (SC) and Bursa Malaysia have paved the way for both responsible and green finance to thrive in Malaysia. 

According to publicly available data from the SC, six SRI or green  bond and sukuk programmes – with a cumulative value of US$1.02bil -- were issued between July 27, 2017 and April 27, 2018. 

RAM said the SRI market is also bolstered by the  growing number of domestic and international investors that are actively engaging with corporates on environment, social and governance (ESG) issues. 

Deputy CEO of RAM Ratings Promod Dass said increasingly more investors are factoring ESG into their analysis as part of best practices, and this is driving demand for SRI.

He was speaking at the Sustainable Investment Roundtable on July 16, which was hosted by the SC. 

This trend is evident from the rise in the number of signatories to the United Nations-supported Principles for Responsible Investment (PRI), from only 63 as at April-2006 to 1,961 as at end-April 2018. 

This global swell in PRI signatories translates into a surge in assets under management (AUM), from US$6.5 trillion to US$81.7 trillion over the same period. 

Khazanah Nasional Berhad and government pension fund KWAP are already PRI signatories. 

The world’s largest pension fund, i.e. Japan’s Government Pension Investment Fund (GPIF) that is also a PRI signatory, allocated US$8.9bil of funds to SRI.

This represents about 3% of GPIF’s portfolio of Japanese stocks. The GPIF (which has US$1.4 trillion asset under management also indicated that in the medium term, the fund could increase its investment in companies with commendable ESG practices. 

These examples of SRI market leadership may prompt other investors and institutions to follow suit.

RAM is an active contributor to sustainability and green finance. 

On May 26, 2016, RAM joined the global line-up of six pioneer credit rating agency signatories to PRI’s Statement on ESG in Credit Ratings. 

RAM’s sister company, RAM Consultancy Services Sdn Bhd, is the first ASEAN-based provider of sustainability ratings and second opinions on green bonds and sukuk.