BPAM launches Malaysia's first ESG bond index series

Bond Pricing Agency Malaysia head of financial engineering and research Noor Bazlina Sharifmuddin and CEO Meor Amri Meor Ayob at the launch of the country's first environmental, social and governance (ESG) bond index series.

KUALA LUMPUR: Bond Pricing Agency Malaysia (BPAM) launched the country's first environmental, social and governance (ESG) bond index series which will monitor bonds with a market capitalisation of RM4.05bil.

It said on Thursday the index series covers ringgit denominated, long term conventional and Islamic bonds (sukuk), classified within the ESG principles. 

BPAM CEO Meor Amri Meor Ayob said the index series aims to be the first point of reference for ESG investments in the fixed income segment. 

“We are proud to share that it is the first of its kind in Malaysia, as no specific index covers bonds and ESG principles at the same time. 

“The index series highlights bond issuers issuing under ESG principles, and tracks their performance. The index series could be used as benchmark, to compare its returns with other investments, ESG themed or otherwise; and in the future could be the base of index funds,” he said.

BPAM ESG Bond Index Series is backfilled from January 2018 and monitors a total of 111 bonds from nine issuers with the total market capitalisation of RM4.05bil as of June 2019. 

It consists of bonds that were issued under or aligned with Securities Commission’s Sustainable and Responsible Investment (SRI) Sukuk framework, Asean Green Bond Standard, Asean Social Bond Standard, Asean Sustainability Bond Standard and United Nation (UN) Sustainable Development Goals (SDG). Index calculation uses BPAM’s evaluated mid prices. 

BPAM's head of financial engineering and research Noor Bazlina Sharifmuddin said the index series has the potential to introduce ESG bonds to a wider audience who have been looking for sustainable investment options. 

“The index series also highlights the issuance principles related to ESG themes for more issuers to participate in the market,” she added.

ESG investments are not a profit driven market. The awareness of the implicit value-proposition of socially responsible investing (SRI) is still at its early stage in Malaysia compared to more mature markets that trade these bonds. 
 
Meor said the launch of the ESG Index Series by BPAM as a benchmark for SRI would  hopefully improve SRI awareness and support the government’s initiatives amongst local fixed income investors to support these bonds in the long run.

The BPAM ESG Bond Index is available to all BPAM subscribers via BPAM’s data dissemination service Bondstream.