KUALA LUMPUR: The United Nations Global Compact (UNGC) has projected that the market for environmental, social, and governance (ESG)-related projects in Malaysia will require financing of about RM45 billion in the next five years.
UNGC Malaysia and Brunei chairperson Ramesh Kana said due to the enormous funding requirements, public sector financing alone would be insufficient given the strain it imposed on public finances.
"As such, the deployment of private sector investments through the capital market will be critical in financing these sustainable development needs, ” he said in a webinar titled "ESG and You: Beyond Investing” organised by Malaysian Industrial Development Finance Bhd (MIDF) today.
Furthermore, he said Malaysian investors were increasingly expecting greater transparency and accountability from investing companies as they took greater interest in social and environmental impact in investment.
Elaborating on the ESG risks in the country, he said climate risk was seen to be prominent with the rising temperature and sea levels and the effects on the food industries, including palm oil supplies.
He estimated that 10.3 per cent of total assets held by banks were potentially exposed to climate risks, with assets in construction, transportation, agriculture and utilities sectors being highly exposed.
Ramesh noted that while the trend in investing in ESG-related projects was nascent, interest in addressing the sustainable needs of the country had grown exponentially in recent years through government support.
"It is inevitable that the ESG landscape in Malaysia will see an increased focus on the societal and governance aspects of ESG as we battle to save both lives and livelihoods during the COVID-19 pandemic and beyond, ” he said, adding that the government was playing a significant role by introducing incentives to ensure positive impact in the post-COVID economy.
Meanwhile, MIDF group managing director Datuk Charon Wardini Mokhzani said Malaysia had plenty of ESG investment projects to be explored to make financial returns locally, especially in renewable energy, and it was time for related sectors to move forward towards the goal.
"Malaysia has room for growth in investments and we don’t have to buy a global fund to invest all over the world. We could invest locally and make the country a better place, ” he added. - Bernama