KUALA LUMPUR: The Employees Provident Fund (EPF) does not use a one-size-fits-all approach when looking at environmental, social, and governance (ESG) concerns in its investments, according to its chief executive officer Datuk Seri Amir Hamzah Azizan.(pic)
“The maturity of ESG practices differ in westernised and developed markets, ” he said in an online “MIDF Conversations” session with MIDF group managing director Datuk Charon Wardini Mokhzani.
Amir explained that EPF had negative screening to exclude unethical stocks.
“So they are no-go zones. We won’t invest in anything which has weapon development or into industries which are gambling-related because there are social ills associated with that. That was a philosophical decision that EPF took along the way, ” he said.
Amir also noted that in Malaysia, there has been a heavy push or focus on ESG issues in the market.
He explained that the provident fund wanted to work with its investee companies in terms of better disclosure and transparency on ESG data, looking beyond short-term returns and incorporate sustainability parameters into its key performance indicators.
“To decide that we draw the line, where we will never invest in anything that has a coal implication, and therefore, let go of all our investments in Tenaga Nasional Bhd, for example, I don’t think that is a prudent decision, ” said Amir.
“We want them (the investee companies) to be very open and transparent in terms of what they’re trying to do, and make commitments along the way. When we can see commitment and action, we will continue to invest or support them.
“We don’t want to end up, from a portfolio point of view, with stranded assets. You could end up with assets that get stuck because they are no longer practical and regulation catches up.” EPF had grown its global exposure in investments, from 21% in 2013 to 36% in more than 40 countries as at end-March 2021.
“Our commitment to the local market continues to grow in absolute terms, and we’ve continued to scale up the investments in the local market – fixed income and also equity, ” he added.
“If you look at our domestic investments, we are a major player in Malaysia. Of the FBM100, we hold about 11% of the total market capitalisation. On fixed income, we have 21% and if you look at Malaysia Government Securities and Government Investment Issue – about 27% of all papers issued are held by EPF, ” he said.
EPF’s investment assets stood at RM981.71bil as at end-March 2021. By asset class, fixed income instruments made up 46% of investments while equities comprised 44%.
Money market instruments, and real estate and infrastructure made up 4% and 6% respectively of investments.
Amir said the portfolio reflected the EPF’s diversification strategy to optimise returns within tolerable risk limits as guided by its strategic asset allocation.
Regarding its investment portfolio, about 60% is conventional while the balance 40% is syariah-compliant.
Amir also noted that 16.3% of its funds are managed through external fund managers while 8.2% is in the private market (private equity, real estate and infrastructure).
“External fund managers bring in different insights and capabilities. The private markets are a very important segment that we’re developing. The mantra for us is to make sure that we have good sustainable long-term returns for our members, ” he said.
Meanwhile, Bernama reported the i-Citra initiative is designed for members to withdraw their savings primarily from Account 2.
All members below the age of 55 are eligible to apply for i-Citra, which allows them to withdraw up to a maximum of RM5, 000 subject to their total combined balance in both Account 1 and 2, according to Amir.
The approved withdrawal amount will be paid for a period of up to five months, with a fixed monthly payment of RM1, 000 per month subject to savings balance and a minimum of RM50.
“If the amount in Account 2 is inadequate, then we will allow depositors to access Account 1.