KUALA LUMPUR: The convergence of environmental, social and governance (ESG) practices and syariah investing has the potential to boost ESG investments across multiple Islamic finance asset classes and the broader financial industry.
Chief executive officer of Bursa Malaysia Bhd Datuk Muhamad Umar Swift said the growth in value-based investing such as ESG has presented a unique opportunity for Islamic finance due to the many shared underlying principles of both ESG and Islamic capital-raising approaches.
“The similarities between the principles of ESG and syariah investing open a wider choice for investors looking for opportunities in the broader socially responsible investment space,” he said in his opening remarks at the Syariah Investment Virtual Conference (SIVC) 2021 yesterday.
“ESG investing, much like syariah investing, promotes responsible behaviour and appeals to investors seeking products that advocate ethical investing due to the selection criteria for the underlying investments.”
Over the last decade, he said Malaysia had witnessed the launch of innovative structures and initiatives that aligned with sustainability and ESG efforts, including the Sustainable and Responsible Investment Sukuk Framework in 2014 by Khazanah Nasional Bhd and Bank Negara’s Value-Based Intermediation (VBI) Strategy White Paper.
According to Muhamad Umar, there is a large body of data suggesting that value-based and ESG investments have provided comparable returns, and in many cases, better financial returns than conventional investments.
“Moreover, despite the market’s recent downturn triggered by the Covid-19 outbreak, most ESG assets have outperformed their non-sustainable counterparts. This trend is expected to continue,” he noted, adding that Bursa Malaysia will continue to play a key role in promoting the sustainability agenda among listed issuers. As of June 2021, 747 or 80% of 940 listed companies on the exchange are syariah-compliant with the syariah market capitalisation making up 68% of the total market capitalisation.“The average daily trading value (ADV) of syariah-compliant securities makes up 79% of the overall ADV of RM4.4bil. We continue to observe our syariah indices consistently outperforming its conventional counterparts over the last ten years,” he added.
Muhamad Umar noted that the FTSE Bursa Malaysia Hijrah Syariah Index, comprising the 30 largest syariah-compliant companies on the FTSE Bursa Malaysia EMAS Index, has surpassed the FTSE Bursa Malaysia KLCI, growing about 22.3% between 2010 and June 2021. — BernamaMeanwhile, Bursa Malaysia chairman Tan Sri Abdul Wahid Omar has called on banks to help the people and businesses get ready for the reopening of the economy going forward.
During the first session of the SIVC 2021 entitled “In Conversation with Tan Sri Abdul Wahid Omar:
Islamic Finance & Sustainability - The Way Forward”, he said local banks have to play a constructive role and understand the situation of borrowers are in while helping them cope with the challenging period.
“The idea is to lend as much support as possible, especially for businesses, to keep them afloat so that when the economy recovers and reopen, the capacity is there for them to restart, and for them to rehire (new workers),” he said.
TAGS: Bursa Malaysia, ESG, Shariah Investing, Muhamad Umar Swift, Abdul Wahid Omar, SIVC 2021