Evaluate governance to prevent greenwashing - SC chairman

KUALA LUMPUR: Greenwashing is becoming a point of concern globally as the investment into environmental, social and governance (ESG) funds has swelled into the trillions, said Securities Commission chairman Datuk Seri Awang Adek Hussin.

He noted that IOSCO, the grouping of securities regulators of which the SC is a part of, highlighted that greenwashing remains a fundamental market conduct concern that poses risks to both investor protection and market integrity.

"Taken more broadly, greenwashing can undermine the fundamental trust in sustainable finance.

"If investors lose trust, the financing required for a just transition can be dissipated," he said in his opening address at the IIC-SIDC Corporate Governance Conference 2024.

Awang Adek said as at end-2023, there were 68 sustainable and responsible investment (SRI) funds in Malaysia with a total investment of RM7.7bil.

He said investors should evaluate the "governance" aspect in ESG first, before considering what it says it does for the "environment" and "sustainability".

"If the G is problematic, they should discount what the company says about E and S because it is likely greenwashing."

He added that investors are in the best position to holds boards and management accountable for their plans, commitments, progress, or lack thereof.

According to Awang Adek, close to 70% of PLCs in 2023 reported that the performance evaluations of the board and senior management included an assessment of how well they were managing the company’s sustainability risks and opportunities.

The SC chairman emphasised also the importance of stewardship among businesses, which would increase the benefits to investors and the wider society.

He noted that total assets under the control of government-linked investment companies (GLIC) in Malaysia are estimated to be worth RM1.87 trillion, making them among the main pillars of the country's socio-economic development.