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30 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) foR BEttER vALUE DELIvERy

TOWARDS MORE

SUSTAINABLE TOMORROWS

WHY IS ESG IMPORTANT TO KWAP?

Reduce risk Financial Fiduciary
and enhance risk duty
risk-adjusted For pension As a pension
returns Reputational funds with Large presence fund, KWAP has
Investing in risk long-term in the domestic a responsibility
companies Companies that investment market towards its
with good practise poor horizon, ESG Opportunity to stakeholders
Environmental, ESG practices factors can have play stewardship to generate
sustainable
Social and pose reputational direct impact on role by promoting risk-adjusted
Governance risk to KWAP. returns. good sustainability long-term
(ESG) practices practices in the returns. There
can contribute Malaysian capital is an added
to delivering market. responsibility for
sustainable risk- KWAP to ensure
adjusted returns. that both KWAP
and its investee
companies are
sustainable in
their business
practices.

Sustainability is a salient principle for KWAP due to our For pension funds, such as KWAP, that are large asset
fiduciary duty to fulfill the mandated role of generating owners with long-term investment horizons in diverse
long-term sustainable returns for our stakeholders, mainly industries, ESG factors can have a direct impact on
the pensioners. investment returns. For example, under the environmental
pillar, a company’s ability to address the market’s transition
At KWAP, we believe that investing in companies with good to low-carbon and deforestation-free economy including
ESG practices can contribute towards delivering sustainable managing risks pertaining to stranded assets will affect the
risk-adjusted returns and therefore enhance shareholder financial expectation on investments in these companies.
value over the long-term.
KWAP believes that investee companies which are exposed
Reputational risks have a two-pronged effort to both to high-carbon-high-cost projects; and projects with high
investee companies and the investors. Over time, we environmental, social and governance risks are more
have seen how ESG factors have affected the consumer’s vulnerable to the risk of stranded assets than companies
preference for products and services in the market. that are actively preparing for a zero-carbon transition.
Consumers are turning away and boycotting products Further to the above, institutional investors such as KWAP
that are, for example, polluting the environment, causing also have a responsibility in setting an exemplary path in
deforestation, or engaging in forced labour in their supply the market owing to our large domestic presence. It is our
chain. In other words, these companies that have poor duty to support national economic development plans
ESG practices pose a reputational risk to the companies and the capital market activities as we are able to make
itself and its institutional investors. a difference by redirecting capital, towards ESG-focused
companies within the market space.