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KWAP’s future is ESG

At KWAP, the concept of sustainability is not new. In fact, the sustainability agenda has long been part of our value creation journey and an important position that we are committed to uphold. In recent years, there has been significant activity in the sustainability space all over the world. Led by investors and the public, the call to action has been for businesses to incorporate Environmental, Social and Governance (ESG) considerations into their operations.

 

That ESG is now so widespread, and mainstream speaks to the wider realisation that striving to live in equilibrium with the world we occupy is necessary for our future prosperity. This manifests itself in numerous ways in the corporate world, as it compels organisations to find solutions to reduce the impact of business activities on the environment, treat employees better, or to ensure that ethics and integrity always remain a top priority. While incorporating these considerations into any business will attract additional costs, more and more companies are seeing the benefits that, for example, a happy, secure, and empowered workforce can bring to its long-term viability.

 

Thus, the overriding narrative in recent years can be distilled into one simple message – the time to act is now, and the urgency to do so is very real. This is where KWAP is ahead of the curve. As a fund that manages the pensions of more than a million civil servants, prioritising long-term sustainability over quick profits is a crucial part of our operations. Since over a decade ago, we strengthened the governance aspect of our operations and over the years, progressively embedded more ESG considerations into investment decisions. We have been firm in our belief that investee companies must generate sustainable shareholder value over the long term to benefit our key stakeholders, our pensioners, who have entrusted us with the management of their retirement benefits.

Driving the ESG agenda (milestones)

While KWAP has been persistent in engaging our investee companies to adopt robust ESG practices, essentially the final decision lies within each organisation. KWAP has no interest in running other companies and will make the appropriate decision on whether to stay invested based on our top priority of ensuring long-term sustainable results. 

 

We are of the view however, that overall and based on our internal ratings, our investee companies in Malaysia have generally improved their ESG practices. There remains room for improvement however, and making these improvements via better initiatives and more robust reporting will not only add value to their respective companies but also attract global funds who are more likely to invest in companies with strong ESG practices.

 

In looking ahead, KWAP will continue advocating ESG practices internally and externally. Within KWAP, our approach towards intensifying the integration of ESG considerations into our investment decision-making process is a constant and consistent process. Our eventual goal is for KWAP to have a fully ESG-compliant portfolio which will imbue our fund with resilience and the continued ability to deliver appropriate returns to our stakeholders.

Driving the ESG agenda (milestones)

2009

KWAP began practicing proactive shareholder activism by monitoring our investee companies’ corporate governance practices as well as issues related to companies’ responsibility towards social and environmental aspects.

2011

Established KWAP Corporate Governance: Principles and Voting Guidelines (which served as a guideline for KWAP in monitoring the conduct of its investee companies with respect to corporate governance practices and the manner that KWAP will vote for resolutions raised in Annual General Meeting / Extraordinary General Meeting).

2012

KWAP participated as a member for the Corporate Governance Working Committee [whose members include Employees Provident Fund (EPF), Khazanah Nasional Berhad, Permodalan Nasional Berhad (PNB), Lembaga Tabung Angkatan Tentera (LTAT) and KWAP].

2014

  • Revised KWAP’s Corporate Governance Principles and Voting Guidelines
  • Participated in Minority Shareholder Watchdog Group (MSWG) and Securities Commission (SC) led initiative to introduce Malaysian Code for Institutional Investors 2014

2015

  • Became a signatory to the Malaysian Code for Institutional Investors (MCII).
  • Became a member to:
    1. Institutional Investors Council Malaysia (IIC) [KWAP former CEO, Dato’ Wan Kamaruzaman Wan Ahmad was appointed as the first chairman of the IIC Council Board Members during the inaugural IIC meeting held in July 2015]
    2. Institute of Integrity Malaysia
    3. International Corporate Governance Network (ICGN)
    4. Asian Corporate Governance Association (ACGA)

2016

  • Established a Responsible Investment Team.
  • Developed KWAP Corporate Level ESG Guidelines.
  • Produced KWAP ESG Guidelines for Investment.
  • Developed KWAP ESG Based Research Methodology.

2017

KWAP is the country host for International Corporate Governance Network (ICGN) Annual Conference 2017.

2018

  • Became signatory to UN-backed Principles for Responsible Investment (PRI).
  • Established KWAP ESG Guidelines for Fixed Income.
  • Organised KWAP Environmental Conference 2018.
  • Established ESG Tracking Methodology.

2019

  • Kicked-off ESG engagements with investee companies that are selected under the ESG Watchlist.
  • Developed KWAP ESG Guidelines for Private Equity.
  • Two (2) of KWAP officers became members of the Joint Committee on Climate Change (JC3). On 27 Sept 2019, Bank Negara Malaysia and Securities Commission Malaysia established the JC3 to pursue collaborative action to build climate resilience within the Malaysia financial sector. The two (2) JC3 committee includes:
    1. JC3 Sub-Committee 1: Climate Change and Principal-based Taxonomy working group
    2. JC3 Sub-Committee 2: Governance and Disclosure

2020

Conducted ESG engagements with investee companies that are selected under ESG Watchlist.

2021

  • Appointment of KWAP CEO, Puan Nik Amlizan as Vice Chairman of the IIC.
  • KWAP became a member of PERKUKUH.
  • KWAP officer became a member of JC3 Committee under JC3 Sub-Committee 5: Bridging Data Gaps.
  • Introduced new ESG criteria into our investment decision-making process by adopting climate-related and human capital considerations.
  • Increased the number of engagements with investee companies focusing on environmental and social related issues.

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