Page 43 - SC SCAR 2023 ENGLISH Flipbook

PART 2 REGULATORY PERFORMANCE AND OUTCOMES
Thematic Review on the Adoption of Guidance Note on Managing Environmental, Social and Governance Risks for Fund Management Companies
In June 2022, the SC issued the Guidance Note on Managing Environmental, Social and Governance Risks for Fund Management Companies (FMCS) (ESG Guidance Note) which sets the SC’s expectation on practices in managing environmental, social and governance (ESG) risks in investment portfolio as well as on stewardship of investee companies. To assess FMCs’ adoption of the ESG Guidance Note, in June 2023, the SC issued a questionnaire to all the FMCs in the industry for them to self-assess their own practices against the key expectations in the ESG Guidance Note.
Generally, FMCs’ progress on the adoption of the ESG Guidance Note are at differing stages. Most FMCs with AUM of more than RM10 billion (hereinafter referred to as ‘Large FMCs’) represented that they have considerably adopted the practices recommended in the ESG Guidance Note. Large FMCs contributed 84% of the fund management industry’s AUM of RM945 billion as of 30 June 2023. Among others, most Large FMCs represented that:
Governance
Policies
Risk Management
Communication with stakeholders
Capacity building
Disclosure
Board of Directors set strategic direction for responsible investment framework and it is implemented by senior management.
Responsible investment frameworks are in place and ESG factors are incorporated in investment processes, decision-making and active ownership.
Material ESG risks in investment portfolio are monitored, assessed and managed on a continuous basis.
• Engagements with investee companies and voting rights are exercised on material ESG issues.
• Inter FMC collaborative engagements on ESG-related matters are held.
ESG-related training provided across various levels of personnel.
FMCs disclose their responsible investment-related objectives, strategies, practices and activities and the disclosures are validated to curb greenwashing risks.
Access to SRI-related resources, data and stewardship as well as sound understanding of relevant complex methodologies would act as catalyst in advancing FMCs’ progress in their SRI journey. The SC acknowledges the efforts undertaken by FMCs thus far and will adopt a multi-pronged compliance approach on key recommendations in the ESG Guidance Note which will be announced in 2024.
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