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Both innovation and collaboration have been crucial to raise awareness and increase commitments to sustainability in the capital market, while enabling future scalability. The SC’s extensive domestic and global collaboration network, coupled with an innovation-friendly ecosystem and facilitative regulatory policies, have facilitated greater synergies between SRI and ICM as well as global recognition of its advancement.
STAYING AHEAD OF THE CURVE
The renewed momentum on climate action highlighted in Chapter 2 has seen growing commitments by countries, cities and companies towards a future with net-zero emissions. This means accelerating the reduction of greenhouse gas (GHG) emissions caused by human activities and offsetting any remaining GHG emissions from the atmosphere through carbon removal. This movement has seen continued investments in renewables and increasing calls for investments to transition emissions-intensive energy, heavy industrial and mobility sectors. The transition to net-zero emission for the global economy will require trillions of dollars in investments – accentuating the need for significantly more financing for the broader economy to achieve carbon neutrality.
As Malaysia transitions towards a low-carbon economy, it is important to recognise that assets from carbon-intensive activities are at risk of becoming prematurely obsolete or ‘stranded’ due to technological advancements, policy responses and regulatory developments. The degree of disruption to the capital market would depend, among others, on companies’ ability to embrace change and mitigate the risk of ‘stranded assets’. Investors and asset owners have started to integrate ESG into their investment strategies and are already taking the initiative to study the potential mispricing of climate risks within their portfolios.
The health pandemic in 2020 also brought the ‘social’ component of ESG to the forefront of investors’ attention alongside the ‘environmental’ component, and raised the need for businesses to play a bigger role with respect to their broader stakeholders – consumers, community and suppliers. Investors and businesses are paying greater attention to societal issues ranging from employee protection to supporting vulnerable communities such as the economically disadvantaged and small-sized businesses.
These movements to preserve the interests of climate and society are in line with maqasid al-Shariah (objective of Shariah), which promotes the attainment of benefits and prevention of harm for the people. By promoting greater alignment with maqasid al-Shariah, ICM can foster a more sustainable and responsible capital market ecosystem. This will enable ICM to play a greater role in facilitating sustainable and equitable growth in the economy.
CAPITAL MARKET MASTERPLAN 3
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