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Greater availability of issuer-specific ESG data will enable the market to objectively measure the ESG risk and impact of companies through metrics such as GHG emissions, workers’ pay and total green revenue27, instead of just relying on sustainability statements and commitments by the companies. ESG data will become more granular, real-time and varied, spurred by technology and innovation. These trends will however come with issues in relation to the reliability and comparability of data, as well as risks of greenwashing – all of which could corrode the confidence and integrity of the market. In response to this, two key areas will be focused on moving forward:
3.3.2
Promoting greater transparency in the market through disclosures; and
Promoting investor protection in the context of greenwashing risks, asset managers’ practices on the use of sustainability-related factors in investment decision processes, transparency of ESG data providers as well as disclosures and governance among credit and ESG rating agencies28.
EXPANDING THE REACH OF ICM TO THE BROADER STAKEHOLDERS OF THE ECONOMY
Malaysia’s ICM has experienced various stages of development since early 1990’s. The initial stage was crucial to lay the foundations for the orderly growth of ICM. The key initiatives included the development of relevant frameworks to facilitate Islamic offerings, complemented by Shariah governance and tax frameworks. A combination of development initiatives by the SC and the industry have resulted in Malaysia being recognised as a global leader in ICM.
Today, the ICM accounts for more than 60% of the Malaysian capital market, and has evolved from largely focusing on basic Shariah-compliant products and services as alternatives to conventional products and services to offering more comprehensive financial solutions for different market segment needs. Moving forward, ICM offerings will continue to be expanded to better support the needs of stakeholders of the economy. One key area of focus will be the Shariah-compliant funding needs of MSMEs, especially in the halal sector, and Shariah-compliant SRI.
The halal economy, which comprises mostly MSMEs, contributes to approximately 7% of the national GDP29. Today, these MSMEs typically rely on the banking sector as well as funds from families and friends30. In this regard, ICM fundraising offerings in VC, PE, ECF and P2P financing can complement the banking sector and fill the funding gaps to support the growth of MSMEs in the halal sector. To facilitate this, the SC will collaborate with relevant stakeholders of the halal economy to establish and develop an ecosystem conducive to businesses in the halal economy, focusing on Shariah-compliant funding models and mechanisms. This includes developing broad Shariah guidance to facilitate assessments of the Shariah-compliant status of unlisted companies for industry reference. Ongoing efforts to raise awareness of alternative Islamic fundraising activities and efforts to broaden Islamic offerings through crowdfunding platforms will also be intensified. These initiatives are expected to expand and provide greater access to the full spectrum of the Islamic investment universe, including the unlisted markets, thus providing greater avenues for both retail and sophisticated investors to participate in both public and private markets. This will enable a more diversified Shariah-compliant investment portfolio across asset classes and economic sectors as well as facilitate greater mobilisation of funds towards the halal economy, promoting inclusivity.
Green revenue are revenues generated from products and services that creates a positive impact to the environment. Sustainable Finance and the Role of Securities Regulators and IOSCO, IOSCO, 2020.
Halal Industry Master Plan 2030, Halal Development Corporation Bhd, 2020.
Understanding Financing through the Lens of Small and Medium Enterprises, BNM, 2018.
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CAPITAL MARKET MASTERPLAN 3
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