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Capital market institutions and intermediaries too are expected to play a key role in Malaysia’s transition towards a low-carbon economy. They can support the achievement of sustainability goals through the intermediation of risk and capital by taking into account ESG factors. This includes incorporating ESG considerations into their corporate, investment and business decisions. Along with the growth in SRI, there will be increasing demand for ESG disclosures and for intermediaries to be able to manage ESG- related risks which could undermine investor interests.
In response to changes in investing behaviours, the intermediation landscape will see more innovation, disruption and competition. As the SC introduces more flexibilities in the regulatory regime to enable innovation and competition, market participants are expected to exercise greater self-regulation in their conduct of business. Increasingly in other jurisdictions, individual firms are taking on a more proactive role in self-policing, self-reporting and self-rectifying breaches.
Large global institutional investors are already leading the way as strong advocates for change, particularly in driving good CG, through direct engagements with investees or by exercising their voting rights. In this regard, the IIC can and should play a bigger role in adopting greater transparency in their engagements and voting patterns.
Moving forward, as the capital market develops further, the SC’s regulatory approach will continue to adapt to allow businesses to meet the changing market needs and innovate – all while safeguarding investors’ interests. In this respect, the SC sees the opportunity to take principles-based regulations further, in line with its objective to be less prescriptive and more outcomes-focused. This will entail making further changes in the SC’s rule-making, supervision and enforcement approach as well as the need for greater regulatory transparency.
STRATEGIC CONSIDERATIONS
4.1.1 PROMOTING RESPONSIBLE BUSINESSES
Diagram 14
KEY THRUSTS TO PROMOTE RESPONSIBLE BUSINESSES
Strengthen board leadership
Develop capacity for ESG leadership
Adopt a whole- of-society approach
Drive long-term value creation for stakeholders and respond to expectations on sustainability
Source: SC.
Develop ability of corporates to respond to sustainability issues in an integrated and strategic manner
Work with key stakeholders to drive businesses to be more accountable and responsible
84 SECURITIES COMMISSION MALAYSIA