KUALA LUMPUR: Bursa Malaysia Bhd aims to create structured products out of the globally benchmarked FTSE4Good Bursa Malaysia Index, which tracks the performance of companies demonstrating strong environmental, social and governance (ESG) practices.

Bursa Malaysia chief executive office Datuk Tajuddin Attan said the exchange hopes to ultimately come out with structured products from the FTSE4Good launched on Dec 22, 2014, but did not specify a time frame for it.

“The index as a start is a reference point, and you can actually create a product out of the index.

“That is why we have the FTSE4Good as a start, and [fund] companies like BlackRock Inc can produce that [structured product],” Tajuddin told reporters after the Global Sustainability and Impact Investing Forum here yesterday.

 Currently, the FTSE4Good, which was developed in collaboration with FTSE as part of the globally benchmarked FTSE4Good Index Series, and the first such index introduced in Asia, has 24 constituents that account for 12% of the top 200 Malaysian stocks in the FTSE Bursa Malaysia Emas Index.

The companies were screened in accordance with transparent and defined ESG criteria.

 Bursa Malaysia director of securities market Ong Li Lee said the regulator does not wish to rush into pushing products out of FTSE4Good before more companies are included in the index.

 “At the end of the day, it will be creating products out of indices. But [having] this [index] is a start. It is a reference,” she added.

 Tajuddin also observed that there is a growing trend of sustainable investing. In 2012, in the United States, one of every nine US dollars invested was for sustainable investing. In 2014, one in every six US dollars was for sustainable investing.

 Citing figures from US fund giant BlackRock, Tajuddin said Asia “had a lot of headroom in this area” as sustainable investments account for less than 1% of total assets managed in Asia.

 Tajuddin added that the role of the exchange is to give guidance and create awareness of listed companies. 

Bursa Malaysia will introduce a new sustainability guide and toolkit that provide new model guidance to other listed companies to be included in the FTSE4Good.

 When asked how much good will come out of the voluntary ESG model, Tajuddin said: “It should be self-governance, but the early stages of the whole thing are normally where we guide.”

The forum, organised by Bursa Malaysia and the World Federation of Exchanges, saw about 200 participants yesterday.

This article first appeared in The Edge Financial Daily, on July 24, 2015.