KUALA LUMPUR (Nov 24): The Securities Commission Malaysia (SC) will introduce a new onboarding programme for directors with a specific focus on sustainability to help build an environmental, social and governance (ESG)-ready board.
In his speech at the virtual launch of Corporate Governance Strategic Priorities 2021 – 2023 (CG Strategic Priorities) on Wednesday, SC chairman Datuk Syed Zaid Albar said this was as investors are demanding that companies demonstrate commitment coupled with measurable action to address ESG risks and opportunities.
“This is driven in part by the global agitation to address the climate crisis, in order to build a brighter and more sustainable future.
“Thus, boards must approach ESG considerations as seriously as business risks and opportunities, in order to achieve long-term sustainable growth,” he said.
The SC’s CG Strategic Priorities comprise 11 initiatives that aim to promote agile and responsible boards, ESG and governance fitness at boards, investor activism and stewardship, deepening engagements with youth on CG, and widening access to CG data.
Syed Zaid cited the recently concluded United Nations Climate Change Conference (COP26) in Glasgow which reflects a strong sense of commitment and optimism across all sectors, in support of the COP26 agenda.
He said the Glasgow Financial Alliance for Net Zero (GFANZ) announced that more than 450 entities in the financial sector across 45 countries representing US$130 trillion of financial assets have committed to aligning their activities to transition to net zero — promising to deliver US$100 trillion of investment needed to achieve this target.
“Large scale commitment such as this will no doubt attract the interest of a multitude of stakeholders who would expect transparency and clear progress.
“To realise this target, real change and transition strategies need to be put in place — not only within your own entity but also that of your clients and investees,” he said.
Syed Zaid also said boards today are under tremendous pressure as a result of rising regulatory expectations and increasing shareholder activism.
He said boards must continuously assess their composition to determine if they have the right skill-set to perform their functions effectively for companies to remain resilient and competitive both through and beyond the pandemic.
"It thus follows that board positions were never intended to be lifelong positions. As the economy and the dynamics of the marketplace evolve and change, boards need to be refreshed to bring in new talent, fresh perspectives and competencies that are more aligned with the current and future demands of the business.
“The Covid-19 crisis accentuated the need for directors to exercise good stewardship to ensure their business models are agile and resilient.
“In this regard, ESG is increasingly becoming top of mind for directors. How boards address sustainability in the context of their company’s strategic objectives and business model will determine the success of the company,” he said.
Meanwhile, Syed Zaid highlighted that 90% of the initiatives under the 2017-2020 Priorities have been implemented through a variety of initiatives.
Among them are the issuance of the revised Malaysian Code on Corporate Governance in 2017 and the Guidelines on Conduct of Directors of Listed Corporations and their Subsidiaries, establishment of the Institute of Corporate Directors Malaysia and the Corporate Governance Council, facilitating the conduct of e-AGMs, and deploying machine learning capabilities in CG monitoring and disclosure assessment.