Its managing director Amirul Feisal Wan Zahir acknowledged that its big holdings in GLCs such as Malaysia Airlines (MAS) and Tenaga Nasional Bhd (TNB) would present challenges to its efforts to achieve net zero emissions across its portfolio by 2050.
However, the US$30 billion (RM128 billion) sovereign wealth fund would not sell out these investments on environmental grounds, he said in an interview with the Financial Times.
“It’s easier for some multinational funds to say: I will sell your company and I will abandon you,” he said. “We are not there to pull the rug from under their feet.”
Apart from its commitment to environmental, social and governance (ESG) standards, Khazanah has also set itself a goal to ensure that 30% of board and senior leadership positions in its portfolio of companies are held by women by 2025.
Malaysia is among several oil-rich states that are already responding to pressure to divest their wealth into more sustainable and ethical investments but, according to the FT report, large investors face growing scepticism about how much they are really doing to support the transition away from climate-changing fossil fuels.
Amirul said Khazanah would also not divest from companies that failed to meet the deadline for female representation, adding it would instead “put them to task”.
“I think, basically, that’s the only thing that we can do,” he said. “I think when we start questioning management, putting the heat under their feet a bit, then it gets done.”
Retaining its investments in MAS and TNB, which generated 45% of its electricity from coal last year, could make Khazanah’s net zero ambitions particularly difficult.
But Amirul said that because of the size of the fund’s substantial stakes in Malaysian businesses — typically “as high as 20%” — Khazanah had a duty to influence change, rather than to sell.
Governance in Malaysia’s state investment sector has come under scrutiny following the revelation in 2015 that billions of dollars were embezzled from government fund 1MDB, in a scandal that led to the conviction of former prime minister and Khazanah chair Najib Razak.