This lack of details was the key contributor in pulling down Malaysia’s overall ESG transparency score, resulting in the FBM KCLI being placed fifth out of the 10 indices surveyed in 2022.
GEM co-founder Michael Diegelmann said FBM KLCI companies still lacked the appropriate content and level of detail needed for optimal transparency, thus ranking in the midfield amongst global and regional peers.
“The FBM KLCI’s ranking showcases progress in sustainability, but also highlights the need for deeper, more detailed ESG reporting in Malaysia,” he said.
“With an average score of 54 out of 100 points, the Malaysian index ranks in joint fifth place alongside the Dow Jones among the 10 indices surveyed. This positions the FBM KLCI ahead of the S&P 500 (53 points), ASX 50 (53 points), WIG 20 (51 points), and BET-20 (41 points),” he added.
The GEM is a research initiative that analyses the transparency of non-financial ESG data from 350 companies listed on 10 of the world’s largest stock market indices.
The report’s findings were unveiled today at a thought leadership event hosted by Perspective Strategies, the Malaysian regional partner of GEM.
More work ahead
Ariane Hofstetter, GEM’s co-founder and head of research, cautioned there was still significant work ahead if companies wanted to “truly embrace sustainability”.
“Malaysian companies excel in adhering to international frameworks, (however) it’s crucial they provide more comprehensive information on ESG aspects.”
She evidenced how significant transparency gaps exist in ESG reporting, with scores of 55%, 39%, and 54% in each respective category.
When disclosing information about materiality factors, 90% of the FBM KLCI reported that a materiality analysis was completed but only 20% provided background information on the year of data collection and how the data was collected.
Perspective Strategies MD Andy See said it was important to realise that the transparency of ESG reporting was critical to inform and engage stakeholders.
“After all, sustainability reporting has been mandatory for all Malaysian public-listed companies since 2016.
“Whilst there are still many hurdles for Malaysian companies to overcome when it comes to transparency, overall, we are moving in the right direction,” he said.
Out of the index’s thirty companies Press Metal Aluminium Bhd and Tenaga Nasional Bhd came out joint top with scores of 72 out of 100.