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Investing And ESG

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Environmental, Social, and Governance (ESG) is becoming a very hot topic recently, and today we will be taking a look at how ESG and investing go hand-in-hand. Smart Investor spoke with Datuk Wira Ismitz Matthew De Alwis, Executive Director & Chief Executive Officer, Kenanga Investors Berhad to find out more about investing and ESG.

He is also one of the speakers at the prestigious ESG Evolve 2022 conference that Kexxel Group is organizing in KL on 6-8 December. We will talk more about the conference at the end. For now, let’s find out more about how Kenanga Investors is pioneering ESG in Malaysia.

Datuk Wira Ismitz Matthew De Alwis, Executive Director & Chief Executive Officer, Kenanga Investors Berhad

Smart Investor: What does ESG mean to Kenanga Investors? Why is it important to your business and how does it impact your industry?

Datuk Wira Ismitz Matthew De Alwis: The impact of ESG on the financial markets has been significant. Investors and businesses alike are beginning to acknowledge that an ESG-driven perspective promises stronger and more resilient economies and businesses. As a result, this awareness has changed the way individuals and institutions invest. Many are now are focusing on mitigating their portfolio exposures to carbon risk for example.

As a partner to the sustainability agenda, we are dedicated to the goal of developing Malaysia’s impact investing landscape. Currently, we believe that the local environment faces issues in capacity building to address sustainability issues such as lack of competencies, skills and technical awareness on ways to adopt a sustainability-driven top-down model at each level of the organisation. Recognising this, Kenanga Investors, as an established financial institution, must actively seek out and collaborate with regulators and corporates finding its footing within the local green economy.

To ensure sustainable performance for our stakeholders, we are confident that the integration of carbon exposures, ESG ratings, financial quality metrics and active engagements, amongst other factors, in a diversified and risk-controlled portfolio has historically resulted in better risk adjusted returns for investors than just plainly investing in a broad market index.

esg environmental social and governance
Image from internationalinvestment.net

SI: What are the key factors for successful ESG deployment?

DWIMDA: We believe that there a few critical factors required for a successful ESG implementation. To begin, a supportive and knowledgeable board is critical in steering the company’s ESG agenda as well as building the appropriate corporate culture, which leads to effective ESG implementation. Furthermore, the ESG goals must not only be specified, but also time-bound and practical during the implementation process. Policies, plans, and oversight mechanisms must address these issues both qualitatively and quantitatively.

At Kenanga Investors, we believe that the continuous delivery of consistent top performance stems from the premise of an effective stewardship and active ownership approach throughout the investment value chain. In search of long-term value accretive investments, we aim to influence investee companies as shareholders through the promotion of responsible and sustainable practices.

SI: What are the challenges that you faced in deployment?

DWIMDA: The lack of knowledge and comprehension of ESG among our retail investors in Malaysia was one of the hurdles we faced in implementing our ESG objectives. Businesses also lacked transparency and reliability when it came to ESG data and disclosure. Furthermore, when it comes to ESG practises, there is a lack of consistent standards, measurements, and focus as some may focus on climate change, whilst others may focus and emphasise human rights issues.

Environmental, social, and governance (ESG) investment Organizational growth. Wooden cube with symbol of esg concept

SI: What are the key trends you see gaining traction for ESG?  What are the areas of growth amongst the pillars to look at in 2023?

DWIMDA: During the Covid-19 pandemic, there was a significant increase in ESG awareness. During this period, many firms suffered financially, whilst others with ESG policies were more protected from the pandemic’s consequences and were able to outperform their peers and competitors.

As ESG awareness continue to grow, trends within the ESG economy increase in tandem as well, most notably is impact investing. This was apparent in the deployment of financial firepower to investments and causes that could provide quantifiable benefits and allowed investors to see and measure the beneficial effects of their investment.

There is currently a significant trend in assuring the interconnectedness of human and developmental needs. Assuring that these needs are fulfilled in a way that benefits society while being environmentally and ecologically sustainable is a delicate balance. The blue economy and nature-based infrastructure are two examples of this.

“It is becoming increasingly critical that sustainable development continues strengthening its foothold in a way that is consistent with future focused values. Regulators and key players must work towards actionable policies that will produce value for stakeholders, investors and our communities. Let us invest in a tomorrow that is prosperous and principled.”

Datuk Wira Ismitz Matthew De Alwis, Executive Director & Chief Executive Officer, Kenanga Investors Berhad

ESG EVOLVE 2022: Driving Catalytic Change For Business Sustainability

Kenanga Investors will share more insights at the ESG Evolve 2022 Driving Catalytic Change for Business Sustainability organized by Kexxel Group  which will be held on 6-8 December in EQ Kuala Lumpur. Come and join us, see you there!

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