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SC Unveils Principles-Based Sustainable And Responsible Investment Taxonomy For The Malaysian Capital Market

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The Securities Commission Malaysia (SC) today unveiled the Principles-Based Sustainable and Responsible Investment Taxonomy for the Malaysian Capital Market (SRI Taxonomy) to help advance the nation’s climate and sustainability agenda.

The SRI Taxonomy provides universal guiding principles for the classification of economic activities that qualify for sustainable investment.

It aims to give clarity towards enabling proper and consistent identification and classification of various types of economic activities as well as the definition of sustainable investments. It also seeks to address concerns on the need to mitigate
and manage the risks of greenwashing.

“The global expansion of sustainable investments has created demand for additional clarity and assistance for market players in identifying economic activities that are aligned with environmental, social and sustainability objectives,” said the SC Chairman
Dato’ Seri Dr. Awang Adek Hussin.

“The SRI Taxonomy adopts a principles-based approach to enhance the standardisation and comparability of sustainable investment assets,” he said. “This was done after considering the state of readiness of the wider Malaysian capital
market, as the capital market constituents are at different maturity levels in their sustainability journey.”

Given Malaysia’s strong position in Islamic finance and the alignment of the underlying principles of Islamic finance with sustainability, particularly from the social and ethical investing perspectives, the SRI Taxonomy also includes a social component, in addition to the environmental component.

The development of the SRI Taxonomy was undertaken by the SC, in collaboration with the industry through an Industry Working Group (IWG). The IWG comprises the World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia as the Lead Technical Expert, and representatives from Bursa Malaysia, asset and fund management companies, investment banks, asset owners and other sustainable finance specialists.

The World Bank Country Manager for Malaysia Yasuhiko Matsuda said, “We are grateful for this opportunity to have supported the SC in developing a framework to aid in unlocking capital for sustainable development priorities. This taxonomy can also assist other countries facing similar challenges in shifting or transitioning towards socially responsible investments and a just climate transition.”

The SC also issued a Public Response Paper today following the issuance of the Public Consultation Paper No.1/2021 on the Principles-Based Sustainable and Responsible Investment Taxonomy for the Malaysian Capital Market in December 2021.

Both the SRI Taxonomy and the Public Response Paper can be found at the SC website at https://www.sc.com.my/development/sri.

About the Securities Commission Malaysia:

The Securities Commission Malaysia (SC), a statutory body reporting to the Minister of Finance, was established under the Securities Commission Malaysia Act 1993. It is the sole regulatory agency for the regulation and development of capital markets. The SC has direct responsibility for supervising and monitoring the activities of market institutions, including the exchanges and clearing houses, and regulating all persons licensed under the Capital Markets and Services Act 2007. More information about
the SC is available on its website at www.sc.com.my. Follow the SC on twitter at @SecComMy for more updates.

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