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Spotlight on ESG practices for business sustainability

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Sustainable finance webinar examines how companies can embrace a new finance landscape and increase supply chain demand

INVESTORS increasingly want to see environmental, social and governance (ESG) practices in companies.

Companies that strategize on carbon reduction aspects, for example, should see significant benefits, including increased innovation, competitiveness, risk management and long-term growth.

During a webinar, Tan Ai Chin, Managing Director, Senior Banker and Head of Investment Banking at OCBC Bank (M) Bhd said, “ESG has become a matter of survival and longevity for businesses”.

The “Sustainable Finance Series” webinar was organized by the Malaysian Institute of Chartered Accountants (MICPA) and the Sustainable Finance Institute Asia (SFIA).

Tan said OCBC had reached S$34 billion (RM109 billion) in its sustainable finance portfolio in 2021 and set a new sustainable finance commitment target of S$50 billion to be achieved by 2025.

“OCBC has become the first foreign bank to collaborate with Bursa Malaysia as part of the latter’s #financing4ESG initiative to jointly develop sustainable financing options that recognize the ESG credentials of listed companies.

“We started these best practices in 2017 and have developed our responsible finance framework to integrate ESG consideration into our finance activities,” she said.

Elaborating on the new financing landscape – decarbonisation – she explained that an estimated total capital investment of RM450 billion is needed by 2050 for Malaysia to achieve net zero.

Tan highlighted the establishment of public policies as well as legislative and regulatory frameworks to facilitate the transition to a low carbon economy.

Meanwhile, Managing Director of AmBank Islamic Bhd, Eqhwan Mokhzanee Muhammad, said sustainable finance covers all financing activities that contribute to sustainable development, including ESG aspects.

Redha Shukor, head of supply chain, operations and sustainability at PwC Malaysia, said there was growing demand for supply chains to become more sustainable.

“It is imperative that companies start rethinking their supply chains to mitigate risk and take advantage of value creation opportunities,” he said.

Regarding steps that could be taken to implement a sustainable supply chain, Redha said it would involve upskilling the workforce in the area of ​​sustainability through development and training programs. ; develop a robust and transparent supplier data framework; disclose a company’s policy on key material ESG issues and progressively apply ESG expectations to stakeholders and conduct audits on suppliers throughout the supply chain to identify potential ESG risks and issues that may arise .

In a panel discussion moderated by SFIA Chief Executive Eugene Wong titled “Towards a Zero Carbon Future: The New Financing Landscape and Supply Chain Opportunities”, Eqhwan said AmBank Islamic was examining credit risks when evaluating loan applications.

Currently, the bank conducts ESG risk assessments and this year introduced an eight-sector specific checklist in addition to a general sector checklist, Eqhwan added.

Tan said concerted efforts have been made by businesses and government-linked companies to understand what could be done and how banks could support them in their ESG initiatives.

“Carbon credit is still new to the market, but it’s actually a cash-flow generator if done right,” she noted.

UEM Edgenta Bhd’s independent non-executive director, Jenifer Thien, said: “It doesn’t matter if you’re a big or a small company, you have to decide whether this (the ESG initiative) is going to be a defensive strategy or a game-changer. .

“If you want to change the game, it will become a business strategy rather than a compliance move.

“If you want to be a survivor, you really have to decide who you want to align yourself with – which clients, funders, etc.

“Understand your supply chain. Meet your key vendors, find out what innovations they are working on or if there are any roadblocks, because collaboration is key,” Thien said.

Redha said companies that have experienced operational improvement or cost efficiencies stemming from sustainability would appreciate its value, even if it always starts with regulatory compliance or stakeholder and investor interests.

When asked if ESG initiatives would take a back seat to inflation risk, Tan said all companies need to get on board.

Redha said it was important for organizations to continue to drive ESG compliance, adding that “it helps organizations focus on value and prioritize their resources effectively.”

Thien emphasized that ESG practices need to be embedded across the business and that “it’s a long-term journey.”

“You need to make short-term progress to see if it’s credible and has a high level of reliability,” she said.