Sustainable And Responsible Investment (SRI) Initiatives in The Malaysia Capital Market

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SRI Sukuk: The Journey Towards Sustainable and Responsible Investment

Jul 23, 2020


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Securities Commission's Capital Market Masterplan 3 (CMP3)

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Development of SRI had been earmarked as a key growth area for the Malaysian capital markets under the Capital Market Masterplan (2001-2010). In 2014, the SC introduced the SRI Sukuk Framework – now recognised as a pioneering regulatory development that integrates the principles of Shariah with those of SRI. In 2017, the SC issued the Guidelines on Sustainable and Responsible Investment Funds (SRI Guidelines), to facilitate and encourage the growth of SRI funds in Malaysia.

The SRI Guidelines – which enable funds to be designated as SRI funds – will broaden the assortment of SRI products and attract more investors to the SRI arena. They will apply to both conventional and Shariah-compliant funds under the SC’s purview, e.g. unit trust funds, real estate investment trust funds (REITs), exchange-traded funds (ETFs), as well as PE and VC funds. Eligible areas for SRI projects include natural resources, renewable energy, community and economic development and waqf (non-profit/charitable) properties/assets. The SRI Guidelines will also introduce additional disclosure and reporting requirements to enhance transparency in the investment policies and strategies of SRI funds. This is anticipated to reinforce Malaysia’s position as a regional SRI centre – a strategic thrust identified under the SC’s Islamic Fund and Wealth Management Blueprint (also launched in 2017).

The SC’s firm commitment to building a conducive ecosystem to spur the growth of SRI in Malaysia is also encapsulated in the Sustainable and Responsible Investment Roadmap for the Malaysian Capital Market (SRI Roadmap), launched in 2019. The five-year roadmap encompasses five overarching strategies, known as the 5i-Strategy, i.e. broadening the selection of SRI instruments, expanding the SRI investor base, establishing a strong SRI issuer base, instilling a robust internal governance culture, and designing information architecture in the SRI ecosystem. The 5i-Strategy contains 20 recommendations to position Malaysia as a regional SRI centre. 

Source: Capital Markets Malaysia

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