Malaysian institutional investors call for action on responsible lending

Statement from KWAP, state fund Khazanah, the Employees Provident Fund and others

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Langkawi, Malaysia: credit James White

A group of leading Malaysian institutional investors have today called for financial institutions to up their game on sustainable development both in the country and across the region.

The demand came at an event in Kuala Lumpur organised by Kumpulan Wang Persaraan (KWAP), the country’s second largest pension fund with RM125bn (€26bn) in assets, and co-hosted by environmental group WWF.

Backing the call along with KWAP were giant state fund Khazanah and the government-run Employees Provident Fund.

It was made by 12 members of the Institutional Investor Council (IIC), the body set up in 2015 following the launch of the Malaysian Code for Institutional Investors (MCII) the previous year.

In a statement headlined ‘A Pledge to Inspire’ the investors said they would “support financial institutions to fulfill their crucial role in driving sustainable development in Malaysia and across ASEAN (the Association of Southeast Asian Nations)”.

“This effort includes commitments to drive responsible lending practices by banks and to build members’ capacity on responsible investment.”The group says that while Malaysia has been a regional leader in sustainable finance, its banks are not disclosing enough about how they address environmental and social risks and opportunities.

“Financial institutions can drive sustainable development by mainstreaming ESG in their loan portfolios”

“One way that financial institutions can drive sustainable development is by mainstreaming ESG in their loan portfolios,” said KWAP’s CEO Dato’ Wan Kamaruzaman, who chairs the council.

And he said financial institutions could develop green products to finance environmentally sustainable projects.

In May KWAP, which signed up to the Principles for Responsible Investment earlier this year, publicly acknowledged 12 of its fund managers for their returns and responsible investment performance.

Meanwhile, KWAP is reportedly looking to extend its current ESG mandate to alternative investments, including real estate and private equity. Deal Street Asia was quoting Chief Investment Officer Nik Amlizan Mohamed.