On February 17, 2023, the Securities Commission Malaysia ("SC") published the revised Guidelines on Sustainable and Responsible Investment Funds ("Guidelines") setting out the reporting and disclosure requirements for a fund to qualify as a Sustainable and Responsible Investment ("SRI") Fund and, under a new chapter added to the Guidelines, an ASEAN Sustainable and Responsible Fund ("SRF"). The amendments revise the first version of the Guidelines issued in December 2017 and are effective on the date of issuance.
The Guidelines have been re-arranged to three parts:
- Part A: SRI Fund - general requirements; disclosure and reporting requirements; and certification in respect of tax exemption for managing an SRI Fund
- Part B: ASEAN Sustainable and Responsible Fund Standards - requirements to qualify
- Part C: Application to Qualify as an SRI Fund and an ASEAN Sustainable and Responsible Fund
The key elements of an SRI Fund and an ASEAN Sustainable and Responsible Fund are summarised below.
SRI Fund
- An SRI Fund is required to adopt certain strategies to achieve its policy e.g. ESG integration, ethical and faith-based investing and impact investing etc.
- Certain matters are required to be included in the fund's annual and interim reports including a statement that the fund has complied with the Guidelines, descriptions on the sustainability considerations adopted and actions taken in achieving the SRI Fund's policies and strategies etc.
- A minimum asset allocation threshold is introduced such that an SRI fund must primarily invest 2/3 of its NAV in securities that are in accordance with its policies and strategies.
- An issuer may, on a voluntary basis, appoint a third-party to verify whether the fund's investments are aligned with its policies and strategies but such third-party's credential and expertise must also be disclosed in any report made available to the public.
ASEAN SRF
- A fund that is either (a) a qualified SRI Fund; or (b) a fund seeking for the SRI Fund qualification, may apply for the qualification as an ASEAN Sustainable and Responsible Fund.
- The issuer must ensure that the SRI Fund complies with the ASEAN Sustainable and Responsible Fund Standards issued by ACMF.
For more details, please refer to the Summary of Amendments and FAQ published by the SC.
Other developments in Malaysia
Malaysia announced several other significant ESG initiatives in the past few months including the launch of the world's first Shariah-compliant carbon exchange, Bursa Carbon Exchange (BCX), in December 2022 and the Bursa Malaysia's and the London Stock Exchange Group's planned launch of a sustainability reporting platform in 2023. These developments are positive signs of Malaysia's progress in developing its ESG capabilities.
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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
