PODCAST: SC looking at establishing greater clarity on SRI Taxonomy

Having issued its principles-based SRI Taxonomy last December to serve as universal guidance for the classification of economic activities that qualify for sustainable investment, the Securities Commission Malaysia (SC) is now exploring ways to provide greater clarity on the guidance.

“We are now trying to look at the next stage of that [taxonomy] development. We are going to be developing taxonomy plus standards, considering it in alignment with the ASEAN ecosystem,” confirmed Sharifatul Hanizah Said Ali, the SC’s executive director of Islamic capital market development. “The next step will be more granular — we are looking at thresholds, metrics, indicators and targets.”

The SRI Taxonomy, the adoption of which is voluntary, is one of the SC’s many initiatives to nurture Malaysia’s SRI industry. Islamic SRI is an important niche the country is focusing on.

“In the last couple of years during the pandemic, this agenda of sustainability has been accelerated, showing us how vulnerable the community and Mother Nature are. There is an urgent need for us to drive and aspire for a sustainable and resilient future,” Sharifatul told IFN.

In 2022, over US$37 billion — a record-high — was invested into sustainable funds, according to Sharifatul.

“The facilitative frameworks and ecosystem we have put into place have boosted awareness and therefore, consequentially the demand on Malaysian companies to undertake SRI practices and also give investment options to investors,” shared Sharifatul.

As at the end of 2022, the country registered 58 qualified SRI funds, representing approximately RM7.05 billion (US$1.51 billion) in value. In comparison, there were only 34 of such funds in 2021, with a net asset value of RM5.08 billion (US$1.09 billion).

“What is also key for us to be mindful of as we take on this journey down the net-zero pathway is that we are estimating about RM350–400 billion (US$74.94–85.64 billion) of investments from the public and private sector from now until 2050. That is huge and we cannot rely on public finance alone — we need to drive market-based funding and capital market needs to play a significant role.”

As of December 2020, RM10.58 billion (US$2.27 billion)-worth of SRI Sukuk was issued in Malaysia. Cumulatively since the introduction of the SRI Sukuk Framework in 2014, about RM18.9 billion (US$4.04 billion) in SRI Sukuk have been sold.

This is an excerpt of an interview with Sharifatul Hanizah Said Ali from the Securities Commission Malaysia. To listen to the full conversation, log on to IFN Podcast.

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