Global ESG Monitor: FBMKLCI companies lack depth and detail in ESG reporting
By Hardesh Singh March 22, 2023
- Malaysian index ranked joint fifth alongside Dow Jones among 10 indices surveyed
- TNB and Press Metal Aluminium place joint-first amongt 30 companies surveyed
Companies on the FTSE Bursa Malaysia KLCI (FBMKLCI) lacked the appropriate content and level of detail needed for optimal transparency in their ESG reporting, a study has found, resulting in a midfield placement among a cohort of 350 companies listed on 10 stock market indexes across four continents.
The Global ESG Monitor (GEM) examines ESG transparency in non-financial reporting. The ranking is based on the degree of transparency in reporting on ESG strategy, materiality, and disclosure of indicators and not their overall performance on such metrics. The GEM Malaysia Regional Report 2022, launched on the 21st of March, marks the first time Malaysia was included in the benchmarking report, assessing 30 companies listed on the FBMKLCI.
With an average score of 54 out of 100 points, the Malaysian index ranks joint fifth place alongside the Dow Jones among the ten indices surveyed. This positions the FBMKLCI ahead of the S&P 50 USA (53 points), ASX 50 (53 points), WIG 20 (51 points), and BET 20 (41 points). Above FBMKLCI rank S&P Asia (56 points), Hang Seng (57 points), EURO STOXX (66 points) and DAX (68 points)," said Michael Diegelmann, co-founder of Germany based GEM which launched in 2019.
Within the FBMKLCI ranking, the top performing companies namely Tenaga Nasional Berhad (TNB) and Press Metal Aluminium Holdings Bhd tied for first place at 72 points, with Petronas Chemicals Group Bhd placing third at 71 points. The bottom three see Dialog Group Bhd , Hong Leong Financial Group Bhd and Kuala Lumpur Kepong Bhd placing 28th, 29th and 30th with scores of 41, 37 and 30 respectively.
The GEM approach is premised on the idea that within ESG reporting, positive aspects must not be overemphasised, and negative aspects must not be omitted, and the breach of either is where greenwashing begins. The report found, for example, that 83% of FBMKLCI companies disclose strategies and measures to uphold human rights, but only 30% of these companies specifically disclose discrimination and harassment incidents. Also, 67% of these companies provide a list of their stakeholders but only 37% describe how stakeholders are determined.
Ariane Hofstetter, the GEM’s co-founder and Head of Research added, “While Malaysian companies excel in adhering to international frameworks, it’s crucial they provide more comprehensive information on environmental, social, and governance aspects to truly embrace sustainability.”
For context, when ranked against the global cohort, TNB and Press Metal Aluminium Holdings jointly ranked 42.
The Global ESG Monitor was launched to understand more about the quality of non-financial reporting using the GEM ASSAYTM framework based on the relevant guidelines of the Global Reporting Initiative (GRI), ISO Standard 26000 and Accountability and Transparency, 2010a.
The report and further information on GEM can be found here.
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