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PETALING JAYA: The Securities Commission Malaysia (SC) today issued its Corporate Governance Strategic Priorities 2021-2023 (CG Strategic Priorities) to promote, among others, environmental, social and governance (ESG) fitness and leadership of boards.

The SC outlined 11 targeted initiatives such as onboarding programmes for directors on sustainability, investor education series on corporate governance and sustainability, and expansion of collaboration with universities to deepen conversations with youth on current corporate governance and sustainability issues.

SC chairman Datuk Syed Zaid Albar (pix) said ESG readiness is no longer a matter of choice for companies, as stakeholders have come to expect more responsible, sustainable and climate-conscious behaviour.

“This expectation is going to increase over time. Thus, boards need to be ESG-ready. Today, the growth trajectories and projections of all economies have been upended (by the Covid-19 pandemic), which adversely affects households and companies across a broad range of economic sectors.

“As the global and Malaysian economies recover from the pandemic, it is important that we ‘build back better’. This means we need to ensure that long-term economic scarring is minimised while existing inequities and structural challenges in the economy do not get worse. These fault lines must be addressed to enable communities and social systems to get back on their feet. And businesses must play their role in society, as good corporate citizens with a purpose,” he said at the virtual launch of the Corporate Governance Strategic Priorities 2021–2023.

The CG Strategic Priorities is a component of the Capital Market Masterplan 3 that was launched in September to chart the path ahead for the Malaysian capital market over the next five years. The CG Strategic Priorities builds on the SC’s previous plan for 2017 to 2020, where a 90% implementation score was achieved.

Syed Zaid said strengthening governance and accountability of boards will continue to be a priority of the SC, as Malaysia pursues the global goal of addressing climate challenges and building a more sustainable future.

“In formulating these strategic priorities, we considered imperatives that will have far-reaching impact on boards and the future of businesses. This includes the rise of the stakeholder economy – which calls for value creation for a broader spectrum of stakeholders. It also demands that businesses and their leaders be responsible for their environmental and societal impacts.

“The Covid-19 crisis accentuated the need for directors to exercise good stewardship to ensure their business models are agile and resilient. In this regard, ESG is increasingly becoming top of mind for directors. How boards address sustainability in the context of their company’s strategic objectives and business model will determine the success of the company. The SC will introduce a new onboarding programme for directors with a specific focus on sustainability to help build an ESG-ready board,” he said.

The SC will implement measures to improve board diversity, including accelerating the participation of women on boards and in senior management. Listed companies are reminded that while it will be mandatory for boards to comprise at least one woman director, boards should put in efforts to achieve the target of having 30% women directors in order to further harness the benefits of having a diverse board. Currently, only 162 listed companies have at least 30% women on their board.

The SC is providing technical input to support the Government’s Perkukuh programme to improve corporate governance practices among government linked investment companies and optimise their performance and contribution in nation-building.

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