Driving Sustainable Investment

Published on 1.2.2023
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Asia Pacific - responsible for more than half of the world’s greenhouse gas (GHG) emissions - is crucial in stopping global warming. This is especially true as the region’s GHG emissions are expected to continue rising, with an anticipated increase of 34% by 2030 compared with 2010 levels.

Reflecting this, countries across the region have stepped up long-term pledges to cut emissions and incorporate environmental, social, and governance (ESG) goals into strategic decisions and business activities. Malaysia has committed to one of the region’s most ambitious pledges, by aiming to become carbon-neutral by 2050 at the earliest. A study by BCG and WWF Malaysia estimates that nearly US$100 billion is required over three decades for Malaysia to achieve Net Zero by 2050. Public finance alone must be complemented with private capital due to the scale required to fulfill commitments.

The government and regulators are accelerating efforts to empower Malaysia toward ESG adoption. Through a “whole of nation” approach, a growing synergy between the ESG goals of government, regulators and the private sector is creating a virtuous circle in Malaysia.

As ESG practices become the cornerstones of sustainable businesses, technology is playing an increasingly critical role in accelerating adoption, through the digital transformation of companies in Malaysia. According to the KPMG 2022 CEO Outlook survey, 74% of CEOs agree that their organisations’ digital and ESG investments are inextricably linked.

Having reliable information and appropriate technological solutions, such as big data, artificial intelligence, the internet of things and 5G connectivity, are crucial to pushing an organisation’s ESG agenda forward. New estimates from the World Economic Forum reveal that digital technologies, at scale, can enable a 20% reduction in GHG emissions by 2050 in high-emitting sectors.

MDEC is confident that Malaysia Digital (MD) companies will play a key role in this agenda. Over the years, a plethora of scale-up programmes have been put in place to support the growth of tech companies in Malaysia and beyond. These programmes have produced global companies that are actively deploying a range of digital solutions, many of which contribute to a greener economy. This year, greater emphasis will be given to channeling ESG-related business opportunities to MD companies.

At the same time, Malaysia continues to strengthen its attractiveness as a destination for business investment by stepping up sustainability efforts. Investors understand that providers of finance are increasingly taking ESG criteria into consideration - according to Bloomberg Intelligence, global ESG assets are projected to hit US$50 trillion by 2025. Against this background, the New Investment Policy, developed by MITI, aims to strengthen the country’s investment ecosystem by increasing economic complexity, creating high-value job opportunities, extending domestic linkages, developing new and existing economic clusters, and enhancing ESG practices.

MDEC recognises the increasing role that digital technologies will play in ensuring a sustainable, inclusive and ethical digital economy. At the same time, we also recognise the need for digital companies to embrace ESG-friendly practices for their own growth and longevity.

We are addressing this sustainability imperative in several ways. Firstly, through the introduction of Malaysia Digital (MD) in 2022, MD Status companies are highly encouraged to align their operations to the government’s carbon neutral and ESG goals. To this end, we are collecting ESG-related data from MD-status companies via the half-yearly MD Industry Survey. This will spur ESG-awareness amongst companies, while providing MDEC with a baseline understanding of MD-status companies’ progress against sustainability indicators.

The environment is the first area that comes to mind for many businesses. However, MDEC recognises that some, particularly SMEs, may find it difficult to relate climate change’s complexities to their operations. In response to this, in 2022 MDEC developed the Malaysia Digital Climate Action Pledge (MDCAP), in partnership with the UN Global Compact Network Malaysia & Brunei, to inspire digital businesses to take practical steps to reduce their carbon footprint. Signatories have access to a range of resources to help them on their journey.

Nearly 80% of the first cohort of MDCAP companies have MD Status. In 2023, MDEC will be actively encouraging more MD-status companies’ commit their support to the MDCAP. By end of this year, we hope that at least 20% of all active MD-status companies have taken the pledge. As part of MDCAP, we will also drive SMEs' development and adoption of sustainable solutions.

MDEC is supporting the development of the Malaysian SDG Investor Map, which is being led by MIDA and the UN Development Programme Malaysia, by providing strategic input on digital ecosystem priorities. Scheduled to be launched in 2023, this will provide the insights and tools the private sector needs to increase their investments toward SDGs.

Lastly, in 2023, MDEC will also be developing an MD ESG Roadmap, which will chart our journey towards a more sustainable digital economy.

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