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RAM Ratings sees Malaysia evolving into a sustainable responsible investment (SRI) hub, supported by its prominent global presence in Islamic finance. The proactive efforts and strong commitment of Bank Negara Malaysia, Securities Commission Malaysia (SC) and Bursa Malaysia have paved the way for both responsible and green finance to thrive in Malaysia. According to publicly available data from the SC, six SRI or green bond and sukuk programmes – with a cumulative value of USD1.02 billion - were issued between 27 July 2017 and 27 April 2018.
The SRI market is also bolstered by the growing number of domestic and international investors that are actively engaging with corporates on environment, social and governance (ESG) issues. “Increasingly more investors are factoring ESG into their analysis as part of best practices, and this is driving demand for SRI,” highlighted Deputy CEO of RAM Ratings Promod Dass, at the Sustainable Investment Roundtable on 16 July 2018, hosted by the SC.
This trend is evident from the rise in the number of signatories to the United Nations-supported Principles for Responsible Investment (PRI), from only 63 as at April-2006 to 1,961 as at end-April 2018. This global swell in PRI signatories translates into a surge in assets under management (AUM), from USD6.5 trillion to USD81.7 trillion over the same period. On 1 February 2017 and 7 February 2018, respectively, Khazanah Nasional Berhad and government pension fund KWAP became PRI signatories. The world’s largest pension fund, i.e. Japan’s Government Pension Investment Fund (GPIF) that is also a PRI signatory, has allocated USD8.9 billion of funds to SRI (according to Reuters on 3 July 2018); this represents about 3% of GPIF’s portfolio of Japanese stocks. The GPIF (which has USD1.4 trillion AUM) also indicated that in the medium term, the fund could increase its investment in companies with commendable ESG practices. These examples of SRI market leadership may prompt other investors and institutions to follow suit.
RAM is an active contributor to sustainability and green finance. On 26 May 2016, RAM joined the global line-up of six pioneer credit rating agency signatories to PRI’s Statement on ESG in Credit Ratings. RAM’s sister company, RAM Consultancy Services Sdn Bhd, is the first ASEAN-based provider of sustainability ratings and second opinions on green bonds and sukuk. RAM’s thought leadership in ESG has culminated in the publication of two papers - RAM’s Criteria & Methodology: Integrating Environmental, Social and Governance Considerations into Credit Ratings and Standpoint Commentary: Championing PRI’s ESG in Credit Ratings, which are available at www.ram.com.my.
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The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
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