29/1/2024

SUSTAINABILITY GOVERNANCE (“ESG AGENDA”)

Are You Ready for the Enhanced Sustainability
Reporting Requirements?
Lee Min On, 31 January 2024

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although the
course instructor endeavors to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received
or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough
examination of the particular situation.

Overview of Today’s Session

 Introduction - typical Governance Structure of a  The ESG agenda from Companies
listed issuer on sustainability Act 2016 perspectives (SSM)
 Definition of sustainability & its growing  Typical Sustainability Governance
prominence (‘business’ case) Structure in an organization &
materiality assessment process
 Sustainability governance, mgmt. & reporting
from perspectives of Malaysian Code on  Key challenges & pitfalls to avoid on
Corporate Governance 2021 Edition Sustainability Reporting
 Bursa’s Listing Requirements - enhanced  Key learning points & takeaways
Sustainability Reporting Framework
 Questions & Comments
 IFRS Sustainability Disclosure Standards – S1 &
S2 by Int. Sustainability Standards Board [ISSB]
 Overview of Sustainability Reporting Guide &
Reporting Toolkits (3rd Edition) – how they assist
on sustainability governance, management &
reporting 2
 29/1/2024

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced Introduction - typical
Sustainability
Governance Structure of a
Reporting
Requirements? listed issuer on sustainability

Typical Governance Structure of a listed organization

Business sustainability SUSTAINABILITY

Running of the Economic,

organisation
Governance ‘EESG’
Environmental & Social
“Lines of defence” Risk Mgmt. Framework Int. Control Reporting Framework
Framework
• ISO31000:2018 Risk Mgmt. - Guidelines COSO 2013 Internal Control GRI, TCFD, TNFD, SASB,
– Integrated Framework CDSB, IIR, ISO, SRG 3rd,
• COSO ERM Integrated Framework 2017 ISSB S1 & S2, etc.

• Timely & accurate corporate disclosures (e.g., CG Report, Risk Mgmt. & Internal
Control Stmt., Sustainability Stmt., MD&A, Fin. Stmts., announcements, etc.) Anti-Bribery &
Corruption
• Roles of Board of Directors to act with transparency, accountability & integrity
measures or
• Compliance with regulations (CA16, LR, CMSA, ITA, AMLA, MACC, etc.)
ISO37001:2016
Enterprise Risk Mgmt. (“ERM”) Corruption Risk Mgmt. Anti-Bribery
Framework Framework Mgmt. System 4
 29/1/2024

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced Definition of sustainability &
Sustainability
its growing prominence (some
Reporting
Requirements? compelling examples on why
ESG is no longer an option)

Introduction to Sustainability & its definition

“Development that meets the needs
of the present without compromising
the ability of the future generations
to meet their own needs”
(Brundtland, 1987)
 In Sept. ‘15, the Sustainable
Development Goals (SDGs) were
adopted by UN General Assembly
with the 2030 Agenda for
Sustainable Development
 The SDGs must form an action plan
to free humanity from poverty & put
the planet back on road to
sustainability
 These objectives, which are one &
inseparable, reflect 3 dimensions of
sustainable development:
ECONOMIC, SOCIAL & ECOLOGICAL
ASPECTS
6
 29/1/2024

Sustainable Development Goals

1.No poverty
2.Zero hunger
3.Good health & well-being
4.Quality education
5.Gender equality
6.Clean water & sanitation
7.Affordable & clean energy
8.Decent work & economic growth
9.Industry, innovation & 11. Sustainable cities & communities
infrastructure 12. Responsible consumption & production
10. Reduced inequalities 13. Climate action
Net-Zero Economy – Economy that emits NO 14. Life below water
greenhouse gases or OFFSETS its emissions, 15. Life on land
e.g., actions like tree planting or employing 16. Peace, justice & strong institutions
technologies that can capture carbon 17. Partnerships for the goals 7
before it is released into the air (‘CC&S’)

Business case for ESG (‘Enhancing risk management’)

Potential losses & impacts (financial) of not adequately dealing
with sustainability-related risks in business operations
• In 2011, Thailand suffered worst flooding in 50 years
• Disruption to supply of parts to auto. makers Toyota,
Honda & Nissan – SE Asia being their mfg. hub
• Honda, their 2nd largest production base outside
Japan, halted production ‘Supply chain implications’
• Affected exports to Australia & Europe Dutch supplier of chipmaking equipment
• Estimated loss in production lowered its 4th quarter revenue outlook -
> USD500 million a month for these 3 companies main factory in Shah Alam was flooded -
Source: Sustainability Reporting Guide First Edition issued by Bursa
halted operations with losses of US$28M
2017: Penang suffered severe flood - 7 lives
(Source: Malaysian floods disrupts semiconductor supply chain; devastates workers (techwireasia.com)

were lost & > 3,700 people were evacuated - Insurance claims arising from floods
estimated 1,000 SMEs out of 10,000 were estimated at RM3B, said PIAM
affected - damages of RM300M (Source: https://www.malaymail.com/news/malaysia/2021/12/28/malaysian-insurance-group-estimates-
flood-claims-payout-at-rm3b/2031566)
8
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Business case for ESG (‘Product & technology innovation’)

Latest (Oct 23): Net Zero
• 2012: Dell committed to achieving 21 sustainability goals by Industry Act of EU – alternative
2020 - covers Company’s entire value chain over 3 areas: clean energy, technology, e.g.,
environment, communities & people hydrogen, carbon capture, etc.
• 1 environment-specific goal - use 50m. pounds of recycled
materials by 2020 (plastics being important component)
• 2014: it became industry’s pioneer to recycle excess carbon
fiber & scrap raw materials into new products
• Pioneered other circular economy initiatives -using packaging
materials developed from ocean plastics & using recycled
gold from electronic waste into new computer motherboards
2017: Dell exceeded goal of using
Source: Sustainability Reporting Guide Second Edition issued by Bursa

50m pounds of recycled materials

Circular economy, leveraging climate-related
- set its sights on using 100m
opportunities – salvage, re-use & ultimately reduce the pounds of recycled plastic & other
use of resources that pose climate-related risks sustainable materials 9

Business case for ESG (‘Maintain a “social licence” to operate’)

Rio Tinto bosses sensationally QUIT after mining
giant destroyed an Aboriginal sacred site dating
back 46,000 years
• Rio Tinto boss Jean-Sebastian Jacques (CEO) quits after destruction of
Aboriginal site
• Chris Salisbury (CEO, Iron Ore) & global head of corporate relations
Simone Niven both quit
• Resignations are due to destruction of Aboriginal site dating back Rio Tinto chairman leaves
46,000 years over destruction of
Indigenous sites
• “What happened at Juukan was wrong,” Chairman Simon Thompson said
After months of public backlash,
• Bonuses of these executives were also cut Simon Thompson said he was
• This is just the first step on a long path towards restoring Rio Tinto's good ultimately accountable for the
practice and reputation in its relationships with Indigenous people.' destruction of scared sites at
Juukan Gorge in Western Australia
• James Fitzgerald from the Australasian Centre for Corporate (Source: Rio Tinto chairman leaves over destruction of
Responsibility said the removals were just the first step Indigenous sites | News | DW | 03.03.2021

Source: Australian Associated Press dated 11 September 2020

10
10
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Business case for ESG (‘Access to Capital’)

• A norm now for investors to evaluate ESG factors & fin.
data when determining their investments Guide issued by BNM to assist FIs
• From 2012-14, global sustainability investment market ↑ assess & classify the economic
by 61% to USD21.4 trillion activities of customers in FIs
• Norway’s pension fund’s policy - divest from any financing decisions
organisation where 30% of revenue is derived from
mining or burning of coal
• Malaysia: local investors have begun to evaluate
sustainability factors in their decision-making process.
Source: Sustainability Reporting Guide First Edition issued by Bursa

Tremendous development & growth across sustainability ecosystem worldwide - ↑ stakeholder

demands (e.g., inst. investors, lenders, customers, NGOs, & regulators) for better ESG practices &
disclosures by businesses
Example: signatories to UN Principles of Responsible Investment, with USD121.3 trillion assets
under mgmt. (as of 2021) – would avoid investing in business not embracing ESG practices
(Source: Consultation Paper No. 1/2022 Review of Sustainability Reporting Req. under Main & ACE Market Listing Req. dated 23.3.22)
11

Business case for ESG (‘Implications on brand value & reputation’)

• Global sports apparel & shoe-making
company received adverse media
exposure on its labour practices - low
wages, poor working conditions & use of
child labour
• It countered by increasing min. wages,
An example of SOCIAL matter which affects
min. age requirements, performing
the ECONOMIC perspective of doing business
audits on their factories globally, &
KUALA LUMPUR: The US Customs & Border
working with NGOs to monitor factories
Protection (CBP) has admitted that the legal
• Became 1st in its sector to publish report threshold required to issue a Withhold Release
on wages & working conditions in their Order (WRO) against any company is “fairly low”.
factories - continues to post its
The acknowledgement from 2 CBP officials come at
commitments, the standards it complies
with & audit data in its corporate a time when 6 Malaysian group of companies are
responsibility report (equivalent to currently banned from selling their products in the
Sustainability Report) US on allegations of using forced labour.
(Source: The Star, 3 June 2022)
Source: Sustainability Reporting Guide First Edition issued by Bursa 12
 29/1/2024

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced
Sustainability
Sustainability governance, mgmt. &
Reporting reporting from perspectives of the
Requirements? Malaysian Code on Corporate Governance
– MCCG 2021 (5 new Practices)

13

Definition of Corporate Governance

Under the MCCG 2021 Edition, Corporate
Governance is defined as:
• the process & structure Established by the Board & Mgmt.
• used to direct & manage the business & affairs of a
company
• towards promoting business prosperity & corporate
accountability (i.e., Economic & Governance perspectives)

• with ultimate objective of realising long-term

Achieving the Vision & shareholder value (i.e., Sustainability perspective)
Missions of the
Company • while considering the interest of other stakeholders
(i.e., Environmental & Social perspectives)

This definition remains unchanged since March 2000 14

 29/1/2024

MCCG 2021 - Roles of the Board & Management on Sustainability

Rationale for ESG Governance, Management & Disclosure
The Company addresses sustainability risks & opportunities in an
integrated & strategic manner to support its long-term strategy & success
Practice 4.1
 Board & Mgmt.: Implications:
- governance of sustainability (setting • Minutes of meetings of the Board &
sustainability strategies, priorities & targets) Management on strategic plan &
- engagement with & consider stakeholders’ budgets to document discussion of ESG
views on ESG targets & monitoring, including action
- development, implementation & monitoring of plans to address ESG performance
strategies, business plans, & risk mgmt. • Tracking process by Management - use of
 Senior Mgmt. drives strategic management of key sustainability indicators to measure
against targets
sustainability matters - integrates ESG in daily
operations & implements ESG strategies & plans 15

MCCG 2021 - Roles of the Board & Management on Sustainability

Practice 4.2
Board ensures sustainability strategies,
priorities, targets & performance against targets
are communicated to stakeholders:
 Employees’ understanding of sustainability
keeps them engaged on ESG issues & support
actions across Group
 External stakeholders - informed via
engagements & disclosures
 Disclose information to assist stakeholders
assess Group’s sustainability risks &
opportunities for decision making
 Disclose the gaps from achieving targets &
actions taken to address the gaps
Implications
• Formalise process to obtain feedback
from stakeholders
• Communication via Sustainability
Stmt. in Annual Report or website
• Group’s tracking mechanism of non-
fin. info. needs to be robust to ensure
reliability of info.
• Consider using IA function to verify
contents of Sustainability Statement
(activities & KPIs)
16
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MCCG 2021 - Roles of the Board & Management on Sustainability

Practice 4.3 Implications:
Directors stay abreast with & understand • Engagement between NEDs & Mgmt.
sustainability issues relevant to Group & its on sustainability issues is vital
business, including climate-related risks &
opportunities • Site visits to key Business Units by
NEDs - visual understanding of
 sufficient understanding & knowledge of
operations
industry & Group’s ESG issues
 Ability to tackle questions & deliberate ESG
risks & opportunities, to make informed
decisions
 Identify professional development needs
on ESG agenda (education program)
 Consider if a change in Board’s composition
or skills matrix is required to strengthen
leadership & oversight ESG issues
17

MCCG 2021 - Roles of the Board & Management on Sustainability

Practice 4.4
Performance evaluations of Board & Senior
Mgmt. include a review of their performance
in addressing Group’s material sustainability
(‘ESG’) risks & opportunities:
 Promote accountability & identify issues
requiring intervention by Board or Senior
Management
 Progress against achievement of
sustainability targets - significant in
performance evaluation
 Outcomes from evaluations & next steps
are shared with Company’s shareholders
Implications:
 Evaluation is not confined to the
economic element, i.e., financial budget
 Nominating Committee
 Assessment of Board & Senior
Management performance includes
questions on ESG performance
(Specimen questions - CG Guide 4th
Edition)
 Remuneration Committee
 Remuneration of Senior Management
considers their ESG performance vis-à-
vis approved targets
18

MCCG 2021 - Roles of the Board & Management on Sustainability
Step-Up 4.5
 Board identifies a designated
person within Mgmt.
 to provide a dedicated focus to
manage sustainability
strategically
 including integration of
sustainability considerations in
Group’s operations
Some examples of Economic, Environmental, Social & Governance [‘EESG’] matters
Economic
 Product relevance & offering
 Technology & systems
 Quality of product & services
 Pricing (competition)
 Innovation (R&D)
 Supply chain management
 Regulatory compliance
Social
 Human rights & labour practices
 Diversity, equity & inclusivity
 Health & safety
 Product safety
 Community relations & engagement
29/1/2024
Implications:
 Chief Sustainability Officer - reports to Risk Mgmt.
or Sustainability Committee & Board on status of
ESG initiatives & effectiveness vis-à-vis targets
 CSO is supported by business unit heads responsible
for embedding ESG in decision-making process
 Management at Business Unit level includes ESG
performance for deliberation, including corrective
measures to achieve targets
How has Mgmt. engaged with external stakeholders for
feedback & understand their concerns on ESG matters?
This affects Group’s strategies in going to the market
19
Environmental This list is non-exhaustive
 Emissions (noise, odour, GHG, etc.)
 Energy efficiency (clean energy & technologies)
 Waste management (circular economy)
 Pollution (effluents, dusts, contaminants)
 Natural resources (clean water, etc.)
 Biodiversity (flora & fauna)
 Regulatory compliance (DOE, etc.)
Governance
 Board diversity & leadership
 Risk Mgmt. & Internal Controls
 Ethics & integrity, anti-bribery & corruption
 Anti-money laundering, compliance & legal
 Cyber-security
 Tax transparency 20
 29/1/2024

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced
Sustainability Bursa’s Listing Requirements -
Reporting enhanced Sustainability Reporting
Requirements? Framework

21

Amendments to Listing Requirements (26.9.2022) – Main & ACE Mkts.

Mandatory disclosures in Sustainability Statement/Report:
a) Governance structure to manage sustainability matters
b) Scope & basis of the scope (e.g., all subsidiaries, including new
ones & those disposed of)
c) What the Material Sustainability Matters (‘MSMs’) are (i.e., risks
& opportunities) Main Market
i) how they are identified (materiality assessment process) Listed Issuers
ii) why they are important to the listed issuer as a Group since 2015
iii) how the MSMs are managed (narratives), including details on: ACE Market -
 policies to manage these MSM FYE 31.12.25
onwards
 measures or actions taken to deal with these MSMs
 indicators relevant to these MSMs which demonstrate how
listed issuer has performed in managing such MSMs LR amendments
 together with data for last 3 FYs, & performance target(s) Prescribed common
sustainability 22
on indicators (if such targets are set) – on a rolling-basis matters & indicators
 29/1/2024

Amendments to Listing Requirements (26.9.2022) – Main & ACE Mkts.

Additional mandated disclosures in Main FYE on or ACE FYE on or after
Sustainability Statement or Report Market after Market
I. Common set of prescribed √ • 9 (31.12.23) √ • 9 (31.12.25)
sustainability matters & indicators (“11 • 2 (31.12.24) • 2 (31.12.26)
Sust. Matters & 22 Indicators”) for ALL
listed issuers & how they are managed
II. Climate-related disclosures – aligned √ 31.12.25 (Full (see N/A
with the Task Force on Climate-related alignment by below)
Financial Disclosures (“TCFD”) 31.12.27)
Recommendations, in a dedicated
section in Sustainability Stmt.
For ACE Market listed issuers - disclose basic plan to transition towards a
low-carbon economy (‘Transition Plan’) in a dedicated section within
Sustainability Stmt., including info. on:
• Board’s & Sr. Mgmt.’s role in overseeing & executing Transition Plan
• strategies & initiatives to reduce climate-related risks & increase climate-
related opportunities 23

Prescribed Common Sustainability Matters for disclosure

Disclosure of 11 prescribed common sustainability matters Disclosure timeline:
& 22 performance indicators by listed issuers Main Market: FYE 31.12.23
ACE Market: FYE 31.12.25
Prescribed Common Common Indicators (22 in total)
Sustainability Matters
(a) Anti-Corruption a) % of employees who have received training on anti-
corruption by employee category
b) % of operations assessed for corruption-related risks
c) Confirmed incidence (no.) of corruption & action taken
(b) Community/Society a) Total amount (unit of currency) invested in community
where target beneficiaries are external to listed issuer
(NGOs, etc.)
b) Total number of beneficiaries of investment in
communities

Implication: A robust process to track & collate such data across the Group 24
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Prescribed Common Sustainability Matters for disclosure

Disclosure of 11 prescribed common sustainability matters Disclosure timeline:
& 22 performance indicators by listed issuers Main Market: FYE 31.12.23
ACE Market: FYE 31.12.25
Prescribed Common Common Indicators (22 in total)
Sustainability Matters
(c) Diversity a) % of employees by gender & age group - each employee
category (staff, Mgmt., Senior Mgmt.)
b) % of Directors by gender & age group
(d) Energy Management a) Total energy consumption (Megawatts)

25

Prescribed Common Sustainability Matters for disclosure

Prescribed Common Common Indicators (22 in total) Disclosure timeline:
Sustainability Matters Main Market: FYE 31.12.23
ACE Market: FYE 31.12.25
(e) Health & Safety a) Number of work-related fatalities (death within 1 year of
accident)
b) Lost time incident rate
c) Number of employees trained on health & safety standards

(f) Labour Practices & a) Total hours of training by employee category

Standards b) % of employees who are contractors or temporary staff
c) Total number of employee turnover by employee category
d) Number of substantiated complaints concerning human rights
violations (ILO standards, UN Int. Bill on Human Rights, etc.)
26
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Prescribed Common Sustainability Matters for disclosure

Prescribed Common Common Indicators (22 in total) Disclosure timeline:
Sustainability Matters Main Market: FYE 31.12.23
ACE Market: FYE 31.12.25

(g) Supply Chain Mgmt. a) Proportion of spending on local suppliers (within country)
(h) Data Privacy & a) Number of substantiated complaints on breaches of customer
Security privacy & losses of customer data
(i) Water a) Total volume of water used (Megalitres)

27

Prescribed Common Sustainability Matters for disclosure

The Sustainability Reporting Guide 3rd Edition provides
comprehensive guidance on how the data on the prescribed
common indicators can be collated for disclosure
Prescribed Common Indicators (22 in total)
Common Disclosure timeline:
Sustainability Main Market: FYE 31.12.24
Matters ACE Market: FYE 31.12.26
(j) Waste a) Total waste generated (metric tons), & a breakdown of the following:
Management i. total waste diverted from disposal (reused, recycled, re-directed)
ii. total waste directed to disposal
(k) Emissions a) Scope 1 emissions in tons of CO₂ₑ (released directly from a business)
Management b) Scope 2 emissions in tons of CO₂ₑ (indirectly released from the energy
purchased by organization)
c) Scope 3 emissions in tons of CO₂ₑ (at least for the categories of
business travel & employee commuting) 28
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Scopes of Emissions
Definition of Scopes 1, 2 & 3 emissions  Scope 3
 Scope 1 All GHG emissions not associated with
 Direct greenhouse gas (GHG) that are organisation itself, but organisation is
controlled or owned by organisation indirectly responsible via its supply chain, i.e.,
(Example: fuel combustion from vehicles emissions from suppliers, partners, customers
& facilities, including fugitive emissions) – & its employees (Example:
e.g., 1 ton of methane [CH₄] ≈ 28 tons  purchased goods & services, capital goods
CO₂ₑ or 7.63 tons of carbon  fuel & energy-related activities
 Scope 2  transport & distribution
Indirect GHG emissions of organisation from  waste generated in operations
purchase of energy (E.g., purchased
 business travels, employees commuting
electricity, steam, heating, & cooling for the
organisation’s own use)  leased assets, processing of solid products,
[GHG: e.g., CO₂, CH₄, nitrous oxide, ozone, use of solid products
chlorofluorocarbons, hydrofluorocarbons,  end of life treatment of sold products,
perfluorocarbons, etc.] leased assets, franchises & investments)
(Source: Carbon Trust, Deloitte, Environmental Protection Agency, GHG Insight & Others TheEdge 29
Malaysia, 19 September 2022)

Disclosure of Material Sustainability Matters (‘EESG’ themes)

The Sustainability Statement/Report of listed issuers will need to
include the following sustainability matters according to the prescribed
timelines set out in the Listing Requirements for Main & ACE Markets

Sustainability Prescribed 11
matters identified by common
the listed issuer sustainability matters,
based on a together with the 22
materiality indicators based on
assessment process – the amended Bursa’s
categorised according Listing Requirements
to ‘EESG’ themes (26.9.22)

30
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Sustainability Reporting – TCFD Recommendations

 TCFD Recommendations (June ‘17) - TCFD’s Recommendations on disclosure
benchmark framework on climate Pillar Scope of disclosure (11 elements)
change disclosures globally 1. Governance The organisation’s governance
 Encourage more effective climate- (2) around climate-related risks &
related disclosures to promote opportunities
informed investment, credit, & 2. Strategy (3) The actual & potential impacts of
insurance underwriting decisions climate-related risks & opportunities
 Enables stakeholders to understand on the organisation’s businesses,
concentrations of carbon-related strategy & financial planning, where
assets in fin. sector & fin. system’s such information is material
exposures to climate-related risks 3. Risk How the organization identifies,
management assesses & manages climate-related
 Brazil, EU, HK, Japan, NZ, Singapore, (3) risks
Switzerland & UK have announced
4. Metrics & The metrics & targets used to assess
requirements for domestic
targets (3) & manage relevant climate-related
organisations to report TCFD risks & opportunities, where such
Recommendations information is material 31
(Source: Consultation Paper No. 1/2022 Review of the Sustainability Reporting Requirements under the Main Market and ACE Market Listing Requirements dated 23.3.2022)

Definitions of climate-related risks & opportunities

Climate-related opportunities Climate-related risks
 Potential positive impacts of climate  Potential negative impacts of climate change on
change on organisation organisation
 Efforts to mitigate & adapt to climate  2 categories, i.e., physical & transition risks:
change - opportunities like resource  Physical risks:
efficiency & cost savings, utilization - from climate change, e.g., event-driven (acute)
of low-emission energy sources, like increased severity of extreme weather
development of new products & events (cyclones, droughts, floods, fires, etc.)
services, & resilience along supply - longer-term shifts (chronic) in precipitation &
chain temperature - increased variability in weather
 Opportunities vary depending on patterns (e.g., sea level rise)
regions, markets, & industries  Transition risks - transition to lower-carbon global
economy, e.g., policy & legal actions, technology
(Source: Sustainability Reporting Guide 3 Edition)
rd

changes, market responses, & reputational

considerations
32
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Sustainability Reporting – TCFD Recommendations

Recommendations Recommendations
4 adoptable recommendations tied to Governance,
Strategy, Risk Management and Metrics & Targets
Guidance for All Recommended Disclosures
Sectors Specific recommended disclosures entities should
Recommended include in their financial filings to provide decision-
useful information
Disclosures Supplemental
Guidance for All Sectors
Guidance for Guidance providing context & suggestions for
Certain Sectors implementing recommended disclosures for all
entities
Supplemental Guidance for Certain Sectors
Guidance that highlights important considerations for certain sectors & provides a fuller
picture of potential climate-related financial impacts in those sectors
Supplemental guidance is provided for financial sector & non-financial sectors potentially
most affected by climate change 33

Sustainability Reporting – TCFD Recommendations (11 elements)

Governance Strategy
Disclose the organisation’s Disclose actual & potential impacts of climate-related risks &
governance around climate- opportunities on organisation’s businesses, strategy &
related risks & opportunities financial planning where information is material

Recommended disclosures Recommended disclosures

a) Describe the Board’s a) Describe climate-related risks & opportunities the entity
oversight of climate- has identified over the short, medium & long term
related risks & b) Describe impact of climate-related risks & opportunities
opportunities on organisation’s businesses, strategy & financial
b) Describe Management’s planning
role in assessing & c) Describe resilience of organisation’s strategy, taking into
managing climate-related consideration different climate-related scenarios,
risks & opportunities including a 2°C or lower scenario
Source: Recommendations of Task Force on
Climate-related Financial Disclosures 2017
34
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Sustainability Reporting – TCFD Recommendations (11 elements)

Risk Management
Disclose how entity identifies, assesses
& manages climate-related risks
Recommended disclosures
a) Describe entity’s processes for
identifying & assessing climate-
related risks
b) Describe organisation’s processes
for managing climate-related risks
c) Describe how processes for
identifying, assessing & managing
climate-related risks are integrated
into organisation’s overall risk
management
Source: Recommendations of Task Force on
Climate-related Financial Disclosures 2017
Metrics & Targets
Disclose metrics & targets used to assess & manage
relevant climate-related risks & opportunities
where such information is material
Recommended disclosures
a) Disclose metrics used by organisation to assess
climate-related risks & opportunities in line with
its strategy & risk management process
b) Disclose Scope 1, Scope 2 &, if appropriate, Scope
3 greenhouse gas emissions, & the related risks
c) Describe targets used by organisation to manage
climate-related risks & opportunities, &
performance against targets
35

Amendments to Listing Requirements (26.9.2022) – Main & ACE Mkts.

Additional mandated disclosures in Main FY on or after ACE FYE on or after
Sustainability Statement or Report Market Market
III. a) at least 3 FYs’ data for each reported √ • 9 (31.12.23) √ • 9 (31.12.25)
indicator • 2 (31.12.24) • 2 (31.12.26)
b) performance target for each reported
indicator, if such a target was set
c) summary of such data &
performance targets in a prescribed
format

(‘What gets measured gets done’)

36
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Amendments to Listing Requirements (26.9.2022) – Main & ACE Mkts.

Disclosure of indicators relevant to MSM which demonstrate how listed issuer has performed
in managing such MSM, together with data for last 3 FYs, & performance target(s) on
indicators (if such targets are set) – “Rolling basis”

[Bursa has released template for reporting – for mandatory & non-mandatory items]

No. Reporting of new indicator (in respect of Minimum data disclosure

prescribed common indicators or newly
assessed indicator)
(a) In the 1st year of reporting a new indicator Data for the financial year
(“said indicator”)
(b) In the 2nd year of reporting the said indicator Data for the financial year & the
immediate preceding financial year
(c) From the 3rd year onwards of reporting the Data for the financial year & the 2
said indicator immediate preceding financial years
37

Amendments to Listing Requirements (26.9.2022) – Main & ACE Mkts.

Additional mandated disclosures in Sustainability Main FYE on ACE FYE on
Statement or Report Market or after Market or after
IV. a) To strengthen credibility of reporting, a statement √ 31.12.23 √ 31.12.25
whether Sustainability Stmt. was subject to
review by Int. Auditor or independent assurance
based on internationally recognised assurance
standards (Statement of Assurance – ‘SOA’) (e.g.,
ISAE 3000, AA1000, ISSA 5000, etc. – opinion )
b) If such review or assurance was undertaken, SOA
must include the subject matter & scope covered,
including conclusions from independent
assurance (i.e., ‘reasonable or limited assurance’
opinion)  Independent review or assurance by Internal Audit or external party
of Sustainability Statement or Report is NOT MANDATORY
 Disclosure of whether it was subject to such a review is MANDATORY
in Sustainability Statement 38
 29/1/2024

Sustainability Reporting – illustrative specimen issued by Bursa

 Our Approach to Sustainability
 Sustainability Governance
 Stakeholder Engagement
 Material Matters
 Risk Management
 Sustainability Framework
 Performance Scorecard
 Management Approach for
Material Matters
 TCFD-aligned Disclosures
100-page report  Performance Data Table
 Assurance Statement
 GRI Content Index
 SASB Content Index
 Additional Information
 Independent Limited
Assurance Statement
 Material Matters
(Appendix – assessment
process, matrix, etc.)
 Climate-related Financial
Disclosure Requirements
for ACE Listed Corporations:
Transition Plan towards a
Low Carbon Economy
 Glossary
39

Amendments to Main Market Listing Requirements (MMLR - 6.6.2023)

Bursa has prescribed that Directors attend the Mandatory Accreditation Program (“MAP”) under
Paragraph 15.08 of the MMLR comprising:
(a) MAP Part I in relation to a Director’s roles, duties & liabilities (“MAP Part I”); &
(b) MAP Part II in relation to sustainability & the related roles of a Director (“MAP Part II”).
Director Timeframe to complete MAP
(i) A Director who is appointed The Director must complete the:
on or after 1.8.23 for the 1st • MAP Part I within 4 months from date of appointment &
time as director of a listed • MAP Part II within 18 months from date of appointment
issuer
(ii) A Director of an applicant The Director must complete:
seeking listing on Bursa & • MAP Part I prior to date of admission of the applicant &
admitted on or after 1.8.23 • MAP Part II within 18 months from date of admission

Existing Directors of listed The Institute of Corporate Directors Malaysia (“ICDM”) has
issuers who are appointed been appointed as organizer for MAP Part II. Details on MAP
prior to 1.8.23 must complete Part II program are available on ICDM’s website at
MAP Part II on or before 1.8.25 https://icdm.com.my. 40
 29/1/2024

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced
Sustainability New Sustainability Disclosure Standards -
Reporting how they impact listed issuers as a Group
Requirements?

41

IFRS S1 - Disclosure of Sustainability-related Financial Information

Issued on
26.6.23
General Requirements for
Disclosure of Sustainability-
related Financial Information
Pending announcement by
MASB on application date in
Malaysia
CORE CONTENT OF DISCLOSURE
a) Governance: Processes, controls & procedures used to
monitor & manage sustainability-related risks &
opportunities (“SRROs”)
b) Strategy: Approach used to manage SRROs
c) Risk mgmt.: Processes used to identify, assess,
prioritize & monitor SRROs
d) Metrics & targets: Reporting Entity’s performance in
relation to SRROs, including progress towards any
targets the Reporting Entity has set or is required to
meet by law or regulation

Disclose info. on material sustainability-related risks & opportunities that could reasonably be expected
to affect Entity’s cash flows as a group, its access to finance or cost of capital over short, medium or
long term & how such material SRROs affect the prospects of the Entity as a group 42
 29/1/2024

IFRS S2 – Climate-related Disclosures

Issued on CORE CONTENT OF DISCLOSURE
26.6.23 a) Governance: Processes, controls & procedures used
to monitor & manage climate-related risks &
opportunities
Climate-related Disclosures b) Strategy: Approach used to manage climate-related
Pending announcement by risks & opportunities
MASB on application date in c) Risk management: Processes used to identify, assess,
Malaysia prioritize & monitor climate-related risks &
opportunities
d) Metrics & targets: Reporting Entity’s performance in
relation to climate-related risks & opportunities,
including progress towards any targets the Reporting
Entity has set or is required to meet by law or
regulation (e.g., GHG emissions, etc.)
Qualitative & Quantitative disclosures of how climate-related risk & opportunities
impact the entity, including the financial effects & the entity’s climate resilience 43

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced
Sustainability The ESG agenda from the
Reporting
Companies Act 2016 perspectives
Requirements?

44
 29/1/2024

Powers & duties of the Board of Directors under Companies Act 2016
Section 211(1) & (2)
 Business affairs of company shall be managed by, or
under direction of the Board
 The Board has all powers necessary for:
• managing & for directing & supervising
management of business & affairs of the
company
• subject to modification, exception or limitation
contained in the Act or the Company’s
Constitution

45

Powers & duties of the Board of Directors under Companies Act 2016
S214 Business Judgment Rule • makes business judgment in good faith for a
Director who makes business judgment is proper purpose
deemed to meet requirements of reasonable
care, skill & diligence & equivalent duties under • does NOT have a material personal interest in
common law & in equity if Director: subject matter
• is informed about subject matter to the extent
the Director reasonably believes to be
appropriate under the circumstances
Shell’s board of directors
sued over climate strategy • reasonably believes that the business judgment
in a first-of-its-kind lawsuit is in the Company’s best interest
(9 Feb. 2023)

 Environmental law firm ClientEarth, in its capacity as shareholder, filed lawsuit against the British oil
major’s board at high court of England & Wales
 It alleges 11 members of Shell’s board are mismanaging climate risk, breaching company law by
failing to implement an energy transition strategy that aligns with the landmark 2015 Paris
Agreement
 “We do not accept ClientEarth’s allegations,” a Shell spokesperson said Source: Oil major: Shell board of directors sued over
climate strategy (cnbc.com) 46 46
 29/1/2024

Powers & duties of Directors under the Companies Act 2016

What’s the Companies Act 2016 take on Directors’ duties on ESG risks?
Legal Opinion on Directors’ duties & disclosure obligations under Malaysian Law in context of
climate change risks & considerations under Commonwealth Climate & Law Initiative (a 52-
page write-up)
- authored by Tan Sri Zarinah Anwar, Chair of ICDM & To’ Puan Janet Looi, Sr. Partner, Skrine
CONCLUSION
Directors of Malaysian companies are duty bound to:
 proactively & urgently apprise themselves of all aspects of
climate change that can affect their companies
 take action to manage the full spectrum of climate related risks
by:
- integrating them into their corporate strategies, plans &
actions Emphasised by the MCCG 2021 & Bursa’s LR
- ensure proper disclosure of such risks
47

Powers & duties of the Board of Directors under Companies Act 2016
How Directors can be seen acting in best interest of company & exercising reasonable care,
skills & diligence on climate-related risks & opportunities

 Identify, evaluate & monitor climate
change risks affecting company -
economic, environmental, social &
governance perspectives in
strategies & operations for long-
term value creation
 Know guidance by regulators & requirements (e.g.,
Bursa’s LR amendments, IFRS S1 & S2, - ensure proper
disclosures on climate change risks
 Identify shortcomings & action plans to overcome
climate change risks & steps to achieve “net zero”
targets

 Factor climate consideration in Board
agenda
 Include climate risks in:
 assessment of financial viability of
assets & investments
 frameworks for mgmt. of risks &
opportunities for Company’s long-
term prosperity
 Ensure filings to regulatory bodies & audited Fin.
Stmts. are NOT misleading, e.g., “greenwashing”
(i.e., unsubstantiated disclosures to deceive
consumers & others on products being
environmentally friendly)
 Steps to avoid misrepresentation of “net zero”
claims in advertising, promotion or marketing
activities & materials 48
 29/1/2024

Code of Ethics for Directors by SSM

Purpose of Code of Ethics:
 enhance the standard of corporate governance &
corporate behaviour
 with a view to achieving the following intended objectives:
 establish standards of ethical conduct for Directors
based on acceptable belief & values one upholds;
 uphold spirit of accountability & transparency in line
with legislations, regulations & guidelines governing
Company
 promote the sustainability of Company by pursuing
“Environmental, Social, & Governance” (ESG)
Issued in Nov. 2023 strategies in Company’s business

49

Code of Ethics for Directors by SSM

Sustainability Practices
Directors are accountable for ESG in Company:
 integrate ESG considerations into decision-
making, i.e., strategic planning, risk mgmt. &
investment
 sustainability strategies, goals & targets are
aligned with Company's overall strategy &
vision
 adopt policies & initiatives to achieve
sustainability in social, environmental&
governance (‘ESG’) conditions in furtherance of
profitability (economic)
 treat employees fairly & promote quality of life
by adopting sustainable corporate social
responsibilities (‘CSR’)
 ensure Company’s policies align with
international trends to promote human
rights
 ensure Company’s activities &
operations do not harm interest & well-
being of environment & society
 ensure effective use of natural resources
& continuously reduce its carbon
footprint
50
 29/1/2024

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced Overview of Sustainability Reporting
Sustainability Guide & Reporting Toolkits (3rd
Reporting Edition) – how they assist
Requirements? organizations on sustainability
governance, mgmt. & reporting

51

Overview of the Sustainability Reporting Guide (3rd Edition)

Issued by Bursa, the 3rd Edition provides guidance (including business
cases) to assist listed issuers on how to disclose in the Sustainability
Statement the information mandated under Practice Note 9 of
Bursa’s Main Market Listing Requirements, covering:
• Sustainability Governance (augmented by separate toolkit)
• Scope & basis of scope for reporting
• Materiality assessment (augmented by separate toolkit)
• Management approach (augmented by separate toolkit)
• Measurement methodologies for indicators
• Performance targets & data table
• Statement of assurance
• Task Force on Climate-related Financial Disclosures (“TCFD”)-
aligned disclosures
• List of disclosure guidance (e.g., sector specific matters, etc.) 52
 29/1/2024

Overview of the Sustainability Reporting Toolkits (3rd Edition)

Including Including
Materiality Stakeholder
Matrix prioritization

Common sustainability How material EESG are Structured process to Identify relevant
governance structures managed, including use identify & evaluate stakeholders, their
covering Oversight, of KPI to track progress, EESG matters that are significance to Group &
Strategic Mgmt. & linking EESG material from Group’s elicit their concerns on
day-to-day performance to & stakeholders’ EESG – so that their
implementation executive remuneration perspectives concerns are addressed
in Group’s strategies
The approach adopted are aligned to the 5 new Practices of MCCG 2021 53

Bursa’s Listing Requirements – key attributes of reporting

Balanced disclosure
The Company reports info.:
 in an unbiased manner
 provides fair representation of its positive & negative
impacts
 that allows info. users to see negative & positive year-
In line with widely-accepted on-year trends in impacts
principles or conventions of
 that distinguishes clearly between facts & the Company’s
good reporting practice,
interpretation of the facts
Sustainability Statements
must contain info. that is: The Company does NOT:
a) Balanced;  omit relevant info. concerning its negative impacts
b) Comparable; &  over-emphasize positive news or impacts
c) Meaningful  present info. in a way that is likely to inappropriately
Source: Sustainability Reporting Guide 3rd Edition
influence the conclusions or assessments of info. users. 54
 29/1/2024

Sustainability Reporting - “balanced, comparable & meaningful”

Comparable & meaningful disclosure
Comparable & meaningful disclosures facilitate analysis
of changes in a company’s impacts
over time, & in relation to those of other companies
Companies should:
 present info. for current period & at least 2 previous
periods, including goals or targets set
 use accepted international metrics (e.g., kg., litres,
etc.), & std. conversion factors, where applicable, for
compiling & reporting info.
 be consistent in using methods to measure &
calculate data - explain methods & assumptions
 report no. or absolute data (e.g., MT of CO₂
equivalent) & ratios or normalized data (e.g., CO₂
emissions per unit produced), enabling comparisons,
& providing explanatory notes when using ratios
 provide contextual info. (e.g.,
Company’s size, geographic location)
to help users understand what
contribute to differences between
Company’s impacts & impacts of
other companies
 present current disclosures alongside
restatements of historical data to
enable comparisons if there have
been changes from info. reported
previously, e.g., length of reporting
period, in measurement methods, in
definitions used, etc.
 if restatements of historical data are
provided, explain changes to provide
contextual info. for interpreting
current disclosures
55

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced
Sustainability
Typical Sustainability Governance
Reporting Structure in an organization & example
Requirements? of materiality assessment process

56
 29/1/2024

Some examples of Sustainability Governance Structure

Board Committee Sustainability governance
Structure to ascribe oversight
BOARD OF DIRECTORS accountability & review in
identification & mgmt. of
Board Sustainability Board Risk Other Board sustainability matters (i.e., roles &
Committee Committee Committees responsibilities of those in charge
of organization’s sustainability
Sustainability Risk Management performance & disclosures)
Working Group MD/CEO Committee
Management Committee

Whichever model is opted, BOARD OF DIRECTORS

Board-approved terms of
reference are needed Board
Committees

Mgmt. Sustainability Risk Management

Committee MD/CEO Committee
44

A typical Materiality Assessment Process of ‘EESG’ matters

2. Identification & 3. Stakeholder
1. Objective &
categorisation of sustainability engagement
Scope
matters

Objectives & Identification of Stakeholder engagement

audience sustainability issues in identification &
categorisation of
Scope Categorisation of 4. Prioritisation sustainability issues
sustainability issues
Stakeholder engagement
Targets & Significance of in prioritisation
organisation’s EES impacts
performance:
Stakeholder feedback
 reportable items Influence on stakeholder’s
 implement assessments & decisions
5. Review Outcome is reviewed
strategies, plans & Materiality Matrix by Senior Mgmt.
priorities
 monitor for Frequency of
achievement materiality assessment 58
 29/1/2024

Sustainability matters – assessment of Materiality (simple example)

Criteria Significance Example: Materiality assessment –
Revenue 50% ‘Safety & health’
Cost 0% (Low [0%]; Medium [50%]; High
Media 50% [100%])
Strategic & operational risk 100% Example: Materiality assessment –
Business opportunities 100% ‘Safety & health’
Overall significance of entity’s EES impacts – safety & health 60% (Influence of stakeholders viewed
relevant to Sustainability Matter)
Influence on stakeholder assessments & decisions
Stakeholder group Employees Customers Investors Community Govt. & NGOs Overall influence
regulator on stakeholder
assessments &
decisions – safety
& health
Stakeholder prioritisation (A) 30% 20% 20% 15% 10% 5%
SAFETY & HEALTH – significance 80% 90% 60% 50% 70% 90%
to stakeholder (B)
Influence on stakeholder 24% 18% 12% 7.5% 7% 4.5% 73%
59
assessments & decisions
[Source: Bursa’ Sustainability Reporting Guide 1st Edition, as adapted]59
(A x B)

Sustainability matters – assessment of their Materiality

Note:
Low to Medium High materiality
 Those 11 sustainability
Influence on stakeholder assessments & decisions

materiality matters
 prescribed by Bursa for
disclosure
Safety &  are NOT required to go
health through this assessment
process
Implication:
 Overall, there will be >
11 sustainability matters
for disclosure in Master-
Low to Medium Pack’s Sustainability
Low materiality materiality Stmt.
[Source: Bursa’ Sustainability
Significance of the organisation’s sustainability impact Reporting Guide 1st Edition] 60
 29/1/2024

SUSTAINABILITY
GOVERNANCE (the
“ESG” AGENDA)

Are You Ready for the

Enhanced
Sustainability Key challenges & pitfalls to
Reporting
avoid on Sustainability Reporting
Requirements?

61

Some key challenges & pitfalls to avoid in Sustainability Reporting

 “Boilerplate statements” – avoid “copy &  Minutes of Board & Committee meetings
paste” from Appendices of Sustainability are ‘silent’ on ESG agenda in relation to
Reporting Guide or toolkits business strategies or plans
 Vague disclosure of sustainability indicators –  For better clarity - to mention criteria or
should also consider: benchmark for reporting, e.g., Sustainability
- effects of changes in Group structure Reporting Guide, Global Reporting Initiatives
(‘GRI’), Task Force on Climate-related
- capacity utilization
Financial Disclosures (‘TCFD’), Sustainability
- per unit intensity, etc. Accounting Standards Board (‘SASB’), Climate
 Omission of sustainability targets, gaps from Disclosure Standards Board (‘CDSB’), etc.
targets & actions taken
 Inconsistent use of comparative indicators for
the period of reporting (e.g., no. of years of
comparatives)
 Clarity is needed on the scope & basis selected
for disclosure, e.g., whether any subsidiary is
excluded from reporting 62
 29/1/2024

Compare & contrast certain disclosure documents under Bursa’s LR

Disclosure Minimum contents required by Bursa’s LR (areas where there are risks of
document contradictory disclosures)
Sustainability • Governance structure; scope of & basis; identification of MSMs & how managed
statement
• Policies, measures taken & indicators of performance
(Non-financial)
Management • Business & operations, objectives & strategies
Discussion & • D&A of financial results & condition, including indicators
Analysis • Significant changes in performance
(Financial & Non- • Capital expenditure requirements
financial) • Known trends or events likely to have material effect on business with reasons or
implications
• Identified anticipated or known risks affecting business, including mitigation plans &
strategies
• Forward looking statements - trend, outlook & sustainability of each principal business
segment, prospects of new businesses & dividend or distribution policy
Statement on Risk • Board’s & Management’s role on risk & control framework, including issues
Management & • Internal audit’s role on risk management
Internal Control • Adequacy & effectiveness of systems – assurance by CEO & CFO 63
(Non-financial) • Independent review by external auditors

Key learning points & takeaways

• The MCCG 2021 Edition sets out 12 new
Practices with 5 new Practices focusing
on Sustainability Governance &
Reporting
• Definition of Sustainability, its emerging
importance & compelling business cases
• Sustainability Disclosure Requirements
under Practice/Guidance Note Listing
Requirements – enhanced Sustainability
Reporting Framework for listed issuers
• Sustainability Reporting Guide, Toolkits
& Illustrative Guide - comprehensive
guidance on meaningful, comparable &
balanced disclosures in line with listed
requirements
• Determination of sustainability activities &
performance indicators’ veracity –
independently assured or verified?
• How to embed Sustainability in the Group’s
operations – operationalise, manage, report
& monitor EESG matters
• Emerging requirements – ISSB on
International Standards on Sustainability
Reporting (S1 & S2)
• Reporting – Challenges faced & pitfalls to
avoid
Is your Group’s information on
sustainability (“EESG”) reliable,
intact, & complete to withstand
independent assurance review or
64
internal audit?
 29/1/2024

Quick assessment of understanding

1) Which of the following 2) 9 of the 11 3) The sustainability statement of a listed issuer
are typical prescribed common for FYE 31.12.23 is REQUIRED to be reviewed
sustainability matters sustainability by the internal auditors OR an independent
of a business? matters per Bursa’s assurance provider for accuracy & compliance
I. Anti-corruption Listing Requirements, A. True
II. Quality of are mandatory for
B. False
products/services disclosure by a Main
Market listed issuer 4) The sustainability matter on “Anti-Corruption”
III. Data privacy
in its Sustainability per Bursa’s Listing Requirements requires
IV. Emission of Statement for FY
greenhouse gases disclosure of only the following 2 indicators:
ending 31.12.23
V. Water a) % of employees who have received training
onwards &
consumption remaining 2 of the on anti-corruption by employee category;
A. I, IV & V matters from FY and
B. I, III, IV & V ending 31.12.24, b) % of operations assessed for corruption-
C. III, IV & V onwards related risks
D. I, II, IV & V A. True A. True
E. All the above B. False B. False 65

QUESTIONS &
COMMENTS
66