Sustainable Investment
Delivering Sustainable Returns
Sustainability At The Heart Of EPF Investment
The Employees Provident Fund (“EPF”) is Malaysia’s foremost pension fund acting in accordance with the Employees Provident Fund Act 1991 (Act 452) with aims of safeguarding members’ savings and helping members achieve a better future. In EPF, we believe that aligning our investment activities with the broader interests of society would serve well with our objectives as a retirement savings fund driven by long-term, sustainable value creation for our stakeholders. EPF recognises that in addition to financial considerations, environmental, social and governance (ESG) factors are essential to make better informed and holistic investment decisions.
In 2021, EPF started the journey to transition to be a sustainable investor and has defined two sustainable investment targets which are to have a fully ESG compliant portfolio by 2030 and climate neutral portfolio by 2050. These overarching targets are supported by ESG policies that have been developed to guide our investment activities around ESG issues and controversial sectors that we have prioritized, based on their urgency and materiality to EPF. These documents will be reviewed and updated periodically to reflect any material updates on the subject matter.
Sustainability at the Heart of EPF Investment
EPF Sustainable Investment Overarching Targets
Fully ESG Compliant Portfolio by 2030
Achieving a portfolio where all investee companies and external fund managers comply with the core ESG expectations set by EPF
Climate Neutral Portfolio by 2050
Achieving a net zero GHG emissions portfolio for climate change-resilient investments
Sustainable Investment Policies
Sustainable Investment Policy
The Sustainable Investment (SI) Policy explains EPF’s overall approach to sustainable investing and integration of ESG factors into EPF’s investment processes and stakeholder engagement. The SI policy forms part of EPF’s overarching investment strategy that has been reviewed, approved and endorsed by the Investment Panel.
Sustainable Investment Stewardship Policy
The Sustainable Investment Stewardship Policy outlines the processes and guidelines the EPF follows in exercising its investor’s rights to foster good sustainability practices amongst its investee companies and external fund managers.
Priority Issue Policy: Climate Change
Our view on Climate Change as a critical issue to address is in line with global priorities. This is evidenced by detailed reports and findings from the 2021 Intergovernmental Panel on Climate Change (IPCC), Swiss Re Institute’s “The Economics of Climate Change”, and the 2021 United Nations Climate Change Conference (COP 26). On the local front, Climate Change has similarly been placed at the forefront of national priorities as Malaysia recently established the commitment to achieve carbon neutrality as early as 2050.
Aside from aligning to national and global priorities, we believe Climate Change has the potential to significantly impact business performance and our overall portfolio returns. According to the World Economic Forum (“WEF”), 4 out of the top 5 global risks are environmental-related. If not managed well, Climate Change can dramatically affect the future of our members. And hence, we recognise the urgency and are committed to play a part in addressing the Climate Change issue.
Priority Issue Policy: Workers’ Wellbeing
Our view on Workers’ Wellbeing as a critical issue to address is in line with global priorities. This is evidenced by detailed reports and findings from the United Nations Children's Fund (“UNICEF”)’s Child Labour: “Global Estimates 2020” and ILO’s Global Wage Report 2020-2021. Locally, we also see increasing controversies surrounding labor rights issues amongst businesses, resulting in international coverage and heightened scrutiny by various stakeholders. We believe Workers’ Wellbeing has the potential to significantly impact business reputation, performance and ultimately overall portfolio returns. As such, we recognise the urgency and are committed to play a part in addressing Workers’ Wellbeing issues.
The Priority Sector Policies consisting of ESG expectations on six sectors namely 1) Palm Oil, 2) Oil & Gas, 3) Mining, 4) Power Generation, 5) Construction and 6) Banking. These sectors are chosen based on EPF’s exposure as well as the ESG risks imminent in the sectors. The Priority Sector Policies aim to address material ESG issues specific to the sector, beyond the scope of the Climate Change and Workers’ Wellbeing Policies. As such, companies that are part of EPF’s priority sectors should refer to the sector policy in tandem and strive to meet the expectations listed in both the issue and sector policies.
Reporting and Disclosures
Statement of Compliance with The Malaysian Code for Institutional Investors
EPF became a signatory to the Malaysian Code for Institutional Investors 2014 (Code) on 24 January 2017, as part of the agenda to further promote good corporate governance in Malaysia. This statement of compliance describes the approach taken by the Employees Provident Fund (EPF) to stewardship and how its investment activities comply with the six (6) principles of the Code.
