KUALA LUMPUR, 31 March 2022: The Employees Provident Fund (EPF) today launched the EPF Sustainable Investment Policy, Priority Issues Policies, and Priority Sector Policies to guide the EPF in making better informed and holistic investment decisions by integrating environmental, social, and governance (ESG) considerations in its investment management processes.
Minister of Finance YB Senator Tengku Datuk Seri Utama Zafrul Tengku Abdul Aziz launched the EPF Sustainable Policy, witnessed by EPF Chairman YBhg Tan Sri Ahmad Badri Mohd Zahir, EPF Chief Executive Officer YBhg Datuk Seri Amir Hamzah Azizan, and senior representatives of the EPF’s external fund managers (EFMs).
The launch marks the evolution of the EPF from an ethical to a sustainable investor in its pursuit to becoming fully ESG compliant by 2030 and climate neutral by 2050. The retirement fund believes that ESG issues are becoming more critical in business practices as they reflect the risks and opportunities of businesses, as well as the wider positive and negative impact on society.
In his speech, Tengku Datuk Seri Utama Zafrul said, “For Malaysia to achieve sustainable growth, it is critical for the country’s economic recovery to be anchored on ESG factors. This focus underpins the 12th Malaysia Plan’s goal of revitalizing Malaysia’s socioeconomic development, with long-term sustainability and prosperity serving as the foundation for improving the Rakyat’s wellbeing.”
“As we are racing against time to mitigate the effects of climate change or other future shocks, institutional investors can and must assist the Government in mainstreaming the sustainability agenda across as many sectors and industries as soon as possible. Therefore, we fully support the EPF, Malaysia's largest institutional investor and pension fund, for completely embracing sustainable investing and reinforcing its commitment to ESG. The Government believes that by institutionalising ESG policies in EPF’s investments, the benefits will cascade down the value chain of Malaysia's capital markets, ultimately benefitting the Rakyat.”
In his address on the EPF Sustainable Investment Policy, EPF Chairman Tan Sri Ahmad Badri said, the Policy formed part of the EPF’s overarching investment strategy endorsed by its Investment Panel.
“The EPF is also the first organisation in Malaysia to have established and issued the Priority Issues Policies that define EPF’s stance on climate change and workers wellbeing. Our Priority Sector Policies specify ESG expectations for key sectors, which serve to supplement the Sustainable Investment Policy.
“Given the EPF’s position as the country’s premier retirement fund, it is crucial that it incorporates ESG factors in the evaluation of investee companies’ performance and business practices. By considering risks and opportunities beyond financial performance, the EPF will be well positioned to make better holistic investment decisions, thus safeguarding our members’ long-term returns and contribute to a wider sustainability ecosystem.”
Following the launch, the EPF’s portfolio managers will be communicating the ESG expectations to its investee companies and EFMs. The EPF’s Sustainable Investment framework will provide the basis for ongoing and future engagements to discuss, assess, and manage ESG risks as well as capitalise on value creation opportunities.
Tan Sri Ahmad Badri added that the EPF would continue to engage its investee companies and EFMs to upgrade their ESG practices and ensure that they are aligned with the EPF’s expectations as outlined in the Priority Issues Policies and Priority Sector Policies, where relevant.
At the launch, all of the EPF’s 16 EFMs signed the Sustainable Investment Pledge to solidify their commitment to include ESG considerations into their investment decision making processes.
The EPF Sustainable Investment Policy is grounded on four key guiding principles to ensure consistency, predictability, and transparency:
1. Integrating ESG in EPF’s investment decision-making process, providing a robust and comprehensive investment process that assesses an investment opportunity not only by the fund’s financial upside potential, but also its performance on key ESG factors;
2. Taking an active leadership role in ensuring investments within the EPF’s portfolio transition towards ESG compliance, while continuously improving its sustainability standards through responsible voting practices, ESG monitoring, as well as active engagements with investee companies and external fund managers;
3. Identifying relevant ESG priorities and targets for the EPF, benchmarking to local and global goals and taking into account the fund’s portfolio exposures. To accelerate these efforts, the EPF’s Sustainable Investment Centre is tasked to develop, implement, monitor, and report the EPF’s annual progress toward its committed sustainability goals.
4. Recognising internal capability building as a key priority in the EPF’s sustainable investment approach to further its transition towards becoming a leader in sustainable investing. The EPF will conduct training and awareness programmes, develop internal sustainability advisory capabilities, and establish a change management office to instil a sustainability-charged top-to-bottom culture within the fund.
Priority Issues Policies and Priority Sector Policies Focus Areas
The Priority Issues Policies and Priority Sector Policies act to supplement the EPF Sustainable Policy by defining EPF’s stance on three priority issues and six key sectors:
1. The Priority Issues Policies currently include two priority issues: climate change and workers’ wellbeing. These focus areas will be reviewed periodically to factor in the latest developments. To integrate these priority issues, the EPF has developed issue-specific ESG expectations in line with global standards, its mandate, national commitments, and peer investors’ practice.
2. The Priority Sector Policies cover six priority sectors, namely palm oil, oil and gas, mining, power generation, banking, and construction. These sectors were chosen based on the EPF’s exposure to these sectors and the ESG risks inherent in them. Given the differences in materiality between these sectors, the EPF has developed sector-specific ESG expectations aligned to global standards, local commitments and nuances, and peer investors’ practice.
Issued by the EPF Media Desk
Corporate Affairs Department
31 March 2022
About the Employees Provident Fund (EPF)
The Employees Provident Fund (“EPF”) is one of the oldest retirement funds in the world. Established in 1951, the EPF is a social-security organisation focused on safeguarding member savings and delivering excellent services. In recent years, in line with its vision of helping members achieve a better future, the EPF has expanded its role to encompass the creation of a comprehensive social well-being ecosystem. Today, the EPF remains steadfast in its commitment to members through consistent efforts to update and improve itself, in order to build the foundation for sustainable, holistic and equitable well-being for all Malaysians.