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Regulatory update
Malaysia is renowned for its rich biodiversity and diverse workforce. It has been positioning itself as a pioneer in sustainability disclosures since introducing Corporate Social Responsibility (CSR) reporting in 2007. Since 2016, all publicly listed companies in the country have been mandated to include a sustainability statement in their annual reports.
These sustainability reports must cover material ESG risks, impacts, and initiatives, as well as relevant performance metrics and targets. Malaysia’s securities exchange, Bursa Malaysia, lays out the guidelines for sustainability reporting, which were last updated in 2022. They offer a structured approach, ensuring that companies address key ESG aspects in accordance with best practices. This requirement enhances corporate transparency and encourages companies to actively manage their environmental and social impacts.
Malaysia is increasingly focused on tackling pressing challenges such as climate change, deforestation, social equity, and governance. Acknowledging the necessity for a sustainable growth model, the Malaysian government has implemented significant policies related to ESG criteria aimed at boosting corporate responsibility and transparency.
In September 2024, the Advisory Committee on Sustainability Reporting (ASCR) launched the National Sustainability Reporting Framework (NSRF), which aligns with the ISSB reporting requirements. This framework seeks to align corporate practices with national and global sustainability goals, positioning Malaysia as a leader in promoting responsible business practices throughout Southeast Asia.
In line with the Task Force on Climate-Related Financial Disclosures (TCFD), Bursa Malaysia encourages companies to provide insights into climate-related risks and opportunities and their financial implications. This TCFD-aligned approach supports Malaysia's transition to a low-carbon economy by helping investors evaluate how companies are managing the challenges of climate change and strengthening resilience in the financial system.
The framework will be implemented in phases, beginning with large listed issuers on Bursa Malaysia’s Main Market in 2025, followed by other Main Market listed issuers in 2026, and ultimately extending to ACE Market issuers and large non-listed companies in 2027.
Malaysia is making notable progress in enhancing sustainability disclosures, driven by comprehensive frameworks and a phased implementation plan. These initiatives are designed to improve transparency, accountability, and resilience in addressing climate-related risks and opportunities.
Malaysia has also established several other key ESG-related regulatory requirements:
- Environmental Quality Act (EQA) 1974 (amendments): Sets pollution control, waste management, and environmental quality standards. Companies must manage their environmental impact, including waste disposal, emissions, and wastewater, addressing the ‘environment’ component of ESG.
- Occupational Safety and Health Act (OSHA) 1994: Ensures companies maintain safe and healthy workplaces, promoting employee well-being and addressing workplace risks, contributing to the ‘social’ component of ESG.
- The Companies Act 2016 and Malaysian Code on Corporate Governance (MCCG): Mandates corporate governance disclosures, such as board diversity and transparency, to enhance governance structures, promote transparency, and build shareholder trust, focusing on the ‘governance’ aspect of ESG.
- Malaysian Anti-Corruption Commission (MACC) Act 2009 (amendments): Requires companies to implement anti-corruption measures, holding them accountable for corrupt practices by employees and third parties, strengthening the ‘governance’ aspect of ESG.
Key market insights:
In addition to disclosure measures, the Securities Commission Malaysia has developed a Sustainable and Responsible Investment (SRI) framework to promote sustainable finance in the capital markets. This includes the SRI Sukuk and Bond Framework, which enables the issuance of green and social bonds that are compliant with Shariah principles, fostering sustainable investment practices.
Additionally, the SRI Taxonomy offers a standardised classification for green, social, and sustainable activities, helping financial institutions ensure consistent and reliable ESG reporting.
Bank Negara Malaysia (BNM) has introduced guidelines to ensure financial institutions incorporate ESG principles in their operations. These include BNM Lending Guidelines, which focus on responsible lending, transparency, and climate-related risk management.
Additionally, BNM has promoted Value-Based Intermediation (VBI) to integrate ESG practices within Islamic finance, aligning with Shariah values and supporting sustainable economic activities.
Malaysia has committed to achieving net zero carbon emissions by 2050. As part of this effort, Bursa Malaysia has established a voluntary carbon market (VCM), enabling companies to buy and sell carbon credits to offset their emissions. Additionally, the Ministry of Environment and Water (KASA) has introduced the National Low Carbon Cities Masterplan, which supports local governments and businesses in adopting sustainable, low-carbon practices.
These initiatives have been reflected in the corporate world through the strong uptake of emissions reduction targets by Malaysian companies. While companies disclosing climate risk have been steadily increasing since 2019, there is a steep increase in net zero targets, particularly between 2020 and 2021 (see figure below).
Company Disclosures in Malaysia
Malaysia is actively supporting the United Nations Sustainable Development Goals (SDGs) by integrating them into its national development agenda.
The Twelfth Malaysia Plan (12MP), which spans from 2021 to 2025, is aligned with the SDGs, focusing on key areas such as climate action, social inclusion, and economic growth.
This plan outlines Malaysia’s commitment to creating a sustainable, inclusive, and prosperous future, with particular emphasis on reducing inequalities, fostering innovation, and transitioning to a low-carbon economy.
Charlie Christopher - Associate Director, Risk & ESG, Malaysia
“As Malaysia embraces ESG, the nation stands at the brink of a transformative era where sustainable growth, economic resilience and social well-being intersect. For Malaysian businesses, now is the time to lead with purpose, act with accountability, and leave a lasting impact. The future of Malaysian business is green, inclusive, and governed by strong principles—if we choose to make it so.”
The information on this page is current as of 30 December 2024