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Greenwashing a growing concern as ESG investments reaches trillion-dollar levels: Awang Adek

Greenwashing a growing concern as ESG investments reaches trillion-dollar levels: Awang Adek

KUALA LUMPUR: Greenwashing is becoming a growing concern, with investments in environmental, social, and governance (ESG) globally reaching trillion-dollar levels, according to Securities Commission head Datuk Seri Awang Adek Hussin.

He emphasised the potential repercussions of greenwashing on investors' confidence and the dispersion of financing crucial for an equitable transition during his opening address at the IIC-SIDC Corporate Governance Conference 2024.

Awang Adek pointed out the growing trend among companies and investors towards adopting sustainability as a viable investment strategy.

"Globally, trillions of dollars have flowed into funds that tout their ESG credits. With the amounts rising, there is also growing concern about greenwashing, greenhushing, and green bleaching," he said.

According to him, the International Organization of Securities Commissions (IOSCO), the grouping of securities regulators of which the SC is a part, highlighted that greenwashing remains a fundamental market conduct concern that poses risks to both investor protection and market integrity.

"Taken more broadly, greenwashing can undermine the fundamental trust in sustainable

finance. If investors lose trust, the financing required for a just transition can be

dissipated," he said.

Malaysia recorded 68 sustainable and responsible investment (SRI) funds with a combined value of RM7.7 billion as of Dec 31, 2023.

Awang Adek noted that governance lapses in sustainability can have far-reaching consequences beyond financial losses, potentially resulting in irreversible harm to the environment and human well-being.

"At the end of the day, it all boils down to good governance. A plan or commitment without the right governance framework to back it up is not credible.

"A corporate governance advocate said, and I tend to agree, that when an investor evaluates what a company says it does for the environment (E) and social (S), they should evaluate the company's governance (G) first.

"If the G is problematic, they should discount what the company says about E and S because it is likely greenwashing," he said.

From a policymaker's perspective, the focus remains on enabling investor stewardship by ensuring the provision of dependable and comparable information on critical sustainability issues, he said.

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