The Securities Commission Malaysia (SC) today issued Guidelines on Sustainable and Responsible Investment (SRI) Funds to facilitate and encourage greater growth of SRI funds in Malaysia. The new Guidelines – which enable funds to be designated as SRI funds – will widen the range of SRI products in the market and attract more investors in the SRI segment.
“Capital markets play a critical role in facilitating fund raising and investments for sustainable initiatives. The introduction of the SRI Funds Guidelines is another significant step towards further development of the SRI ecosystem in the Malaysian capital market, reinforcing our positioning in the regional SRI segment and global leadership in Islamic finance,” said Tan Sri Ranjit Ajit Singh, the SC Chairman.
“Developing the SRI was identified as a key area of growth for the Malaysian capital market under the Capital Market Masterplan, and in 2014 the SC introduced the SRI Sukuk framework, now widely acknowledged as a pioneering regulatory development that integrates the principles of Shariah with those of SRI,” Ranjit added. In July 2017, the world’s first green sukuk was issued in Malaysia under the SRI Sukuk framework.
With Islamic funds being recognised as part of the SRI universe, Malaysia is currently the largest SRI funds market in Asia (excluding Japan). It has 30% share of the region’s USD52 billion fund assets. Malaysia is also the second largest Islamic funds market globally (by domicile) at 29% of the US$56 billion global total asset under management (AUM).
The SRI Funds Guidelines will apply to fund products within the SC’s oversight, such as unit trust funds, real estate investment trust funds, exchange-traded funds, and venture capital and private equity funds. The Guidelines will also introduce additional disclosure and reporting requirements that aim to encourage greater transparency in investment policies and strategies of SRI funds. Fund managers that manage qualified SRI funds under these Guidelines will be eligible for tax incentives as announced in the recent 2018 Budget.
The Guidelines will be applicable for both conventional and Shariah-compliant funds. This will build on Malaysia’s position as a regional Shariah-compliant SRI centre, a strategic thrust that was identified under the SC’s Islamic Fund and Wealth Management Blueprint launched earlier this year. The Guidelines are available here.
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