Securities Commission issues Simplified Guide on the National Sustainability Reporting Framework

The National Sustainability Reporting Framework (“NSRF”) was issued by the Ministry of Finance of Malaysia on 24 September 2024.
 
The NSRF introduces the use of the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board, i.e. the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures (collectively “ISSB Standards”), as the baseline sustainability disclosure standards for the following companies in Malaysia:
 
Group Applicable Entities Annual Reporting Period beginning on or after:
1 Main Market listed issuers with market capitalisation (excluding treasury shares) of RM2.0 billion and above as of 31 December 2024, or as at the date of its listing after 31 December 2024 1 January 2025
2 Main Market listed issuers (other than listed issuers in Group 1) 1 January 2026
3
  • ACE Market listed issuers; and
  • Large Non-listed Companies (Large NLCos) with annual revenue of RM2.0 billion and above for two consecutive financial years preceding the current financial year
1 January 2027
 
Parts V to VII of the NSRF accord certain flexibilities to the application of IFRS S1 and IFRS S2 for the initial two or three years from the respective implementation dates.
 
In late December 2024, the Main Market Listing Requirements and ACE Market Listing Requirements of Bursa Malaysia Securities Berhad were amended to be aligned with the provisions of the NSRF, effective from the applicable implementation dates mentioned in the NSRF.1
 
To support the board of directors of companies in adopting the NSRF, the Securities Commission Malaysia (“SC”) released a simplified guide, ‘Navigating the Transition: A Guide for Boards’ on 20 January 2025. This Guide will, among others, provide the board of directors with simplified and actionable steps on key areas such as governance, sustainability data boundaries, financial impact assessments, and integration with enterprise risk management systems.
 
The Guide outlines the following eight key-questions for consideration by boards: 
  1. What is the NSRF? 

  2. Is there a cross-functional team responsible for sustainability and climate reporting? 

  3. Does the company’s sustainability data have the same boundary as its financial reporting? 

  4. Has the company assessed the financial impact of sustainability and climate-related risks and opportunities? 

  5. Is the identification of sustainability risks and opportunities integrated into the Enterprise Risk Management (ERM) system? 

  6. Has the company started tracking metrics to assess sustainability and climate-related risks and opportunities? 

  7. Are the company’s material metrics assurance-ready? 

  8. Are training and capacity building needs addressed? 
In addition to requiring a cross functional team to ensure successful implementation of the ISSB Standards, finance (additional budget allocation), technology (the need for new technology and tools) and people (upskilling of existing team and additional headcount) have been identified as additional resources required to ensure the same. Furthermore, it is also identified that key considerations recommended in the Malaysian Code of Corporate Governance would allow for alignment with best practices.
 
The Guide provides that prioritising training and capacity building by boards and management will allow for effective implementation of the ISSB Standards. The considerations that have been identified for developing organisational capabilities to meet sustainability reporting requirements include: 
  1. conducting a Training Needs Assessment to identify key roles of departments or teams responsible for sustainability reporting, assess knowledge gaps in sustainability reporting and use of the ISSB Standards; 

  2. strengthening leadership commitment including role modelling where leaders are encouraged to actively participate in sustainability training; 

  3. providing continuous learning opportunities by, among others, encouraging employees to pursue relevant certifications; and 

  4. monitoring and evaluating effectiveness. 
According to the Guide, the framework for assurance of sustainability information, including the assurance providers, will be announced after further consultation and engagements with relevant stakeholders.
 
To further support the transition, the Advisory Committee on Sustainability Reporting (“ACSR”), has introduced PACE (Policy, Assumptions, Calculators, Education), an initiative offering training, tools, and resources to meet NSRF requirements in adopting the ISSB Standards. More details of these initiatives are available here.2
 
The initiatives by the SC and the ACSR to assist companies and boards of directors in the adoption of the ISSB Standards are to commended. It is hoped that these initiatives will assist smaller companies and their board members to navigate a journey through uncharted waters.
 
Resources
 
Alert by Siti Ayenaa Binti Mohd Anis (Associate) of the Environmental. Social and Governance Practice of Skrine.
 
 
 

1 Our article on the amendments to the Listing Requirements can be accessed here.
2 According to the subsite, some of the tools are currently being developed.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.