Bursa Malaysia amends listing requirements to enhance sustainability reporting framework
30 September 2022
On 26 September 2022, Bursa Malaysia Securities Berhad (‘the Exchange’) announced amendments to enhance the sustainability reporting requirements in the Main Market Listing Requirements (‘Main LR’) and the ACE Market Listing Requirements (‘ACE LR’) (collectively ‘the LR’).[1]
According to the Exchange, the amendments seek to elevate the sustainability practices and disclosures of listed entities on the Main Market (‘listed issuer’) and the ACE Market (‘listed corporation’).
The enhanced sustainability reporting requirements will be introduced to Part III of Practice Note 9 of the Main LR (‘PN9’) / Guidance Note 11 of the ACE LR (‘GN11’) which sets out the contents to be included in the Sustainability Statement[2]. A summary of the key amendments to the LR is set out below.
1. Aligning the ACE LR with the Main LR
Prior to these amendments, GN11 did not set out specific matters to be included in a listed corporation’s Sustainability Statement but only stated in general terms in paragraph 6.1 that a listed corporation should ensure that the information in its Sustainability Statement are balanced, comparable and meaningful by reference to the Exchange’s Sustainability Reporting Guide.
In a significant step forward, the amendments largely align the disclosure requirements for Sustainability Statements in the ACE LR with those contained in the Main LR. A new paragraph 6.2 of GN11 requires a listed corporation to disclose the following information in its Sustainability Statement, which are identical to those in paragraph 6.2 of PN9:
- the governance structure to manage the economic, environmental and social risks and opportunities (‘sustainability matters’);
- the scope of the Sustainability Statement and the basis for the scope;
- how material sustainability matters are identified and why they are important to the listed corporation; and
- how material sustainability matters are managed, including details on policies to manage such matters, measures taken to deal with these matters, and indicators which demonstrate the performance of the listed corporation in managing the said matters.
The above requirements will apply to Sustainability Statements issued by a listed corporation for financial year end (‘FYE’) on or after 31 December 2024.
Sustainability matters are considered material if they:
- reflect the listed issuer’s / listed corporation’s significant economic, environmental and social impacts; or
- substantively influence the assessments and decisions of stakeholders; and
- fall under the common material sustainability matters as set out in Annexure PN9-A / Annexure GN11- A (as defined and further discussed under section 3 below).
2. Quantitative information on indicators for material sustainability matters
A listed issuer / listed corporation will be required to disclose three financial years’ data on a rolling basis for each reported indicator in the following manner:
- in the first year of reporting a new indicator – data for the financial year;
- in the second year of reporting the said indicator, data for the financial year and the immediate preceding financial year; and
- in the third year onwards of reporting the said indicator, data for the financial year and the two immediate preceding financial years.
A listed issuer / listed corporation will also be required to disclosure the performance targets in relation to the indicators (if any).
A listed issuer and a listed corporation are required to include a summary of such data and performance targets in a prescribed format.
The above requirements will apply to Sustainability Statements issued by a listed issuer for FYE on or after 31 December 2023 and by a listed corporation for FYE on or after 31 December 2025.
3. Common material sustainability matters
For the purposes of a Sustainability Statement, a new Annexure PN9-A to PN9 (‘Annexure PN9-A’) / Annexure GN11-A to GN11 (‘Annexure GN11-A’) sets out the following 11 matters which are deemed to be Common Material Sustainability Matters to be included in the Sustainability Statements of all listed issuers and listed corporations:
(1) Anti-corruption;
(2) Community / Society;
(3) Diversity;
(4) Energy Management;
(5) Health and Safety;
(6) Labour Practices and Standards;
(7) Supply Chain Management;
(8) Data Privacy and Security;
(9) Water;
(10) Waste Management; and
(11) Emissions.
Annexure PN9-A / Annexure GN11-A also identifies the common indicators that apply to each Common Material Sustainability Matter. A summary of Annexure PN9-A / Annexure GN11-A, is available here.
A listed issuer is required to include the Common Material Sustainability Matters in sub-paragraphs (1) to (9) above and in sub-paragraphs (10) and (11) above in its Sustainability Statements issued for FYE on or after 31 December 2023 and 31 December 2024 respectively.
On the other hand, a listed corporation is to include the Common Material Sustainability Matters in sub-paragraphs (1) to (9) above and in sub-paragraphs (10) and (11) above in its Sustainability Statements issued for FYE on or after 31 December 2025 and 31 December 2026 respectively.
4. Statement of Assurance
Commencing from the Sustainability Statement issued for FYE on or after 31 December 2023, a listed issuer is required to state whether its Sustainability Statement has been subjected to an internal review by its internal auditor or to independent assurance performed in accordance with recognised assurance standards[3]. If such review or assurance has been undertaken, the Sustainability Statement must disclose the subject matter and the scope covered and in the case of an independent assurance, the conclusions.
A listed corporation will be subject to the above obligation in its Sustainability Statements issued for FYE on or after 31 December 2025.
5. Alignment of climate-related disclosures
A listed issuer is required to align its climate-related disclosures with all four pillars comprised in the Recommendations of the Task Force on Climate-Related Financial Disclosures (‘TCFD Recommendations’), namely governance, strategy, risk management, and metrics and targets, in a dedicated section within the Sustainability Statement.
This requirement will apply to Sustainability Statements issued by a listed issuer for FYE on or after 31 December 2025 but will not apply to a listed corporation.
6. Basic transition plan
A listed corporation is required to disclose its basic plan to transition towards a low-carbon economy (‘transition plan’) in a dedicated section within its Sustainability Statements for FYE on or after 31 December 2026. The transition plan must include the following information:
- the role of the board and senior management in overseeing and executing the transition plan; and
- the strategies and initiatives to reduce climate-related risks and increase climate-related opportunities.
A listed corporation will not be required to comply with the above requirement if the listed corporation’s Sustainability Statement includes climate-related disclosures aligned with the four pillars of the TCFD Recommendations discussed in section 5 above.
The requirements pertaining to a transition plan does not apply to a listed issuer.
Comments
The amendments to the LR are in line with current global trends of giving greater emphasis to environmental and sustainability matters. The requirement to report on the progress of material sustainability matters in quantifiable terms will assert pressure on listed issuers / listed corporations to take concrete steps to improve the scorecard for their sustainability practices, or otherwise risk attracting potential liabilities under the LR.
The alignment of the Sustainability Statement requirements in the ACE LR with those in the Main LR is a significant step-up for ACE Market listed corporations who will have to invest a significant amount of time and resources to meet the new requirements.
To assist listed issuers and listed corporations to embark on this phase of their sustainability journey, the Exchange has updated its Sustainability Reporting Guide and Toolkits, which can be accessed here.
Article by To’ Puan Janet Looi (Partner and Co-Head) and Francine Ariel Paul (Senior Associate) of the ESG Practice of Skrine.
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.
[1] The amendments to the sustainability reporting requirements in the LR formed the subject matter of Consultation Paper No. 1/2022 issued by the Exchange on 23 March 2022.
[2] Under the LR, the Sustainability Statement is a narrative statement of the listed issuer’s / listed corporation’s management of material economic, environmental and social risks and opportunities and comprises part of the annual report of a listed issuer / listed corporation but may be issued as a standalone document provided it complies with Part III of PN9 / GN11, and is issued concurrently with the annual report (see updated Questions and Answers issued on 26 September 2022).
[3] The Exchange has clarified in the updated Questions and Answers issued on 26 September 2022 under the Main LR and the ACE LR that the recognised assurance standards are the International Standard on Assurance Engagements (ISAE) 3000 and the International Organisation for Standardisation (ISO).