RECENTLY, aluminium smelter Press Steel Aluminium Holdings Bhd raised a whopping RM1bil through a placement of shares.
Ordinarily, this could not come as a shock. The corporate has been hitting report earnings as a result of skyrocketing worth of aluminium.
Its share worth has shot up 3 times within the final two years, giving it a market capitalisation of just about RM54bil now.
An funding banker tells StarBizWeek that the position by the corporate was taken up by a number of funds that included native and international in addition to government-linked funding corporations.
Actually, the providing was 50 occasions oversubscribed.
However the query is, can an organization like Press Steel be deemed to be ticking the environmental, social and governance (ESG) packing containers, an more and more vital factor being inculcated by funding funds around the globe, Malaysia included.
Press Steel is an aluminium smelter and derives over 75% of its income from this enterprise.
The aluminium trade is claimed to be extremely energy-intensive, has vital environmental influence and releases a big proportion of vitality as waste warmth, says a marketing consultant.
We imagine that our excessive ESG requirements will improve our aggressive edge and maintain us related. – Kenneth Pereira
“As well as, recall that Press Steel is an organization that makes use of subsidised electrical energy that’s generated from the Bakun Dam. Clearly, this isn’t a favoured firm for greenies,” he provides.
In its defence, although, Press Steel lays declare to having an intensive sustainability and carbon-neutral programme in place.
The corporate goals to be carbon-neutral by 2050.
In an e mail reply to StarBizWeek, Press Steel stresses that it complies with the related air emission regulation within the locations it operates, being Malaysia and China.
“ESG is a steady course of and Press Steel’s journey is continuing,” the corporate says.
Responding to issues about air pollution attributable to aluminium smelting, Press Steel says that waste warmth is usually contained inside the smelting pots for the electrolysis course of, slightly than emitted to the setting.
“The benefits and drawbacks ought to be seen in a holistic method and aluminium has been broadly touted because the inexperienced metallic as a result of its infinite recyclability properties.
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“Greater than 75% of the aluminium ever produced remains to be in use at present.
“It is usually an vital metallic to assist inexperienced purposes equivalent to electrical autos and renewable vitality, particularly photo voltaic vitality,” it provides.
Press Steel additionally says that it has been participating actively with each international and home buyers on its ESG journey.
“The buyers have been saved abreast of our progress and we disclose all pertinent info on ESG through our web site and annual report,” it says.
Equally, one would suppose that any firm concerned in extracting hydrocarbons from the bottom would instantly fall out of the listing of ESG-compliant corporations and therefore not get any love from funding funds.
That once more doesn’t appear to be the case. Take Hibiscus Petroleum Bhd
, for instance.
That is an oil and fuel exploration and manufacturing firm, with a mean web manufacturing price of 9,107 barrels of oil equal per day in monetary yr 2021.
Nonetheless, Hibiscus is a constituent of the FTSE4Good Bursa Malaysia index, which contains corporations that display a number one strategy to addressing ESG dangers.
Hibiscus is ranked among the many high 25 public-listed corporations of FBM EMAS when it comes to ESG rankings by FTSE Russell.
Heng: The subsequent trade winners are those who’re probably the most responsive and adaptive to the market in attaining sustainability.
Much like Press Steel, the corporate goals to be a net-zero emissions producer by 2050.
In 2021, the corporate revealed its Local weather Change Framework and Vitality Transition Technique.
This roadmap covers Hibiscus’ intention to create a resilient portfolio, decarbonise its operations and spend money on clear vitality.
In a reply to StarBizWeek, Hibiscus managing director Kenneth Gerard Pereira famous that the corporate has been thought to be one in every of seven exemplary main Malaysian companies having progressive local weather ambitions at COP26 in Glasgow.
“We imagine that our excessive ESG requirements will improve our aggressive edge and maintain us related, as our stakeholders and the investing group choose to conduct ‘accountable funding’ and want to perceive potential sustainability dangers to enterprise efficiency.
“Hibiscus recognises the significance of sustainability and is dedicated to implementing sustainable practices to realize the correct stability between the targets of our shareholders, attaining financial success, fulfilling our moral obligations to different stakeholders and the broader group through which the group has a presence,” he says.
Pereira additional factors out that Hibiscus continuously engages buyers on suggestions and proposals on enhancing its ESG practices.
“Up to now, our interactions with buyers have been optimistic.
“It’s noteworthy to spotlight that now we have a considerable portion of our shares held by institutional buyers, each home and international, with an growing development during the last yr,” he says.
The expertise of Press Steel and Hibiscus reveals that buyers, particularly massive funds, don’t essentially keep away from a carbon-intensive firm or a sector deemed pollutive.
Surin: Malaysian corporations have been comparatively sluggish in integrating ESG requirements into their companies.
One also can word that international buyers have been web consumers of the Malaysian plantation sector in current weeks, amid the elevated crude palm oil costs and the provision disruption danger.
The stronger curiosity is seen regardless of the ESG issues of the plantation sector, together with allegations of pressured labour.
This raises the query, can any pollutive or non-environment pleasant firm be deemed ESG-compliant, so long as they’ve a great “plan” in place?
An environmental marketing consultant says that corporations have to “stroll the discuss” to be thought-about ESG-compliant.
“Corporations might take a while to place their ESG pledges into motion, however buyers and the bigger group should be capable of see the efforts taken to implement the measures.
“Shareholders should repeatedly monitor whether or not the administration is definitely embracing the ESG requirements as dedicated,” in response to the marketing consultant.
Proforest Southeast-Asia regional director Surin Suksuwan says that Malaysian corporations have been comparatively sluggish in integrating ESG requirements into their companies.
Nonetheless, the sturdy push by the Finance Ministry has been a driving consider dashing the ESG compliance, in response to him.
Proforest works with numerous corporations throughout the provision chain of main agricultural commodities.
“Many worldwide corporations have made public commitments that put ESG on the core of their enterprise.
“It’s the trade itself driving ambition and transparency, though the danger of non-compliance is each reputational and monetary,” he says.
In the meantime, Greenpeace Southeast-Asia Malaysia campaigner Heng Kiah Chun concurs that ESG requirements have began an enormous dialogue, however the targets are nonetheless distant.
“Corporations also needs to be ruled by the Foundational Precept of the United Nations Guiding Rules on Enterprise and Human Rights, particularly, the company duty to respect human rights that requires enterprise enterprises to keep away from inflicting or contributing to adversarial human rights impacts by way of their very own actions, and deal with such impacts after they happen.
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“Corporations should additionally search to forestall or mitigate adversarial human rights impacts which might be instantly linked to their operations, services or products by their enterprise relationships, even when they haven’t contributed to these impacts,” he says.
PwC Malaysia, in its current “Positioning Company Malaysia for a sustainable future” report, famous that Malaysia remains to be within the early levels of its ESG journey.
“In comparison with extra developed nations, growing economies like Malaysia will take an extended time to succeed in web zero,” it says.
The report talked about that out of the highest 50 listed corporations in Malaysia, about 94% have ESG methods.
Nonetheless, solely 62% of such corporations have ESG embedded of their companies.
The report highlighted the truth that many corporations have a grand “storytelling” about their ESG plans, however have but to make agency strikes to include these plans into precise measures.
Nonetheless, on the whole, efforts to embrace ESG are regularly going down in Malaysia as there’s rising consciousness and a better demand from buyers.
Regardless of the continuing efforts, some trade observers opine that sure sectors have been unfairly focused by proponents of ESG.
As an example, regardless of the measures taken by the plantation sector to scale back carbon emissions by way of accountable planting, the sector has continued to be seen with prejudice.
One other instance can be the glove manufacturing sector, which has been affected by pressured labour allegations.
Nonetheless, Greenpeace’s Heng believes that gamers in such sectors ought to take extra duty to show their dedication to sustainability, as a substitute of lamenting about being unfairly focused.
He additionally says that buyers should require the industries to show their sustainability dedication.
“Moreover, shopper pushed stress for an moral provide chain is a development now, that means that the subsequent trade winners are those who’re probably the most responsive and adaptive to the market in attaining sustainability.
“For that cause, Greenpeace is pushing for a systemic shift in how these sectors function,” he says.
This contains, in response to Heng, holding plantation corporations accountable for his or her misconduct or neglect resulting in forest fires, pushing fossil fuel-based industries to make a shift towards renewable vitality, and highlighting the function banks play in funding local weather change by investing within the coal trade regardless of its clear vitality rhetoric.
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In the meantime, Proforest’s Surin acknowledges that some industries are focused as a result of unsustainable practices equivalent to pressured labour and little one labour.
“It may be the case that some industries have been missed just because there’s a lack of know-how or campaigning taking place.
“The vital factor is to have a look at the course of journey – whether or not an trade is taking motion to enhance and progress on key social and environmental points,” he says.
With the growing push for ESG compliance in Malaysia, there are additionally complaints that corporations in sure sectors are discovering it troublesome to safe financing as a result of ESG issues.
It seems that banks are much less versatile to carbon-intensive sectors or these deemed pollutive on the subject of offering financing.
Surin concurs that the bigger monetary establishments are actually insisting on conducting due diligence earlier than they supply loans to plantation corporations, together with checks on safeguards in opposition to deforestation or human rights abuses.
He additionally says that Proforest is more and more being approached by Malaysian corporations that they haven’t labored with earlier than, doubtlessly appearing on stress from the monetary establishments and recognising the necessity to perceive the place they’re and implement actions to enhance.
“Smaller corporations and particular person buyers could also be slower to place ESG concerns on the forefront, however I imagine this can even change.
“The monetary sector typically appears to be like in danger and we don’t need them to see danger and select divestment as a substitute of engagement, as that gained’t assist elevate requirements throughout sectors as an entire,” he says.
Hibiscus’ Pereira additionally acknowledges that monetary establishments have been maintaining with authorities insurance policies and internationally-accepted ESG frameworks in driving the ESG agenda
“The monetary establishments are highly effective brokers of change and it’s clear by now that such change must be carried out in an orderly method so it reduces the damaging influence on the lives of civil society,” he says.
And whereas Pereira agrees on the intention of the ESG agenda, he highlights that the drive to a decrease carbon future by way of strict ESG compliance has brought on a big drop of fossil gasoline funding over time.
Quoting Rystad Vitality, he says that the height exploration and manufacturing investments within the oil and fuel sector was recorded at US$886bil (RM3.8 trillion) in 2014.
However the investments have diminished over time to US$393bil (RM1.7 trillion) in 2020.
Whereas the drop is partly as a result of Covid-19 pandemic, he says it was additionally attributable to the “tightening of the E standards” within the ESG requirements.
“Quick ahead to 2022, we’re at present confronted with a extreme vitality crunch which has resulted in growing vitality costs and subsequently, commodity costs and rising inflation.
“Whereas renewable vitality progress has been on the rise for the previous decade, we are able to conclude that the vitality hole at present is a results of the speedy underneath investments within the fossil gasoline trade which isn’t met by the expansion of renewable vitality,” he says.
Transferring ahead, Pereira hopes that the fossil gasoline sectors wouldn’t be demonised.
“As an alternative, we must always incentivise decarbonising these sectors so we are able to obtain a stability between vitality safety, vitality affordability and setting sustainability,” in response to him.