Malaysia’s $30 billion wealth fund supports carbon-emitting SOEs

Malaysia’s $30 billion sovereign wealth fund has ruled out a divestment from the country’s fossil fuel-dependent state sector despite tough sustainable development goals set this month.

Amirul Feisal Wan Zahir, managing director of Khazanah Nasional, acknowledged that the large holdings in the national airline and power companies will challenge the fund’s efforts to achieve net-zero emissions across its portfolio by 2050.

But Amirul Feisal told the FT that the fund would not sell investments on environmental grounds.

“It’s easier for some multinational funds to say: I’m going to sell your company, I’m going to dump you,” he said. “We’re not trying to pull the rug from their feet.”

Khazanah became the latest sovereign wealth fund to commit to environmental, social and governance standards this month. The fund also aims to ensure that by 2025 30 percent of board members and senior leaders of its portfolio companies are women.

Around the world, oil-rich countries like Malaysia are responding to pressure to shift their wealth to more sustainable and ethical investments.But big investors face growth skepticism About how much work they’ve really done to support the transition from fossil fuels for climate change.

Amirul Feisal said Khazanah would also not divest from companies that failed to complete women’s representation on time, adding that it would “put them on task”.

“I think, basically, it’s the only thing we can do,” he said. “I think it’s done when we start questioning management and stressing them out a little bit.”

Retaining its investments in national carrier Malaysia Airlines and state power company Tenaga Nasional Berhad, which generated 45% of its electricity last year from coal, could make Khazanah’s net-zero ambitions particularly difficult.

But Amirul Feisal said that because of the fund’s large stake in Malaysian businesses – often “up to 20%” – Khazanah had the onus to influence change, not sell it.

Khazanah is chaired by Malaysia’s prime minister and has long had a strict mandate to support the country’s economy. In 2004, it was placed at the centre of Malaysia’s government-linked enterprise transformation programme to revitalise state-owned enterprises.

The governance of Malaysia’s state investment arm has come under scrutiny after a 2015 scandal that revealed the misappropriation of millions of dollars by government fund 1MDB. conviction Former Prime Minister and Khazanah Chairman Najib Razak. Najib is appealing against the conviction.

Khazanah, which does not disclose all its investments, has been prioritizing good governance for years, said Amirul Feisal. He pointed to steps the fund has taken to improve transparency in state-owned enterprises as part of the GLC’s transformation plan.

“It wasn’t called ESG at the time,” he said. But by improving governance, we have “increased performance, increased productivity, increased transparency. The entire Malaysian market actually benefits”.

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