The Employees Provident Fund (EPF), Malaysia’s pension fund, has published the EPF Sustainable Investment Stewardship Policy, becoming the first institutional investor in Malaysia to publish a standalone stewardship policy for sustainable investment.

EPF said in a statement on Wednesday that the policy outlines the processes and guidelines the EPF follows to promote good sustainability practices among its investee companies and external fund managers.

It said the stewardship undertaking has strengthened the EPF’s commitment to help build a better retirement future for Malaysians by delivering long-term sustainable value.

This aligns with the United Nations-supported Principles for Responsible Investment (PRI), which define stewardship as institutional investors using their influence to maximize overall long-term value, encompassing economic, social, and environmental assets essential for returns and the interests of clients and beneficiaries.

“We believe that sustainable investment is key to creating long-term value for Malaysia,

“As a responsible institutional investor, we are committed to advancing this principle by systematically promoting and instilling good business practices that incorporate environmental, social, and governance (ESG) factors into all investment decisions,” EPF Chief Executive Officer, Encik Ahmad Zulqarnain Onn said.

According to him, this stewardship commitment accelerates the EPF’s progress towards achieving a fully ESG-compliant portfolio by 2030 and a climate-neutral portfolio by 2050.

“We aim to empower our investee companies and EFMs to generate positive societal and environmental impacts, keeping all stakeholders’ best interests in mind, while maximizing portfolio-level risk-adjusted returns,” he added.

As the largest institutional investor in Malaysia, the EPF said it is taking a leadership role to influence the adoption of good sustainability practices within the Malaysian capital market, whether individually or collaboratively through platforms such as the Institutional Investors Council (IIC).

The EPF Sustainable Investment Stewardship Policy covers approaches to key stewardship areas, such as monitoring, engagement and escalation options, in efforts to align companies with its sustainable investment policies and improve management of material ESG risks and opportunities.

The EPF’s stewardship philosophy is centered on four key activities, namely proxy voting, monitoring, active engagement and collaborative initiatives.

The EPF’s stewardship commitments are strengthened by its membership in several principles-based codes, which require the EPF to be an active owner and integrate sustainability considerations into its ownership policies and practices.

As a government-linked investment company in Malaysia, the EPF said it adheres to the Sustainable Investment Standards (SIS), which was launched in May 2023.

It said the fund has also been a signatory to the United Nations-backed Principles for Responsible Investment (PRI) since April 2019.

It has also been a signatory to The Malaysian Code for Institutional Investors (MCII) since January 2017.

Subsequently, the EPF Sustainable Investment Stewardship Policy development took into consideration the principles outlined in the local and global stewardship codes such as The Malaysian Code for Institutional Investors (MCII) and International Corporate Governance Network (ICGN) Global Stewardship Principles.

In addition, the policy hinges on and is guided by EPF’s ESG policies and processes, specifically the EPF Corporate Governance Principles and Voting Guidelines and EPF Sustainable Investment Policies.

It is noted that in 2010, the EPF became the first institutional investor in Malaysia to launch the Corporate Governance Principles and Voting Guidelines to inform the public, investors and companies on EPF’s voting guidelines.

In March 2022, the EPF launched the Sustainable Investment Policy, Priority Issues Policies, and Priority Sector Policies to guide the EPF in making better informed and holistic investment decisions by integrating ESG considerations in its investment management processes.

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