What are the climate risks and opportunities faced by Malaysian industry? How well are companies in Malaysia positioned to manage growing risks and capitalise on opportunities?

The answers to these questions will reveal the extent to which Malaysian companies will stay competitive against international peers, sustain their growth, and build trust with investors. Industry response is also critical for Malaysia to meet its own international commitments on climate change.

But there is no single answer that fits all sectors and companies. Key risks and opportunities vary across different sectors and geographies, ranging from reduced agricultural productivity to infrastructure damage, reduced operational efficiency, public health, and eventually, increased financial and investment risks.

In this report, we review two leading companies from each of four industries that have high exposure to climate change: banking, power, transport infrastructure, and consumer food. This report contains our review of key matters of concerns and includes recommendations that are specific to each sector and company. Some of the key questions we ask are:

• Banking: Do Maybank and CIMB evaluate financing opportunities arising from the low-carbon transition (e.g. renewables, biogas plants) and set targets to seize market share? Do they assess their exposure to high-risk sectors (e.g. coal power, palm oil) and communicate clear policies and processes to limit their exposure?
• Power: Do Tenaga Nasional and YTL Power assess the competitiveness of their assets and ensure that new investments will be economically productive across each asset’s design life? Do they provide clear decarbonisation strategy to minimise impact on their revenue and asset value?
• Transport infrastructure: Do Westports and Malaysia Airports Holdings Berhad conduct stress tests to assess the resilience of their existing infrastructure and properly factor in climate costs for the future projects?
• Consumer food: Does Sime Darby Plantation communicate clear plans to manage the impact of physical risks on its plantations and product yield? Does Nestlé Malaysia communicate clear plans for capturing fast-growing markets in low carbon products (e.g. plant based dairy)?

The report finds that Malaysian companies are still early on their sustainability journey despite the notable progress made in recent years. There are gaps to be filled. For example, Tenaga Nasional’s newly announced renewable target of 8,300MW by 2025 does not align with the Malaysian government’s renewable generation target.

Our recommendations for companies hinge on one key factor: the board. From assessing climate risk exposures to formulating a transition strategy, the board plays a key role in guiding the management through what can be a bumpy road to a low carbon future. Sustainability issues are wide ranging, and climate change is complex. Having a board level committee responsible for sustainability, as well as enhancing the board capacity on the matter, is therefore crucial to ensure that relevant issues are discussed and addressed on time. However, there are still a limited number of such committees across the Malaysian corporate landscape. Only one of eight companies we reviewed, Sime Darby Plantation, had a sustainability committee at the board level.

We hope this report provides a useful guideline for both companies and investors in navigating across green steppingstones; and for regulators in identifying potential regulatory bridges to assist industry’s transition.

This report was produced for CLSA as part of their Blue Book range for top tier investors.