Zurich Malaysia pushing companies to step up on climate action
The Malaysian unit of Zurich Insurance is actively engaging with portfolio companies on climate risks and disclosures as the group marches towards a net-zero investment portfolio by 2050.
“It is important for us to understand if the investee companies acknowledge climate change as a significant issue and if they view it as a relevant risk and/or opportunity for their business,” Junior Cho, country CEO and head of Zurich Malaysia, told AsianInvestor.
“We also look for the presence of a policy (or equivalent) as a commitment to action on climate change as well as the appointment of a board member or committee with explicit responsibility for oversight of climate change policy.”
This matches a global trend where asset owners are actively assessing climate-related risks to their investment portfolios.
The insurer, on a related note, also previously told AsianInvestor that it sees potential investment opportunities in renewables.
“We identify growth opportunities in sectors related to renewable energy and clean technology, reflecting the global shift towards sustainable investments,” Cho said.
Zurich Malaysia is a subsidiary of Switzerland’s Zurich Insurance. Zurich Malaysia consists of four units including general and life insurance as well as takaful units.
CLIMATE DISCLOSURES
Several entities have told AsianInvestor that are engaging with investee companies to promote more disclosures, on climate and other sustainability metrics.
Some of this is also being driven by regulatory requirements, which are compelling institutions to make climate-related financial risk disclosures.
Canada Pension Plan Investment Board and British Columbia Investment Corporation Management are just two examples of global pension funds that have proxy voting policies that require portfolio companies to make specific climate-related disclosures and appointment of an board-level executive with oversight on climate change policy.
Climate-related disclosures are also becoming increasingly important in Malaysia, with upcoming mandatory disclosure requirements for climate-related financial risk in alignment with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.
Companies in Malaysia area already disclosing climate risk data, with about 50 Malaysian companies voluntarily disclosing data in 2022 via CDP, a global disclosure platform operated by a charity.
That's twice the number from the previous year, according to Bursa Malaysia, the local stock exchange.
The Joint Committee on Climate Change (JC3), a collaborative platform for climate resilience co-chaired by Bank Negara Malaysia and Securities Commission Malaysia, has also released guidelines for financial institutions regulated by BNM to make TCFD-aligned climate-related financial risk disclosures.
These guidelines are set to be adopted by the end of 2024.
Insurers, especially general, are one of the best-placed to assess climate risks since their entire business model is built on assessing and paying for losses suffered by clients due to climate events, French insurer AXA told AsianInvestor last year.
ESG IMPORTANCE
Zurich Malaysia has also actively incorporated environment, social and governance (ESG) factors in its investment process.
"Our ESG framework is designed to integrate the relevant [ESG] factors into the investment process, from company research to portfolio construction,” said Cho.
“The assessment of ESG factors is based on both qualitative and quantitative methods, and we engaged an external data provider for ESG data as well as engagement with investee companies.”
Cho did not specify who the external data provider is.
Global parent Zurich Insurance, which is headquartered in Switzerland, has also committed to a net zero investment portfolio by 2050.
It has also set other related targets such as reducing the emissions intensity of listed equity and corporate bond investments by 25% by 2025 from 2019 levels and reducing the emissions intensity of direct real estate investments by 30% from 2019 levels over the same period.
The insurer also plans to increase impact investments by 5% as well.
As part of other climate action and biodiversity protection measures, the Malaysian unit has teamed up Tropical Rainforest Conservation and Research Centre to reintroduce rare and endangered species into the Malaysian tropical rainforfest ecosystem.