Malaysia’s KWAP looks beyond profits on ESG allocations

The pension fund is focusing on creating investment results beyond profits, its CIO tells AsianInvestor.
Malaysia’s KWAP looks beyond profits on ESG allocations

The Malaysian pension fund Kumpulan Wang Persaraan (Diperbadankan), also known as KWAP, has increased its focus on environmental, social, and governance (ESG) standards and their ability to create sustainable returns.

Hazman Hilmi Sallahuddin

“With regards to SAA, internally we do not just view it as strategic asset allocation, but we also view it as sustainable asset allocation. It is a different way of approaching our portfolio management,” Hazman Hilmi Sallahuddin, chief investment officer at KWAP, told AsianInvestor.

KWAP’s total assets under management (AUM) was MYR184.5 billion ($38.5 billion) as of July 2023.


It has also been noticed at KWAP’s headquarters in Kuala Lumpur that discussions have emerged on ESG standards and their ability to make a positive difference. Some have even raised concerns over whether ESG might limit portfolio performance.

For the pension fund, the tool to ensure a strong case for ESG is to take the next step, in the form of impact investments. And Hazman believes in implementing the investment strategy that seeks to generate financial returns while also creating a positive social or environmental impact.


One way to do this is to start at the grassroots level. In September 2023, KWAP launched a venture capital vehicle called Dana Perintis (“Pioneer Fund”) aimed at boosting both the domestic and regional venture capital (VC) and startup scene.

ALSO READ: Malaysia’s KWAP aims to boost domestic VC activity with new fund

Dana Perintis has committed to investing up to RM500 million over the next 18 to 24 months in startups. On February 16, KWAP announced its first batch of investments made under the Dana Perintis strategy.

The investments, which amount to RM100 million, comprise two direct investments in Malaysian startups and two venture capital (VC) fund commitments.


The pension fund for federal employees in Malaysia works with a broader range of success criteria, while ensuring it creates the financial performance and meets the return targets across asset classes.

“Investment institutions have a fiduciary duty which is to deliver the returns. We as an industry need to grow that narrative so fiduciary duty should not be restricted to financial returns, but it should also cover sustainable and responsible returns,” Hazman said.

To facilitate the focus on sustainability and responsibility, a foundation of ESG integration has been rolled out on a large scale, in and around the pension fund.

For starters, KWAP has ESG guidelines for the corporate side, making sure that the organisation also adheres to ESG standards.

On the investment side, the Malaysian pension fund has ESG guidelines for each of its asset classes, where documentation is done separately. KWAP does its own scoring for both public and private market assets, and an ESG review is done in all investment papers.

A revamp of KWAP’s strategic asset allocation in November 2022 changed the split of domestic and overseas assets from 80/20 to 70/30. It also brought the portfolio target balance between public and private assets to 80/20 from 90/10.

ALSO READ: Malaysia's KWAP looks to private credit after private equity boost

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