Malaysia’s Employees Provident Fund (EPF), the country’s largest pension fund, will play a more active role in directing its investee companies to beef up corporate governance, particularly in sustainable investing, according to Chief Executive Officer Alizakri Alias.
He said the EPF has a “very strict” code of corporate governance principles, and is changing the way it directs investee companies, especially on their environmental, social and governance (ESG) practices.
“We are now moving away from [telling investee companies] ‘don’t do that’ to ‘this is where you should move towards’,” Mr. Alizakri told participants of a virtual investment conference on July 7. “Investee companies would see more direction from us in the area we want them to focus on, particularly ESG.”
He said the value of EPF’s “top social stocks” declined less than 10% over the last few months since the coronavirus pandemic while the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index fell over 16%.
“Therefore, ESG stocks have resilience. ESG is not [just] nice to have, it is a definite need to have,” he said.
Mr. Alizakri warned that the EPF is prepared to vote out the board or management of an underperforming investee company rather than sell its holding “if we are not happy with the way the company is being run” or if the management doesn’t take the fund’s input into account.
The EPF had 924.75 billion ringgit (US$217.04 billion) of assets under management as of end-2019, and over 7.4 million members.