PUTRAJAYA: The Principles on Good Governance (PGG) will ensure only qualified individuals are appointed as directors in government-linked investment companies (GLIC) and make GLICs better prepared to adopt environmental, social and governance (ESG) elements in their investment strategies, says Tengku Datuk Seri Zafrul Tengku Abdul Aziz.

       The Finance Minister said that the PGG would be the sole reference to governance baseline and sustainability practices for all GLIC.

       "To ensure the GLICs are well managed, the PGG emphasises the roles and responsibilities of the board. All directors should lead by example based on principles, as well as obligations in accuracy, transparency and loyalty.

       "The process of appointment and qualification of a director is given significant emphasis.

       "Only individuals who are qualified and have extensive experience, as well as integrity, will be appointed as GLIC board members," he said after launching the PGG for GLIC on Friday (April 15).

       Tengku Zafrul also said the PGG places an emphasis on having a diverse board of directors for GLICs, hence recommending having at least 30% women on a GLIC's board.

       With ESG issues such as flash floods, natural disasters, environmental pollution, as well as issues closely related to the social aspects, such as poor treatment of foreign workers getting more frequent, Tengku Zafrul said the government would ensure GLIC are prepared to face the increasing market demand for ESG practices.

       "The PGG recommends the establishment of a governance structure for the oversight of ESG elements in their future investment strategies.

       "There is also a need to increase capacity and expertise on ESG to ensure its future sustainability," he said.

       Tengku Zafrul also said that various global data have shown that companies focusing on ESG issues have managed to reduce costs, increase employee productivity, reduce various risks, as well as create more jobs and business opportunities.

       "Furthermore, the Covid-19 pandemic has clearly proven that corporate companies that are always ready and practise good governance have an advantage in terms of resilience," he said.

       Malaysia’s GLIC consists of six organisations, namely the Employees Provident Fund (EPF), Permodalan Nasional Bhd (PNB), Retirement Fund (Incorporated) (KWAP), Khazanah Nasional Bhd, Lembaga Tabung Haji dan Lembaga Tabung Angkatan Tentera (LTAT).

       They have total assets of RM1.7trillion, making the GLICs one of the main pillars of the nation’s socio-economic development.

       Tengku Zafrul said PGG was part of the GLIC/Government-Linked Company (GLC) Restructuring Programme spearheaded by the Finance Ministry for the past 18 months, which included, among others, the strengthening government-owned investment institutions programme and strengthening the people's investment initiative launched in 2021.

       He said the preparation of the PGG had taken into account current developments and discussions on the principles and practices of best governance at the local and international levels, including the Malaysian Code on Corporate Governance (MCCG) launched by the Securities Commission Malaysia last year.

       PGG was supported by three key principles, which are leadership and effectiveness of the board of directors, strengthening the board of directors’ composition, and encouraging accountability and transparency in investment management.