KENANGA INVESTMENT BANK BERHAD SUSTAINABILITY REPORT 2024 BASIS OF THIS REPORT OUR APPROACH TO SUSTAINABILITY KENANGA AT A GLANCE GOOD GOVERNANCE LEADERSHIP STATEMENTS SUSTAINABLE ECONOMIC GROWTH ENVIRONMENTAL STEWARDSHIP EMPOWERING PEOPLE AND COMMUNITIES APPENDIX 45 44 Our Sustainable Investment Products: Kenanga Sustainability Series (“KSS”) Kenanga Investors’s KSS currently has three (3) Sustainable and Responsible Investment (“SRI”)-qualified ESG funds. These funds are listed in the research reports made available on our website via the ‘Market Insights’ webpage which provides a clear overview of the ESG criteria for investment. Eq8 Launches World’s First Waqf ETF to Drive Socio-Economic Impact Investing On 10 December 2024, Eq8 Capital Sdn Bhd, a member of Kenanga Investors Group, launched the world’s first Waqf-featured exchange-traded fund (“ETF”), the Eq8 FTSE Malaysia Enhanced Dividend Waqf ETF. Listed on Bursa Malaysia, this ETF is designed to distribute income annually, with half allocated as Waqf assets and the remaining half payable to unitholders. The initiative is the result of a strategic collaboration between Eq8 and Yayasan Waqaf Malaysia, which will oversee the Waqf assets. The launch of the Waqf ETF reflects KIG’s ongoing commitment to impact investing, supporting Malaysia’s socio-economic development, and contributing to the United Nations’ Sustainable Development Goals. The initiative aims to foster long-term, sustainable benefits in sectors like education, healthcare, economic empowerment, and environmental preservation. It aligns with the Malaysian government’s efforts to encourage collaboration between the public and private sectors to maximise the potential of Waqf assets for social good. The ETF uses an innovative income-focused strategy, combining momentum with high dividend yields. This strategy is designed to deliver attractive returns to investors while also making a positive social impact through the allocation of Waqf assets. The ETF offers investors opportunity to contribute to community development while pursuing financial returns. Yayasan Waqaf Malaysia will channel the Waqf assets into key sectors such as education, healthcare, and economic empowerment. The launch of this ETF also supports the growth of Waqf initiatives in Malaysia, providing a new avenue for investors to participate in socially responsible investments. The launch marks Eq8’s fifth ETF product, further establishing its position as Malaysia’s largest ETF issuer. For more information on funds and its performance funds under the KSS, please refer to: https://www.kenangainvestors.com.my. Kenanga Sustainability Series: High Yield Bond Fund Launched on 30 March 2022, the Fund is Malaysia’s first SRI-qualified high-yield bond fund, which seeks to provide income and capital growth by investing in the Northern Trust (“NT”) Global High Yield ESG Bond Index Fund, managed by NT Asset Management. The Fund excludes securities that do not meet certain ESG criteria, such as weapons producers, tobacco producers, thermal coal producers, and companies that are in breach of the UNGC’s Ten Principles. The Fund employs an optimisation methodology proprietary to the Fund Investment Manager to overweight securities issued by companies that are leaders in implementing ESG principles, thereby maximising exposure to securities with higher ESG ratings while aligning key risks relative to the ICE BofAML Global High Yield Index, including duration, yield, option-adjusted spread, and credit quality. As of 31 December 2024, the Fund size is RM1.7 million. Kenanga Sustainability Series: World Quality ESG Fund Launched on 6 September 2022, the World Quality ESG Fund aims to provide capital growth by investing in the NT World Quality ESG Fund, managed by NT Asset Management. The Fund’s Investment Manager uses a proprietary scoring system to select eligible securities, excluding those that fail to meet specific ESG criteria. Securities are evaluated based on key quality indicators, including profitability, management efficiency, and cash generation, ensuring the Fund targets those with strong performance and favourable ESG characteristics. As of 31 December 2024, the Fund size stands at RM88.9 million. Kenanga Sustainability Series: Emergency Waqf Musa’adah Fund Launched on 6 October 2022, the Emergency Waqf Musa’adah Fund aims to generate sustainable returns that directly benefit climate change-related disaster victims in the country, helping them return to normalcy. The Fund seeks to provide income distribution and capital growth by investing in a diversified portfolio of Shariah-compliant equities, equity-related securities, sukuk, Islamic money market instruments, and Islamic deposits, integrating both Shariah principles and sustainable investing. The External Fund Manager adopts a comprehensive ESG methodology throughout its investment process, including ESG integration, where relevant ESG factors are incorporated into securities analysis and post-investment monitoring. Positive screening is used to assess and score companies based on their ESG performance, ensuring investments are made in those with strong ESG qualities. Negative screening excludes investments in sectors or companies not aligned with international norms or the Fund’s core ESG values. If any of the Fund’s investments show a persistent decline in ESG factors or scores, the External Fund Manager will seek to divest from them within an appropriate timeframe. As of 31 December 2024, the Fund size stands at RM2.1 million. Engagement with Investee Companies KIG maintains regular engagement with investee companies to drive meaningful ESG integration. As part of its ongoing efforts to strengthen its ESG framework and adapt to the evolving sustainability landscape, they have enhanced their Engagement Policy to incorporate updated standards, including the revised Malaysian Code for Institutional Investors (“MCII”) principles. In 2024, they conducted in-depth engagements with over 30 companies, focusing on key ESG issues, including climate change. The Focus on Green Economy We continuously explore various approaches to facilitate the development of a green economy through the deployment of capital and financial flows. Kenanga Private Equity Sdn Bhd (“KPE”), our private equity arm, strives to actively explore climate-friendly ventures, as well as companies with a strong ESG agenda. KPE has also embedded the Climate Change Risk Assessment Checklist (“RAC”) into its investment risk assessment strategy. As of 31 December 2024, approximately RM73.9 million (28%) of KPE’s portfolio is focused on the renewable energy sector. Kenanga’s Corporate Banking unit has begun incorporating ESG factors into its lending and financing activities. As of 31 December 2024, 13.3% of loan and financing portfolio amounting to RM94.5 million under Kenanga’s Corporate Banking division in green lending and financing are related to renewable energy, green technology, and climate change mitigation activities. SUSTAINABLE ECONOMIC GROWTH SUSTAINABLE ECONOMIC GROWTH
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