Bursa Malaysia announced 21 new additions to the FTSE4Good Bursa Malaysia (F4GBM) Index on December 14, 2022, bringing the total number of constituents to 98. The changes, effective December 19, 2022, also include 10 deletions from the index. The F4GBM Index, launched in December 2014, measures the performance of publicly traded companies that demonstrate strong environmental, social, and governance (ESG) practices.
A separate FTSE4Good Bursa Malaysia Shariah (F4GBMS) Index will now have 79 constituents following 21 additions and seven deletions. The bourse said in a statement that the December 2022 review period resulted in 21 new additions to the F4GBM Index components.
Ten companies were removed. This continues the index’s trend of year-over-year growth since its debut in 2014. “The firms that make up the FTSE Bursa Malaysia EMAS Index, which includes PLCs from the small, medium, and large market capitalization groups, are what make up the F4GBM Index,” Bursa Malaysia said in its statement.
The F4GBM Index now has 98 constituents overall. The index was first introduced in December 2014 with 24 elements.
It tracks the performance of publicly traded businesses that exhibit sound ESG principles.
Shariah-compliant index also expands
The F4GBMS Index will have 79 constituents as a result of the 21 new additions and seven cancellations. This index debuted in July 2021 with 54 constituents. It is designed to track F4GBM constituents that are shariah-compliant in accordance with the screening technique used by the Shariah Advisory Council.
“All constituent changes will become effective on December 19 at the start of business,” Bursa Malaysia said. Both indices compare to global benchmarks in June and December of each year.
The F4GBMS Index provides investors with a shariah-compliant option within the broader ESG framework.
ESG focus drives index growth
The expansion of the F4GBM Index reflects a growing emphasis on ESG principles among Malaysian listed companies. Companies included in the index must meet specific environmental, social, and governance criteria. These criteria are assessed by FTSE Russell, the index provider.
The index has grown steadily since its launch. It started with 24 constituents in 2014.
Today it has 98. This growth indicates that more Malaysian companies are adopting ESG practices and meeting the index’s requirements. Bursa Malaysia has been actively promoting ESG adoption among listed companies.
The exchange provides guidance and resources to help companies improve their ESG disclosures and performance. The F4GBM Index is a benchmark for investors seeking to invest in companies with strong ESG credentials.
Market implications for investors
The index changes will affect how some investors allocate their funds. Exchange-traded funds and other investment products that track the F4GBM Index will need to adjust their holdings. Companies added to the index may see increased demand from ESG-focused investors.
Those removed may face selling pressure. The F4GBM Index is part of the FTSE4Good Index Series, which includes indices for various markets around the world.
These indices are used by investors to identify companies that meet globally recognized ESG standards. The inclusion of a company in the index signals that it has strong ESG practices relative to its peers. For Malaysian companies, being added to the F4GBM Index can enhance their reputation among international investors.
It can also improve their access to capital from ESG-focused funds. The index changes reflect the evolving ESG landscape in Malaysia and the broader region.
The bourse’s statement confirmed that all changes will take effect on December 19, 2022. Companies and investors should prepare for the adjustments to the index constituents. The next review period will occur in June 2023, when further changes may be announced.
The overall trend shows a clear direction. More Malaysian companies are meeting ESG standards. The F4GBM Index continues to grow.
This benefits investors who want to align their portfolios with sustainable practices. It also encourages more companies to improve their ESG performance.
The December 2022 review marks another step in this ongoing process.
