Malaysia launches National Sustainable Reporting Framework

Malaysia has launched a National Sustainable Reporting Framework (NSRF) in support of its commitment to reduce its economy-wide carbon intensity (measured against GDP) by 45% in 2030 compared to 2005 levels, and to achieve net-zero emissions by 2050.

The NSRF was developed by the Advisory Committee on Sustainability Reporting (ACSR), an inter-agency committee comprising representatives from the Securities Commission Malaysia (SCM), the Audit Oversight Board of SCM, Bank Negara Malaysia, the Companies Commission of Malaysia, Bursa Malaysia, and the Financing Reporting Foundation.

The NSRF uses the IFRS® Sustainability Disclosure Standards issued by the International Sustainability Standards Board, specifically the IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate related Disclosures), (collectively referred to as the “ISSB Standards”) as the baseline sustainability disclosure standards for “applicable entities” (discussed further below) in Malaysia.

Following its launch on 24 September 2024, Malaysia joins more than 20 jurisdictions – collectively representing 55%of global GDP - which have decided or are taking steps to use the ISSB Standards.

Objective

The NSRF provides a framework that will allow companies to disclose “reliable, decision-useful and globally comparable sustainability information”. It is intended to move companies towards a common global language for sustainability reporting to ensure that corporate Malaysia provides “consistent, comparable and reliable sustainability information” that will accurately measure and effectively manage sustainability risks and opportunities. The NSRF also aims to improve the transparency and accountability of companies with respect to their climate related risks and sustainability practices thereby creating an environment more amenable to investment and global supply chain integration and best practices, attracting investors who are increasingly prioritising sustainability as one of the most important factors in making investment decisions.

Structure and Implementation

The NSRF will be implemented through a phased and developmental approach, allowing companies to gradually adopt the standards based on their maturity and readiness. Companies can also voluntarily use other complementary reporting frameworks and recommendations in addition to the ISSB Standards, to meet the information needs of different stakeholders.

It is adopting a climate-first approach. It also provides additional transition relief to facilitate the use of the ISSB Standards. Additionally, ACSR will provide capacity building programmes and support that will help companies comply with the standards.

Applicable Entities

On and from prescribed dates (see Adoption Timeline below), the NSRF will apply to companies listed on Bursa Malaysia’s main market, companies listed on Bursa Malaysia’s ACE Market, and non-listed companies (“NLCos”) if they meet the prescribed threshold of consolidated group revenue of RM2 billion (approximately USD500 million) and above for two consecutive financial years preceding the current financial year (“Large NLCos”).

Entities that do not fall under any of these categories may voluntarily adopt the NSRF requirements and provide their own sustainability and climate-related disclosures.

Applicable entities are expected to adhere to their respective regulator’s requirements on location and timing of reporting.

Adoption Timeline

The adoption timeline provided under the NSRF is as follows:

1. Companies listed on Bursa Malaysia’s main market with a market capitalization of RM2 billion and above (“Group 1 Companies”) will start reporting from January 2025. In practical terms, this will impact about 130 companies (representing over 80% of market capitalisation on Bursa Malaysia) in 2025.
2. Other companies listed on Bursa Malaysia’s main market (“Group 2 Companies”) will begin in January 2026.
3. Companies listed on Bursa Malaysia’s ACE Market and Large NLCos (“Group 3 Companies”) will follow in January 2027.

Additional Transition Relief

In order to facilitate adoption and implementation, the NSRF provides additional transition relief in order to facilitate companies to concentrate on collecting data for the operating activities that contribute most to their performance. All companies will start with a focus on climate disclosures, before needing to address other sustainability topics later.

For the first two reporting periods (2025 and 2026), Group 1 and Group 2 Companies are permitted to disclose information on only climate related risks and opportunities (in accordance with IFRS S2), focus on providing climate-related disclosures specifically on principal business segments and to postpone disclosure of (the harder to quantify) Scope 3 emissions (unless already required by that company’s regulator). Group 3 Companies are entitled to this relief for an additional year until 2027.

External Assurance Requirements Currently Voluntary

Currently, the requirement for external assurance on sustainability reporting by companies is voluntary under the NRSF. It is recognised that such external assurance is necessary to ensure reliability and address concerns such as greenwashing. There is a plan to mandate reasonable assurance on Scope 1 and Scope 2 emissions starting 2027, but the assurance framework will be subject to further consultation.

Conclusion

It is recognised that an enhanced sustainability reporting framework will attract more investors who prioritise sustainable practices. Equally, Malaysia, as a trading nation with a significant role in the global supply chain, should view the NSRF as a positive development to avail greater opportunities by transitioning and implementing international sustainability reporting standards and practices.

The NSRF represents a significant step in Malaysia's commitment to sustainability and climate action. It establishes a comprehensive framework for companies to measure, manage, and disclose their sustainability impacts effectively.

Click here for a copy of the NSRF.

The information provided above does not, and is not intended to, constitute legal advice pertaining to the NSRF; information, content, and materials stipulated above is based on our reading of the NSRF and are for general informational purposes only.