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For years, ESG reporting in Malaysia has been evolving quietly...
For years, ESG reporting in Malaysia has been evolving quietly in the background. Companies disclosed sustainability information; investors skimmed through it, and regulators encouraged better practices, often without clear consequences for those that fell short. That period of gentle persuasion is coming to an end.
As Malaysia moves toward 2026, ESG reporting is no longer a soft expectation or a reputational exercise. It is becoming structured, mandatory, and closely tied to how companies explain risk, performance, and long-term value. The future involves more than just additional reporting; it signifies a fundamental shift in how sustainability data is compiled, managed, and utilized.
The most important development shaping this new phase is the introduction of the National Sustainability Reporting Framework, or NSRF. Rolled out by the Securities Commission Malaysia, the framework establishes a clear and phased pathway toward mandatory ESG disclosures that align with global sustainability standards issued by the International Sustainability Standards Board.
This alignment is intentional. Rather than creating a uniquely Malaysian ESG framework, regulators have chosen to anchor local reporting to IFRS Sustainability Disclosure Standards, specifically IFRS S1, which covers general sustainability-related financial disclosures, and IFRS S2, which focuses on climate-related risks and opportunities.
The message is straightforward: ESG disclosures are expected to be decision-useful, financially relevant, and comparable with those companies operating in other major markets.
The NSRF does not impose a single deadline on all companies. Instead, it introduces ESG reporting requirements in stages, recognizing differences in company size, complexity, and readiness.
Larger Main Market issuers are already at the front of the queue. Companies with a market capitalization of RM2 billion or more are required to begin IFRS S2 climate‑first disclosures for annual reporting periods starting on or after 1 January 2025.
Full IFRS S1 general sustainability disclosures are phased in for Group 1 from the 2026/2027 reporting years, with transitional reliefs in the first years of application.
From FY 2026, all other Main Market issuers (Group 2) start IFRS S2 climate reporting, with IFRS S1 taking effect from FY 2027. At this point, ESG reporting stops being something that applies only to the largest players. It becomes a mainstream obligation across the market.
From FY 2027, ACE Market issuers and large non‑listed companies (revenue ≥ RM2 billion) enter the regime, with IFRS S2 climate disclosures first (FY 2027), IFRS S1 from FY 2028, and fuller Scope 3 and value‑chain reporting expectations gradually crystallizing toward around FY 2030, with transitional reliefs in the early years.
The direction of travel is clear. While companies may enter the framework at different points, the end state is a market where sustainability and climate disclosures are standard practice rather than exceptions.
One of the most significant aspects of Malaysia’s ESG reporting transition is its strong alignment with international standards.
IFRS S1 and IFRS S2 are designed to ensure that sustainability information is directly relevant to investors’ assessments of enterprise value. Climate risks, governance practices, and social factors are no longer treated as peripheral issues. They are framed as matters that affect cash flows, asset values, and long-term resilience.
For Malaysian companies, this alignment matters. It allows ESG disclosures to be understood and compared by global investors who are already familiar with these standards. In an increasingly competitive capital market, credibility and comparability can influence investment decisions just as much as financial performance.
This shift also raises the bar. Companies can no longer rely on generic statements or loosely defined metrics. ESG information must be specific, consistent, and grounded in how the business actually operates.
To support this more structured approach, Bursa Malaysia has introduced a dedicated ESG Reporting Platform. Accessible through Bursa LINK, the platform acts as a centralized repository for mandatory ESG disclosures.
CSI Platform (Bursa Malaysia): Centralized Sustainability Intelligence Platform is the core digital infrastructure; it is described as a national repository, with modules for TCFD reporting and a carbon calculator for Scope 1–3.
SEDG (Simplified ESG Disclosure Guide): SEDG is a simplified ESG disclosure guide providing 35 priority disclosures aligned with Bursa’s Sustainability Reporting Guide, GRI, ISSB and the GHG Protocol, designed to help SMEs respond consistently to multiple stakeholder requests.
This move reflects an important change in mindset. ESG reporting is no longer seen as supplementary information scattered across annual reports and sustainability brochures. It is becoming a core disclosure, presented in a prescribed format with consistent performance indicators, targets, and historical data.
For regulators and investors, it improves transparency and comparability. For companies, it introduces greater discipline and greater accountability into the reporting process.
As reporting expectations rise, so does scrutiny of governance.
Under the new ESG reporting landscape, boards of directors are expected to play an active role in overseeing sustainability-related risks and opportunities. It is no longer sufficient to delegate ESG entirely to management or sustainability teams. Boards must demonstrate that they understand the material ESG issues facing the business and that these issues are considered in strategic and risk-related decisions.
This does not mean every board member must be an ESG expert. It does mean that sustainability discussions need to be grounded in evidence, supported by data, and linked to business outcomes. Over time, this may influence board composition, training, and committee structures, particularly as climate and sustainability risks become more financially significant.
Alongside stronger governance, assurance is also gaining importance. While full external assurance may not be required for all ESG disclosures immediately, expectations are clearly moving in that direction, especially for emissions data. From annual periods beginning on or after 1 January 2027, Group 1 issuers are expected to obtain at least limited, and over time reasonable, assurance on Scope 1 and 2 GHG emissions, with assurance requirements extending to other groups in subsequent years, subject to further regulatory consultation and guidance.
Although the NSRF focuses primarily on listed and large entities, its impact will reach far beyond them.
As companies improve their ESG disclosures, they will increasingly seek sustainability data from suppliers and business partners. This creates a ripple effect throughout value chains, particularly affecting small and medium-sized enterprises.
At the same time, Malaysia’s National Industry i-ESG Framework is working in parallel to support broader ESG adoption across industries. While currently voluntary, the framework is structured in phases: a “just transition” phase from 2024 to 2026 focused on building ESG capabilities, especially for SMEs, followed by a scaling phase from 2027 onwards aimed at embedding ESG practices more deeply into operations.
Together, these initiatives signal a clear intention: sustainability is not just about reporting. It is about how businesses operate, plan, and compete in the long term.
For Main Market listed companies, the message is unambiguous. By 2026, IFRS S2 climate reporting is mandatory across all Main Market issuers, and IFRS S1 general sustainability disclosures are being phased in, starting with the largest companies. Companies need systems, data governance, and internal controls that can support reliable sustainability disclosures, not just polished narratives.
This includes the ability to measure emissions accurately, assess climate-related risks, and explain how ESG factors influence financial decisions. Companies that delay preparation may find themselves scrambling to meet requirements, while those that invest early are likely to gain clarity and confidence in their reporting.
For SMEs, even those outside direct regulatory scope, ESG expectations are becoming a commercial reality. Customers, financiers, and partners are increasingly asking for credible sustainability data. Being able to respond may soon be a prerequisite for staying competitive.
For investors, the benefits are equally clear. Standardized ESG disclosures improve risk assessment, valuation, and capital allocation, particularly as climate risks become more visible and material.
Malaysia is positioning itself as a market that takes sustainability seriously, as a measurable part of business performance. Aligning ESG reporting with international standards, strengthening governance and assurance, and building supporting infrastructure underscores the need for resilience, responsibility, and readiness for the future.
The next chapter of ESG reporting will not be without challenges. Data gaps, capability constraints, and cultural shifts lie ahead. But it also presents an opportunity for companies to rethink how they create value and manage risk in a changing world.
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About the author
Director – Projects & Value Chain at SAM Corporate LLC
Follow the expert:
Rajagopal Kannan is the Director of Projects & Value Chain at SAM Corporate LLC, leading ESG, risk management, and sustainability initiatives. With over 20 years of experience, including a decade in banking and financial risk, he specializes in credit structuring, Basel II & III, ISO 31000, COSO ERM, internal audit, and regulatory compliance under CBUAE, DFSA, ADGM, and SCA.
His current focus lies in ESG integration, climate and sustainability risk management, and value chain sustainability. A GRI-certified Sustainability Professional and GARP-certified SCR holder, he also holds multiple global credentials including PRM®, GRCP, GRCA, CRCMP, CBiiiPro, CSM, and CISI Level 3.
