Category: Featured in the Media

Donald J. Trump’s return to the White House is a remarkable political comeback, but for those invested in environmental, social, and governance (ESG) initiatives, his re-election spells a serious setback. Trump’s opposition to regulatory oversight – particularly on climate change and social inclusion – signals a halt to United States policy support for many sustainability and social equity initiatives.

While this disrupts the ESG landscape, it is not a death blow. The momentum for sustainable practices, which took root in the late 1990s, has gained strong footholds in the European Union, China, and among many US corporations. Yet, without robust US government involvement, ESG efforts will be slowed.

Trump’s return highlights an urgent need for ESG policies to be not only ambitious but equitable and credible. Across nations, there is visible anger over the rising costs of living, which voters often attribute to progressive climate policies.

In Southeast Asia, leaders have shown an understanding of this balance, prioritising affordable policies that don’t overlook working-class citizens. In practice, this often means more fossil fuel subsidies, continued investment in infrastructure, and a cautious approach to environmental regulations. Without a “just transition,” criticism of ESG as an “elite scam” gains traction, resonating with those who feel excluded from the promised benefits of these policies.

The ESG agenda must grapple with a fundamental question: has it genuinely improved the environment and lives on the ground? Has it strengthened labor rights, raised wages, or held major corporations accountable for their environmental impact? Or has it simply become more paperwork, tax incentives, and subsidies that favor large corporations, while ignoring the concerns of normal people?

In the US, rural and working-class voters, who’ve been increasingly abandoning the Democratic Party, feel alienated by ESG policies and the progressive agenda. These groups might wonder if sustainability initiatives serve their interests, or if they merely serve as talking points for corporate lobbyists and fund-raising non-governmental organisations.

Southeast Asia’s palm oil industry is a good example of this, where the push for sustainable palm oil has, in many cases, burdened smallholder farmers with higher compliance costs and reduced market access. Large-scale producers, with their greater economies of scale, have managed to navigate the regulatory landscape more easily, consolidating their hold on global supply chains while the smallholders are often left out.

For many, these developments support claims that ESG regulations are a form of neo-colonialism or “regulatory imperialism”. The sense of injustice makes it easier to downplay climate concerns, harming both the social and environmental goals that the ESG movement seeks to promote. If policymakers and ESG proponents fail to address these issues – if they don’t ensure that the ESG agenda directly benefits working class and rural communities – the credibility of ESG will deteriorate further.

Originally published by Eco-Business.

KUALA LUMPUR: The Asia School of Business (ASB) had its first annual ASB Research Day 2024 on its cutting-edge research on sustainability across key sectors, including business, energy, and social impact in Malaysia and ASEAN.

This marquee event showcased ASB’s three research centers: The Center for Sustainable Small-owners (CSS), the Center for Technology, Strategy & Sustainability (CTSS), and the ASEAN Research Centre (ARC). It brought together key figures from leading corporations, financial institutions, and human resources professionals, fostering collaboration and dialogue on sustainable practices and innovations shaping the future of ASEAN’s economy.

ASB also shared its research magazine on its sustainability work in business, energy sustainability, and social sustainability, offering a valuable resource for policymakers, corporate leaders, and researchers alike.

In his opening address, Sanjay Sarma, Chief Executive Officer, President, and Dean of Asia School of Business, stated, “The 2023/2024 edition of sustainability research from ASB offers essential insights for regulators, academics, corporate leaders, and policymakers. This year’s emphasis on sustainability confronts critical global issues like climate change and resource depletion, both key to securing long-term economic and societal stability. Backed by our strategic partnerships and the dedication of our team, this research aims to inform ethical, data-driven decisions for a sustainable future. With the region’s sustainability investment projected to reach $150 billion by 2030, our efforts are more crucial than ever.”

In her keynote address, Dr. Melati Nungsari, Deputy Dean of Research at ASB, spoke of the critical role businesses play in advancing sustainability. “From our research on sustainability in business, we’ve learned that any serious effort requires the transformation of all stakeholders”. She underscored the region’s role where “ESG adoption across Southeast Asia has risen significantly, with 78% of companies now integrating some form of ESG criteria into their operations. Employees must be equipped with the right knowledge, skills, and technology to incorporate sustainability into their daily work and embrace the changes necessary for long-term success. Clear leadership, regular updates, and rewarding exemplary behaviors are all crucial steps to this transformation.”

The event delved deeper into “Sustainability in Focus: What Does It Really Mean?” with panelists including Dr. Vasagi Ramachandran, Kar Yern Chin, Emir Izat, and Muhilan Ratnam where they explored the different sectors of sustainability, a growing research area at ASB. As sustainability becomes a more pressing global challenge, the panel emphasized the importance of raising awareness and educating the public.

ASB’s newly released research magazine, available for pickup and download at https://ebrochure.asb.edu.my/view/16519775/ featured ASB’s work in the following key sections:

Part 1: Sustainability in Business

ASB’s research focuses on partnering with various institutions and industries in the realm of business sustainability. ASB has collaborated with the ASEAN-Korea Centre, palm oil smallholder farmers in Johor under the P&G Smallholder Program, and corporate organizations such as PwC Malaysia. ASB’s work focuses on the “social” aspect of ESG, a key area of concern for firms and businesses. While environmental sustainability often receives significant attention from companies, the complexities of the social aspect and employees are frequently overlooked despite their crucial role in achieving overall sustainability.

Part 2: Energy Sustainability

Energy sustainability addresses the critical challenges of energy security, environmental protection, and social equity. By focusing on sustainable energy practices, The Center for Technology, Strategy & Sustainability (CTSS) at ASB delves into how greenhouse gas emissions can be reduced, mitigation policies for climate change, and the preservation of natural resources. Sustainable energy solutions can promote economic development and social well-being by providing access to clean and affordable energy for all, especially in underserved communities. The transition to sustainable energy systems also drives innovation and job creation in new industries, fostering economic resilience and growth. In essence, energy sustainability is crucial for building a more stable, equitable, and healthy future for our planet and its inhabitants.

Part 3: Social Sustainability

At ASB, social sustainability is closely tied to the ASEAN Research Center (ARC), which conducts research on underprivileged communities to advocate for impactful policies. ARC’s work looked into the hawker community in Malaysia, and palm oil fields to investigate conditions and human rights of the workers. One project under ARC, the Rapid Youth Success Entrepreneurship/Employability (RYSE), conducts both programs and research within Malaysia to empower Malaysian youth with entrepreneurship and employability opportunities.

Originally published by The Exchange Asia.

By Joseph Cherian, Deputy CEO of Asia School of Business

In today’s dynamic economic landscape, small and medium-sized enterprises (SMEs) play a pivotal role in many nations’ economies. They serve as the engines of growth and innovation. As we navigate unprecedented geopolitical and supply chain challenges, such as those arising from the recent global pandemic, it has become increasingly evident that SMEs require robust financial support systems to thrive. With SMEs contributing significantly to the national economic fabric, fostering their resilience demands a coordinated and comprehensive approach.

Singapore provides a good case study with its all-of-government approach to supporting SMEs, epitomized by institutions like Enterprise Singapore (ESG) and the Economic Development Board (EDB). ESG’s multifaceted support, ranging from development grants, upskilling and talent development, productivity enhancements to international networking, sales, and marketing, illustrates the comprehensive manner of assistance provided to its SMEs in order for them to thrive. Moreover, initiatives like EDB’s venture fund (EDBI), which invests in promising SMEs in technology and select high growth industries, demonstrate the government’s commitment to fostering innovation and growth within the SME ecosystem.

During times of crisis, such as the recent global pandemic, the coordinated efforts of these government agencies become paramount. ESG’s role in channeling subsidized bank loans to vetted SMEs showcases the importance of a streamlined and efficient support system. Fragmented or siloed approaches risk diluting the impact of assistance, which may leave SMEs vulnerable to unanticipated economic shocks.

Drawing parallels, the U.S. Small Business Administration (SBA) also offers a plethora of support mechanisms for American SMEs, underscoring the importance of a diverse toolkit. From concessionary loans to counseling, training, upskilling, and networking sessions, the SBA takes a multifaceted approach necessary for SME resilience, especially for minority and women-owned businesses.

Private initiatives like Alignable in the U.S., which fosters online networking among SMEs and functions like a conjoined LinkedIn and Facebook for SMEs, demonstrate the potential of leveraging technology and business-focused social media platforms to enhance collaboration and resource-sharing within the SME community, especially in areas such as information-sharing, continuing education, and thought leadership. Establishing a similar platform in Malaysia can facilitate knowledge exchange and business referrals, fostering a supportive ecosystem for SME growth.

Moreover, capital market solutions, as exemplified by the Securities Commission Malaysia’s five-year roadmap for SMEs, offer these enterprises access to diverse funding mechanisms. These solutions not only stimulate economic growth but also create employment opportunities and enhance market liquidity.

Historically, many SMEs do not have access to local capital markets. They usually rely on government support, concessionary loans and grants, bank financing, or are simply owner-financed. Most government support to SMEs during crises is in the form of loans and debt channeled through the private sector at concessional rates, which eventually have to be repaid.

To mitigate negative economic and social consequences, to save organizational capital, especially organization-specific human capital, alternative financing schemes are necessary. Capital market solutions, particularly those involving tradeable funding vehicles, that partner with both the public and private sectors (PPP) to fund large-scale infrastructure and green projects around the world, and which include a credit enhancement component, are especially useful and illustrative in the current context. This type of financing mechanism is referred to as “Blended Finance.”

The Managed Co-Lending Portfolio Program (MCPP) by the International Finance Corporation (IFC), the World Bank’s investment arm, is a good vehicle structure to replicate in Malaysia for public-private financing of its SMEs. The Managed Co-Lending Portfolio Program (MCPP) is a syndication lending structure with credit enhancement, specifically designed for infrastructure projects. It allows the IFC to co-invest in a diversified portfolio of loans for due-diligence projects, attracting institutional investors from both the public and private sectors. The Swedish government or the IFC de-risks the MCPP portfolio through a first-loss guarantee, a.k.a. credit enhancement. The IFC recently announced the launch of its MCPP One Planet (climate change) facility, which comprises a portfolio of Paris Agreement-aligned emerging market senior loans.

A corresponding example is the IFC/Amundi Green Cornerstone Bond Fund, which channels capital from institutional investors into anchor investments in sustainable bond issuances from corporates and financials in developing countries. Fund proceeds are primarily used to buy green bonds issued by banks in developing countries. Blended Finance in this case helps unlock private capital with the aid of public or MDB capital with the same first-loss warranties via equity participation.

Equity investment can effectively leverage public money. Case in point is the IFC-Amundi structured fund that attracted 16 times as much private investment into the funding vehicle! Good due diligence by a trusted institution coupled with proper credit enhancement from a long-lived sovereign authority could encourage asset owners sitting on trillions of dollars in assets to participate in sustainable finance-related investment vehicles. This is due to the first loss warranties available, which makes the structure akin to investment grade.

Malaysia can draw on its strengths and comparative advantage by considering utilizing credit-enhanced Islamic Blended Finance vehicles for innovative SME financing, which by construction are ESG compliant.

Quasi-equity financing can also emerge as a promising avenue, especially during times of crisis, by offering SMEs an alternative funding mechanism to traditional debt financing. By providing first-loss protection for lenders and enabling flexible repayment structures, quasi-equity schemes mitigate financial risks for SMEs while promoting sustainable growth.

My essay on quasi-equity financing, combined with a simple financial economic model, which first appeared in an article I wrote for the Nomura Journal of Asian Capital Markets in Fall 2021, illustrates that in equilibrium, quasi-equity combined with concessional loans economically dominates a pure concessional loan scheme2.

All the innovative financing schemes for SMEs mentioned here are Pareto-optimal — i.e., at least one party is better off, with no one worse off. These structures:

• Free up the bank’s capital for further lending (asset recycling),
• Disintermediate and mitigate the risks that risk-averse banks face when approving risk-taking SME entrepreneurs’ loans (risk management),
• Improve the credit quality of the funding portfolios such that asset owners like pension funds can now invest in them (credit enhancement).

In conclusion, fostering SME resilience demands a holistic and coordinated approach that encompasses financial assistance, technological innovation, and regulatory support. By emulating successful models and embracing innovative financing mechanisms, we can build a resilient ecosystem that empowers SMEs to thrive in an ever-evolving global economy.

As we look towards the future, it is imperative that the government, financial institutions, and industry stakeholders collaborate to create an enabling environment where SMEs can flourish. By prioritizing SME financial support and fostering a robust, all-encompassing, technology-driven ecosystem of innovation and resilience, Malaysia can pave the way for sustained economic prosperity and inclusive growth.

Originally published by The Exchange Asia.

By Mustabeen Ul Bari and Elsa Satkunasingam*

Study of Malaysian market suggests green stocks outperform in the short term to ESG regulatory changes

Interest in businesses that prioritise governance, environmental, social responsibility and governance or ESG has surged in recent years, driven primarily by consumer demand, regulations, and unprecedented climate shocks. From an investor perspective, there is an expectation that businesses practising ESG would be more prepared to manage climate risks, scarcity of resources, and consumer demand for more eco-friendly products and services.

There is evidence that in the US, investor support for green stocks over brown has surged, driven not by anticipation of higher returns but by increasing concern about climate change.

Originally published by Asia Asset Management.

*Mustabeen Ul Bari is a graduate of the Master of Business Administration programme at the Asia School of Business (ASB) in Kuala Lumpur. Elsa Satkunasingam is a director and senior lecturer in executive education at the school. The authors would like to express their appreciation to Yasmin Ahmad of ASB Executive Education for her research assistance.

Originally published by Medium.

After more than 80 years in the making, artificial intelligence (AI) has finally reached a point of inflection with the advent of generative AI. Gen AI can redefine industries, reshape the labour market and challenge the capabilities of both individuals and corporations.

As we navigate this rapidly evolving landscape, the need for strategic adaptation is becoming existential, encompassing reskilling initiatives for society, governmental financial and computation support, and corporate innovation.

A long time coming

The journey of AI began in 1943 with Walter Pitts and Warren McCulloch’s conceptualisation of the artificial neuron. Decades of fluctuating progress followed, marked by periods of optimism but eventually of stagnation, commonly referred to as AI winters.

Significant breakthroughs in the early 2000s, particularly with the use of graphics processing units (GPUs) to accelerate neural networks and set the stage for the current wave of AI optimism. However, it was the introduction of convolutional neural networks in 2012 that truly ignited the current AI revolution.

Gen AI, particularly large language models (LLMs) like GPT, LLaMA and Claude, are a new frontier in this evolution. These models have demonstrated capabilities far beyond the original objectives behind their development, influencing various domains through their interaction, reasoning, knowledge and generative capacities.

The rapid advancement of Gen AI presents contradictory challenges: its potential benefits are immense, but so are the risks and disruptions it can engender.

Unpacking the impact of Gen AI

Gen AI’s influence extends across multiple dimensions, reshaping how businesses operate and how individuals perform their tasks.

Interaction and interfacing: LLMs excel in natural language processing (NLP), enabling unprecedented levels of interaction and interfacing. This capability has transformative implications for customer service, office administration and various service industries.

The automation of these roles not only increases efficiency but also introduces new application possibilities. For instance, customer service bots can now handle complex queries, and robots in restaurants can take orders and payments, enhancing efficiency and cost savings.

Reasoning: One of the surprising developments in Gen AI is its basic reasoning ability. While these systems don’t inherently possess reasoning skills, their large associative memory allows them to effectively simulate reasoning.

This capability is improving as researchers integrate more intentional logic facilities into AI systems. Such advancements promise to enhance decision-making processes across various sectors, from healthcare to finance.

Knowledge: Gen AI bridges the gap between unstructured and structured data, a breakthrough with profound implications. Techniques like fine-tuning and retrieval-augmented generation (RAG) enable AI to handle vast amounts of unstructured data, transforming it into actionable insights.

This development rekindles the concept of “knowledge management” in a powerful new way, potentially revolutionising fields that rely heavily on knowledge interpretation and application.

Generation: The generative capabilities of AI are already making waves in creative industries, as evidenced by the Hollywood Writers’ Strike over AI-generated content. Beyond creativity, these capabilities are impacting coding, engineering design and more.

The ability to generate complex content and solutions autonomously positions Gen AI as a disruptive force across multiple domains.

Navigating the labour market shift

The integration of Gen AI into the workforce is reshaping the job market in significant ways. Unlike previous automation waves that predominantly affected blue-collar jobs, Gen AI is set to impact white-collar roles more profoundly.

Furthermore, since jobs that require cognition more than physical action tend to employ more women, women will be more impacted by Gen AI. These changes call for a proactive approach to reskilling and upskilling the workforce.

Labour economists argue that technological innovation can create new jobs through increased productivity, but the rapid pace of Gen AI advancements necessitates swift and comprehensive reskilling initiatives to avoid widespread job disruption, as well as to enable competitiveness.

Corporate adaptation: Challenges and strategies

The AI transformation within corporations will require more than incremental adjustments; it demands a fundamental redesign of business operations and strategies. AI is statistical and probabilistic, employees using AI will need to master risk management in decision-making processes.

Risk and Talent: Large corporations face significant challenges in adopting Gen AI due to the need for a new breed of risk professionals. Recently, an Air Canada chatbot went rogue and offered unauthorised deals to customers. Incidents such as this highlight the difficulties in managing AI-driven processes.

Smaller, more agile companies may navigate these risks more effectively, but they too require robust strategies to mitigate potential pitfalls.

SMEs can seize the opportunity: Small and medium enterprises (SMEs) have a unique opportunity to leverage Gen AI for competitive advantage. Unlike large corporations, SMEs can be can more quickly adapt to the quirks and advantages of Gen A.

However, they face barriers such as limited access to advanced AI technologies and the need for specialised skills. Governments play a crucial role in supporting SMEs through financial incentives, training programmes and affordable access to AI resources.

Addressing misuse

While Gen AI offers immense potential, it also poses risks related to cybersecurity and misuse. The sophistication of social engineering attacks, such as deep fake scams, highlights the importance of educating all employees about the risks associated with AI technologies.

Recommendations for policymakers

Policymakers must take proactive measures to facilitate the Gen AI transition. Some key initiatives are:

Talent development: A multifaceted approach to talent development is crucial. This includes educating individuals on the basics of Gen AI, training technical staff to manage and implement AI technologies, and equipping leaders with the knowledge to navigate the strategic implications of AI adoption.

Supporting SMEs: An AI transformation service for SMEs can help these businesses thrive in the Gen AI economy. This includes providing training courses, networking opportunities and affordable consulting services. Governments should also consider grants, loans and incentives to support AI adoption in SMEs.

Democratising AI access: Ensuring affordable access to AI technologies is essential for SMEs. This may involve utilising open-source models, exploring innovative AI technologies that require fewer computational resources, and considering AI as equivalent to a subsidised utility.

The emergence of generative AI is a watershed moment in the evolution of technology. Its potential to transform industries, redefine job roles and enhance productivity is immense. However, realising these benefits requires a concerted effort from individuals, corporations, policymakers and nations. By embracing strategic adaptation and proactive measures, we can harness the transformative power of Gen AI, ensuring a prosperous and inclusive future for all. The time to act is now, as the AI revolution continues to gather momentum, shaping the future of business and labour in profound ways.

Originally published by The Edge.

Read the full article HERE.
Originally published by The Edge.