PETALING JAYA: Norges Bank’s recent investment in Sarawak conglomerate Cahya Mata Sarawak Bhd (CMS) may stem from a motivation to promote the environmental, social, and governance (ESG) agenda in the Borneo state rather than for purely commercial considerations.
As Norway’s central bank, Norges Bank is also entrusted with managing the country’s massive sovereign wealth fund, the Government Pension Fund Global (GPFG).
Malaysia University of Science and Technology (MUST) economics professor Geoffrey Williams said while Norges Bank’s 5% shareholding is relatively small, it does make it a substantial shareholder.
“This, in turn, gives it more influence on ESG matters.”
On Sept 8, the bank acquired a 5.03% stake, or 50.05 million shares, in CMS for an undisclosed amount. Based on a calculation using the closing price that day, it could have forked out some RM56.8 million for the stake.
This is a marginal investment considering the GPFG has an investment value equivalent to US$1.42 trillion (RM6.6 trillion) and is the largest single owner in the world’s stock markets.
The fund’s aim is to ensure responsible and long-term management of revenue from Norway’s oil and gas resources to benefit the current and future generations.
“Norges Bank is an ‘active shareholder’ with a clear ESG mandate,” Williams told FMT Business.
According to Bloomberg data, the recent purchase by Norges Bank makes it the fifth largest shareholder of CMS after Sarawak Economic Development Corp with 5.67% stake, Lembaga Tabung Haji (7.46%), the family of Sarawak Yang di-Pertua Negeri and former chief minister Abdul Taib Mahmud’s late wife Laila Taib (10.33%) and Majaharta Sdn Bhd (12.55%).
More than a cement manufacturer
Considering the size of CMS, Williams said it is improbable that Norges Bank’s emergence in the group was solely motivated by investment returns and commercial considerations alone.
CMS certainly looms large in Sarawak, Malaysia’s biggest state by land area and is the leading infrastructure facilitator and prime mover in its growth.
Established as a cement manufacturer some 47 years ago, its portfolio now spans over 35 companies involved in cement and phosphates manufacturing, oil tools, green technology, construction materials, trading, construction, road maintenance, property development, financial services and telco infrastructure.
Williams said Norges Bank will be using its shareholding to influence company policy on ESG directly.
“’The bank will have more leverage on board decisions now as a substantial shareholder and can also work with other shareholders on specific ESG issues.”
He also suggested the bank’s investment could be related to the impending launch of the Sarawak sovereign wealth fund which is built around the Norwegian model, GPFG, that is managed by Norges Bank.
“Based on this premise, it suggests the acquisition holds minimal significance regarding investment factors, but more a focus on ESG considerations in the state,” he concluded.
The Sarawak sovereign wealth fund is expected to take off Jan 1, 2024 with an initial allocation of RM8 billion.
Norway’s GPFG has a total investment of US$1.89 billion (RM8.87 billion) in 156 Malaysian companies that make up only 0.1% of their investments around the globe.
Cumulatively with fixed income investments of US$546.82 million (RM2.57 billion) in treasuries with the Malaysian government, this makes up a total value of US$2.44 billion (RM11.45 billion), according to the fund’s website as of Dec 31, 2022.
Killing two birds with one stone
Economists are in agreement that when it comes to sustainability and the environment, both Sarawak and Norway are on a similar trajectory.
Monash University Malaysia economics professor Niaz Asadullah is not surprised with Norges Bank’s investment as ethical investment strategy and ESG standards are high on Sarawak’s development agenda.
He alluded to the state government’s plans to mainstream carbon trading initiatives and noted it has even issued licenses for carbon trading to local oil and timber companies.
“This means that in the near future, Sarawak-based companies that invest more in ESG compliance and/or are co-owned by companies with a solid ESG track record will have a strategic advantage over others,” he told FMT Business.
As Scandinavian countries are highly rated in ESG-related global indices, with Norway among the top five in the world, Niaz said by securing Norges Bank as a substantial shareholder, “CMS has killed two birds with one stone”.
Segi Enam Advisors political economist Khor Yu Leng concurs, adding “Sarawak’s green policy is the focus now”.
“The state’s pro-green policy thrust is catching attention and its ESG implementation will be keenly watched,” she told FMT Business.
Khor said the government-linked companies (GLCs) of Sarawak and Norway can find much affinity as both have small populations with interests in oil and gas, hydropower, forests, and more.