FTSE4Good Criteria Decoded for Malaysian Companies
Updated · By SustenyX
Attracting responsible investors and boosting your market visibility is key for Malaysian companies, and it starts with understanding global ESG standards.
In short: the FTSE4Good Bursa Malaysia Index (F4GBM) recognises Bursa Malaysia-listed companies with strong environmental, social and governance (ESG) practices. FTSE Russell scores each company on three pillars (Environmental, Social and Governance), split into 14 themes and more than 300 indicators. The score uses only what the company has published. Companies are assessed once a year, and the index is reviewed twice a year, in June and December.
This guide decodes the criteria: what is assessed, how it is scored, and what a company can do to improve its standing.
The six-slide summary. The full explanation follows below.
What is the FTSE4Good Bursa Malaysia Index?
The FTSE4Good Index Series is a significant global benchmark that measures the environmental, social and governance (ESG) performance of companies. The FTSE4Good Bursa Malaysia Index is its Malaysian member, run by FTSE Russell with Bursa Malaysia. It is designed to measure the performance of Malaysian companies whose ESG score is above a set threshold. A companion index, the FTSE4Good Bursa Malaysia Shariah Index, holds the constituents that are also Shariah-compliant.
For Malaysian companies, being included in this index means being recognised for strong sustainability practices, which is crucial for attracting international and local responsible investors. It signals to the market that your company is committed to sustainable and ethical operations, in line with Bursa Malaysia’s push for greater ESG adoption.
How does FTSE Russell assess Malaysian listed companies?
FTSE Russell scores each company from publicly available information only: the annual report, the sustainability report, the website and published policies. It does not send questionnaires to companies. This has a practical consequence. A practice the company never published earns no credit, however well it is run.
Companies do get a chance to respond. FTSE Russell gives them access to its research platform (SID) and about four weeks to review the assessment and point to more public information that could be taken into account.
The assessment looks at two things:
- Policies: whether the company has a commitment, a policy or a management system for the issue.
- Performance: whether it reports results, such as figures, targets and progress against them.
The two together show how well a company manages its ESG risks and opportunities. A policy with no reported performance scores lower than both together.
Companies are assessed once a year. The F4GBM index is reviewed twice a year, in June and December. The companies eligible are the constituents of the FTSE Bursa Malaysia EMAS Index: about 370 large and mid-sized companies, or around 47% of Malaysian listed companies (FTSE Russell, 2022 figures).
Some companies are excluded whatever their score: producers of tobacco, coal, firearms and military or controversial weapons, and investment trusts. The full rules are in FTSE Russell’s FTSE4Good Bursa Malaysia Index ground rules (version 3.2, August 2026).
What are the three FTSE4Good pillars?
FTSE4Good assesses companies across three main pillars, each with specific criteria:
- Environmental: a company’s approach to climate change, resource use (such as water and energy), biodiversity protection and pollution prevention.
- Social: how a company manages its human capital (labour standards, health and safety), its impact on human rights, community relations and product responsibility.
- Governance: corporate governance structures, including board effectiveness, executive pay, anti-corruption policies and tax transparency.
Each pillar is split into themes. There are 14 themes in all:
| Pillar | Theme | What it looks at, in plain terms |
|---|---|---|
| Environmental | Biodiversity | Impact on land, habitats and species |
| Environmental | Climate Change | Emissions, climate risk, transition plans and targets |
| Environmental | Pollution & Resources | Waste, emissions to air and water, use of materials |
| Environmental | Supply Chain: Environmental | Environmental standards set for suppliers |
| Environmental | Water Security | Water use and water risk |
| Social | Customer Responsibility | Product safety, fair treatment and data privacy |
| Social | Health & Safety | Workplace safety systems and results |
| Social | Human Rights & Community | Human rights due diligence and community impact |
| Social | Labour Standards | Working conditions, diversity, fair pay |
| Social | Supply Chain: Social | Labour and human rights standards for suppliers |
| Governance | Anti-Corruption | Anti-bribery policy, training and controls |
| Governance | Corporate Governance | Board structure, independence and oversight |
| Governance | Risk Management | How ESG and business risks are identified and managed |
| Governance | Tax Transparency | Disclosure of tax approach and payments |
How are the environmental, social and governance pillars scored under FTSE4Good?
FTSE4Good uses a detailed scoring method to rate a company’s ESG performance. It evaluates companies using a comprehensive set of ESG indicators across the three pillars: more than 300 in all, with 10 to 35 in each theme. Not every indicator applies to every company. On average about 125 indicators are applied to any one company. The indicators cover a broad range of topics, from a company’s carbon footprint and water management to its employee diversity policies and anti-bribery measures.
The score is built up in layers:
- Indicators. Each indicator is scored against the company’s public disclosures.
- Themes. Indicator scores roll up into a score for each of the 14 themes.
- Exposure. Not every theme matters equally to every company. Alongside each theme score, FTSE Russell measures the theme’s exposure: how relevant it is to that company’s business. Water security matters more to a plantation group than to a software company.
- Pillars and overall score. Theme scores roll up into pillar scores and one overall ESG score, using an exposure-weighted average. The issues that matter most to the company carry the most weight. The score runs from 0 to 5.
To be included in the index, companies must reach a minimum overall score across all assessed indicators, showing a baseline level of ESG performance. The current threshold is set out in the ground rules linked above, and FTSE Russell says it intends to raise the bar over time. A higher score does more than secure inclusion. It also marks a company as a sustainability leader within its industry, and the overall score is used to adjust each company’s weight inside the index.
Where Malaysian companies stand. FTSE Russell’s own figures put the average ESG score for Malaysian companies at 2.5 in 2022, up 33.7% since 2018. Governance is the strongest pillar, at 4.3, up from 3.4 in 2018.
What factors affect a FTSE4Good ESG score?
Five things move a score most:
- Exposure. A company’s industry and markets decide which themes carry the most weight. Two companies with identical disclosures can score differently.
- Whether it is disclosed. Only published information counts.
- How it is disclosed. A policy that exists but is hard to find, or is not stated in the form the indicator asks for, can go uncredited.
- Policy and performance together. Commitments earn more when backed by metrics, targets and reported progress.
- Coverage of the value chain. Supplier standards and supply-chain emissions are scored under their own themes, not only the company’s own operations.
Where we most often see points lost. In our reviews of Malaysian PLCs, the most common misses come from disclosure quality, not from a lack of ESG work:
- Strategy, metrics and targets. Boards often leave out specific targets for commercial reasons. FTSE Russell asks for clear metrics and targets, so leaving them out costs points on core indicators.
- Supply chain. For industries such as construction and transportation, gathering supplier and Scope 3 data is a real structural barrier, and it shows up as lost points on value-chain indicators.
- Governance format. A policy exists internally but goes uncredited because it is not published in a form an analyst can find and credit.
We cover these in more detail in The Most Common FTSE4Good Disclosure Gaps We See in Malaysian PLCs.
How can a Bursa Malaysia-listed company improve its FTSE4Good score?
For Malaysian companies aiming for FTSE4Good inclusion, proactive preparation is key:
- Establish strong governance. Make sure the board oversees ESG issues properly, with clear responsibility for them.
- Set clear targets. Define specific, measurable goals for environmental and social performance, and report progress against them each year.
- Ensure transparency. Disclose your ESG data and practices consistently and clearly, in the documents FTSE Russell reads.
- Engage stakeholders. Build strong relationships with stakeholders and involve them actively in your sustainability journey.
- Leverage technology. Use smart tools to manage data efficiently and keep reporting accurate.
Timing matters. Once the annual report and sustainability report are published, that cycle’s disclosures are fixed. The cheapest improvements are the ones made while the report is still a draft. See Predict Your FTSE4Good Score Before Your Annual Report Is Finalised.
What are the benefits of joining the FTSE4Good Bursa Malaysia Index?
- Visibility to responsible investors. Investors and fund managers who screen for ESG standing can see index membership at a glance.
- Fund eligibility. Funds that track or screen against the index can only hold its constituents.
- Access to sustainable finance. Lenders that assess green and sustainability-linked financing look for the same credentials.
- A credible public signal. Inclusion is assessed by an independent index provider, not self-declared.
How does FTSE4Good index inclusion affect investor confidence?
Inclusion tells investors that an independent provider has checked the company’s published ESG practices against a public method and found them above a set threshold. Because the assessment uses only public disclosures, it also shows that the company reports openly, and transparency is something investors weigh in its own right. Inclusion is not a guarantee of share performance. It is evidence that ESG risks are being managed and disclosed.
How should a board monitor its company’s FTSE4Good performance?
- Track themes, not just the headline score. The overall score hides which themes are pulling it down. Ask for the score by pillar and by theme, and how each moved against last year.
- Focus on the high-exposure themes. Those carry the most weight for your industry, so a gain there moves the overall score most.
- Work to the calendar. Assessment is annual and index reviews fall in June and December. Review the disclosure plan before the reports are drafted, not after they are published.
- Give the work an owner. Unclear ownership of ESG reporting is one of the most common reasons the same gaps repeat year after year.
How can a company benchmark its FTSE4Good score against competitors?
Compare against companies in the same industry. Their themes have similar exposure, so their scores are close to like for like. Compare at pillar and theme level, where the differences can be acted on. A peer’s published sustainability report shows what they disclose on each theme that you do not.
Our Sustainability Ratings Analyser predicts a company’s FTSE4Good score across the E, S and G pillars and shows the gaps across all 14 themes, so a team can see where it stands before the next review.
How does FTSE4Good relate to Malaysia’s mandatory sustainability reporting?
The FTSE4Good assessment runs alongside Malaysia’s mandatory sustainability reporting. Better disclosure under the National Sustainability Reporting Framework (NSRF) and IFRS S1 and S2 also gives FTSE Russell more to credit. For the dates by company group, see our NSRF and IFRS S1/S2 timeline for listed companies. For the wider ratings landscape, see Navigating the ESG Ratings Maze and Anti-Corruption, Governance and ESG Ratings.
Key terms
- FTSE4Good Bursa Malaysia Index (F4GBM) is the Malaysian index in the FTSE4Good series, made up of Bursa Malaysia-listed companies that meet FTSE Russell’s ESG criteria.
- The ESG score is FTSE Russell’s overall measure of how well a company manages ESG issues, built from its pillar and theme scores.
- A theme is one of the 14 ESG topics a company is scored on, such as Water Security or Anti-Corruption.
- Exposure refers to how relevant a theme is to a company’s business. It decides how much each theme counts.
- An indicator is a single assessment within a theme, scored against the company’s public disclosures. Each theme has 10 to 35.
Sources
- FTSE Russell — FTSE4Good Index Series
- FTSE Russell — ESG Scores and data model
- FTSE Russell — Malaysian ESG scores overview (PDF)
- FTSE Russell — FTSE4Good Bursa Malaysia Index ground rules, v3.2 (PDF)
- Bursa Malaysia — FTSE4Good Bursa Malaysia Index FAQ (PDF)
- Bursa Malaysia — FTSE4Good ESG Ratings FAQ, August 2023 (PDF)
Want to know where your company stands before the next review? Speak to our team.
