KUALA LUMPUR: Bursa Malaysia Bhd, which currently has 24 constituents on its FTSE4Good Bursa Malaysia index, is working with more companies to increase the number of constituents on the index. The index, also known as the environmental, social and governance (ESG) index, was launched in December 2014 and the 24 constituents were selected from the top 200 Malaysian stocks on the FTSE Bursa Malaysia Emas index. Bursa Malaysia director of securities market Ong Li Lee said the index is based on the FTSE ESG Ratings, which has expanded its methodology from six themes to 14 themes. "This means that when they zoom in to look at the companies, they are looking at far more details on the practices of environment, social and governance and besides that, they look at the supply chain as well," she told reporters at the sidelines of the Global Sustainability & Impact Investing Forum yesterday. She said the exchange has been on a hand-holding programme with companies to teach them how to improve their standards, in order to be included in the index while simultaneously maintaining the 24 constituents in terms of keeping up to the standards required. The 24 companies come from a mixture of sectors and 85% of them are syariah-compliant. Ong said there is no limit to the number of companies that can be included on the index as it is not a tradeable index. The ESG index is reviewed twice a year in June and December, while inclusion is once a year. Bursa Malaysia CEO Datuk Tajuddin Atan said demand for sustainable investments is growing and the exchange will introduce a new sustainability guide and toolkit that provides a new model guidance for other listed companies that will help them get on to the ESG index. Speaking at a panel session at the forum yesterday, Nasdaq OMX Group vice chairman Sandy Frucher said regulation is a two-way street and has to be balanced or else it would drive away small and medium-sized companies. "You are literally going to make listed markets an impossible journey for small and medium-sized companies unless we have a balanced view on regulation, that we go towards relevant things for investors that has to include ESG standards but you just can't pile it on top of an existing framework that is almost crushing to small and medium-sized companies," he said. Frucher also questioned the fact that analysts do not ask questions related to ESG when preparing research reports. BlackRock managing director Marc Desmidt (pix) responded, saying that a lot of these questions stray to very sensitive areas for some companies, where perhaps they could be performing a lot better. "This, really, now speaks of the nature of how analysts and banks do business with corporates where if an analyst were to surface some of these issues that are uncomfortable for these companies, the companies will penalise the banks or analysts by cutting of access to the company and future business opportunities. That's a very immature approach quite frankly but it is the reality that we face today. Until regulation puts in place some basic rules, it isn't going to change," he said. Desmidt said analyst reports do not include ESG measures as standards in the way they include certain financial matrix and would require an "all encompassing effort" by the whole industry to change this.