The Muamalat Newsletter Vol. 2 2024

FEM eNewsletter | December 2024 63 driver behind the rise in ESG disclosures across Malaysia. In 2015, Bursa Malaysia introduced theSustainabilityReportingGuide, which required public-listed companies to disclose material ESG risks and opportunities (Kamaludin et al., 2022). This regulatory initiative led to a notable increase in ESG disclosures, particularly after 2014. Despite this, concerns persist over the quality and substance of the information disclosed. Many firms still engage in superficial or symbolic reporting, meeting regulatory obligations without providing meaningful insights into their sustainability efforts (Kamaludin et al., 2022). This demonstrates that while regulatory mandates are essential for encouraging ESG disclosures, they must be complemented by genuine commitment from corporate leaders to sustainability principles. 3. The influence of corporate governance Corporate governance, particularly in terms of board independence and diligence, plays a significant role in shaping ESG disclosure practices(Seow, 2024a). In Malaysia, independent directors are pivotal in maintainingtransparencyandaccountability within ESG reporting (Kamaludin et al., 2022). Research indicates that firms with a higher proportion of independent directors tend to providemorecomprehensiveESGdisclosures, as these directors are able to offer unbiased oversight and mitigate conflicts of interest (Ismail & Latiff, 2019). Board diligence, often reflected in the frequency of boardmeetings, also positively correlates with the quality of ESG disclosure. More diligent boards are better positioned to integrate ESG concerns into corporate strategies and oversee their implementation (Kamaludin et al., 2022). However, the effectiveness of governance structures, including board independence and diligence, in fostering meaningful ESG disclosure is contingent on the broader governance culture of the organization. 4. Boarddiversity and its impact Board diversity, particularly in terms of gender, has emerged as a key factor influencing ESG disclosure practices among Malaysian firms. Research consistently shows that the inclusion of women on corporate boards enhances transparency, especially within the governance and social dimensions of ESG reporting (Kamaludin et al., 2022; Wasiuzzaman & Wan Mohammad, 2020). Women directors often bring unique perspectives and tend to be more attuned to social and environmental issues, which can drive stronger corporate social responsibility and improve the overall quality of ESG disclosures (Wahyuningtyas & Susesti, 2022). However, the relationship between gender diversity and ESG transparency is not straightforward. In highly competitive environments, the positive impact of female board members may be diminished, particularly when diversity is more of a regulatory requirement than a genuine commitment by the firm (Wan Mohammad et al., 2023). This suggests that while gender diversity is a crucial driver of enhanced ESG disclosure, its effectiveness is heavily influenced by the broader governance structure and the company’s authentic commitment to sustainability. 5. CEO traits and their impact The characteristics of a CEO significantly shape the level and quality of ESG disclosure in Malaysian firms. CEOs who exhibit strong leadership, extensive industry experience, and a firm commitment to ethical governance are more likely to embed ESG principles into corporate strategies (Seow, 2024d). These leaders foster a culture of transparency and accountability, encouraging their organizations to be more open in reporting their environmental, social, and governance efforts. Additionally, CEOs with a robust educational background, a global perspective, and experience in