El Niño 2026/27: Strategic Foresight From The Dec 2025 Discussion Paper On Corporate Governance Framework

CGM Climate Virtual Briefings | 18 June 2026

Speaker:

-       Dr. Gary Theseira, Chair of CGM Council

On 18 June 2026, CGM hosted a Climate Virtual Briefing for corporate leaders, led by Dr. Gary Theseira. The briefing outlined the El Niño phenomenon and its implications for Malaysia’s water supply. Dr. Gary then provided a thorough analysis of its impact on climate governance in Malaysia, against the backdrop of a shifting regulatory and investment landscape. He presented an expert overview of the challenges facing companies and boards, and the solutions to tackle them and capitalise upon them.

He opened by introducing the El Niño phenomenon using an online weather-monitoring platform, Windy.com, to demonstrate how real-time digital information is an increasingly important component in any toolkit for assessing the impact of climate change and extreme weather on agriculture, rainfall and supply chains. He then went into technical depth about the three stages of Pacific weather patterns (normal, La Niña and El Niño) and their implications for temperature and rainfall. Dr Gary emphasised that El Niño Southern Oscillations (ENSO) will result in cooler sea surface temperatures in the Western Pacific, which leads to warmer air temperatures and less rainfall for Southeast Asia.

Moving on to describe the current predicament, he provided statistics showing that the sea surface temperature anomaly (an increase in sea surface temperature above normal) between January and June has steadily increased from 0.75 degrees above normal  to 3.1 degrees above normal, and identifying this as a strong indicator of progression towards El Niño conditions. He then turned to Malaysia’s water supplies, pointing out that the biggest impact of an El Niño event across 2026-2027 could potentially lead to a situation of ‘water bankruptcy’ of Malaysia’s water supply system. He explained ‘water bankruptcy’ as a reduction in the water supply, down to critical levels, driven mainly by an overwhelming and unrelenting demand - as opposed to a water ‘crisis’, which is triggered primarily by natural variation in the supply. He cited a study by the National Oceanic and Atmospheric Administration (NOAA) that reported that since 2000, the intensity and size of Western U.S. droughts have been dominated by heat, rather than a lack of precipitation

Dr Gary used the recent Tropical Storm Senyar that occurred in November 2025 as an example of extreme fluctuations in the water availability, demonstrating how even relatively mild extreme rainfall (80mm over two days) severely overstretched dam capacities in the northern part of peninsular Malaysia such as the Timah Tasoh Dam in Perlis (1.3m above the danger level), only for these dams to be drained to critically low levels, just four months later in March of 2026. Dr Gary then discussed potential solutions for wider water-supply reforms, referencing Singapore’s supply-demand circularity model which recycles industrial, commercial and public wastewater into ‘new water’ that can be reintroduced to the water cycle.

After providing a thorough overview of the scientific and contemporary context surrounding the El Niño effect, Dr Gary focused on the implications of this weather pattern on corporate governance in Malaysia, drawing particularly on the Security Commission's (SC) Corporate Governance Framework Discussion Paper from 2025. Firstly, Dr Gary briefly indicated the three key areas of corporate governance that need to be strengthened to ensure companies and organisations are best equipped to cope with growing water scarcity in Malaysia. The first key area is board leadership and effectiveness, which Dr Gary described as ensuring the composition of the board contains the correct skills and competences required to deal with such risks, as well as ensuring oversight of Social Practices and monitoring value creation, KPIs and remuneration. He then emphasised the importance of effective audit and risk management as the second key area. He used the beverage industry’s close collaboration with authorities and water suppliers as a strong example of pro-active corporate risk management. Finally, Dr Gary highlighted the importance of integrity in corporate reporting and meaningful relationships with stakeholders as the third key area where corporate governance must be developed.

Dr Gary then explored the first thematic area that he had identified, which stemmed from the lessons of the Malaysian Corporate Code on Governance (MCCG) 2021. He emphasised the importance of data-driven foundations for proposals, anchored on empirical evidence from the SC’s Corporate Governance Monitor, which tracks the adoption of MCCG and the quality of disclosures from businesses. He also stressed that corporate governance must move beyond mechanical box-ticking, and that compliance codes should clarify the outcomes that boards and companies are expected to achieve. Dr Gary then underlined the need for regulatory flexibility, avoiding unnecessary compliance burdens on companies whilst retaining certain practices mandated by the SC or Bursa Malaysia. Finally, he reiterated the SC’s stance that corporate governance should be a key enabler for a resilient, inclusive and sustainable capital market.

A second thematic area that Dr. Gary argued the SC will plan to address going forward is corporate conduct. He traced the progression of standards of conduct in Malaysia and the global trend towards greater emphasis on ESG and wider stakeholder scrutiny. He drew attention to the importance of identifying behavioural shifts as the basis for any regulatory approach to reforming corporate governance, pointing to Bursa Malaysia’s ‘PLC Transformation Programme’ as an example of how regulatory interventions can strengthen corporate and shareholder values.

The third thematic area that Dr Gary covered was emerging developments in digital transformation, AI, cybersecurity, data and digital ethics. He stressed that whilst the blurring lines between technology, data and risk have revolutionised how companies operate, this digital transformation carries new and unfamiliar risks, as well as opportunities. Some solutions Dr Gary posited to combat these challenges include strengthening AI governance, with the aim of mitigating any biases or assumptions embedded in AI models that aren’t transparent. To ensure that effective board oversight is performed, he also suggested that board literacy be reinforced, and IT security, digital and AI risks should be standing agenda items for board meetings.

Dr Gary then moved on to discuss shifting expectations of corporate governance amongst both regulators and global investors. Firstly, he stressed that investors are paying close attention to the ways that companies and their boards plan for long-term risk, oversee strategy, invest in growth opportunities and exercise capital discipline; a long-term approach to corporate governance is key for securing investor confidence. Then, Dr Gary highlighted that board accountability for value creation is something that regulators, such as the SC, are considering as an incentive for focusing on long-term value creation. Furthermore, the SC is consulting on its approach to disclosures, deliberating on whether companies should be mandated to disclose how their purpose, values and strategies contribute to long-term value creation. The SC is also considering whether to take a differentiated regulatory approach to disclosure obligations to reduce superfluous compliance burdens.

Dr Gary then closed his presentation with a summary of his key points, emphasising that the impending water bankruptcy in Malaysia is a useful perspective from which to view the incoming pressures on corporate governance. He also highlighted that there has been a shift from a compliance-based mindset to an outcomes-based one amongst boards and regulators, and thus boards must demonstrate credible accountability for sustainable value creation. He also reiterated that they are expected to be held to account regarding digital, AI governance and social practices. Finally, he stressed that boards will be required to provide decision-useful disclosures that meet rising investor expectations.

The session concluded with Dr Gary answering some questions from attendees on topics, such as the perceived impediment of ESG momentum in the face of geopolitical instability; Dr. Gary responded that the drawback of ESG terminology cannot detract from the undeniable year-on-year increase in carbon dioxide concentrations in the air, and that geopolitical conflicts are a mere distraction from the underlying climate risks. Another question was around the financial challenge of data access and empirical disclosure facing organisations. Dr. Gary responded by drawing attention to the many free global climate data sources available to companies and boards but stressed the importance of understanding how the data can be used to develop  actionable insights into the risks and opportunities presented by climate.

In conclusion, the session equipped attendees with valuable scientific information on the impending El Niño phenomenon, and how companies and boards can pro-actively strengthen areas of their corporate governance practices in order to pre-emptively anticipate and plan for future regulatory and climate-related developments.