KUALA LUMPUR: Bank Negara Malaysia urges financial industry players and others from the private sector to play more proactive roles in increasing funding pathways for green and sustainability related projects.
Bank Negara assistant governor Fraziali Ismail said by stepping up such efforts, there would be more innovative financial instruments or alternative financing, sustainable or green bonds or sukuk that would support the government’s climate change agenda.
In his closing remarks at Malaysia Showcase during Climate Week NYC 2020 in New York on Thursday, he urged for strong commitment to combat climate change and take immediate actions to take charge of future economic growth.
“For corporations and businesses, over and above concerns on regulation and legal risks, is the need to commit to invest in doing the right thing for ‘people, profit and planet’.
“Corporations and businesses that align their policy and advocacy agenda to climate action have an important role in averting a path towards climate catastrophe, ” he said.
Fraziali pointed out that as the world heads towards a climate conscious future, and for the whole system to change at the needed pace and scale, policy makers need to step up as well.
For emerging economies such as Malaysia, there is a careful policy balance between transitioning to a low-carbon economy while addressing needs of society and businesses.
“This is meant to minimise unintended consequences of channelling financing towards non-green and non-sustainable practices and to minimise transition risk, ” he added.
He said Bank Negara was cognisant of this in crafting its strategies to respond to climate risk.
“Our commitment stems from the direct relevance that climate change has to our mandates in preserving monetary stability and financial stability.
“Approximately 11.7% of Malaysian financial institutions assets are potentially exposed to climate change. Our aim is to ensure that financial institutions are adequately measuring, mitigating and building buffers against climate risk.
“Our target is for climate risk to be featured more visibly in the risk management practices of financial institutions by 2022. Of equal importance is our resolve to build their capacity to become effective agents of change in facilitating transition towards a low-carbon economy, ” he said.
Fraziali noted that it was paramount that there should be a common language to categorise economic activities to help facilitate financial flows towards activities that would support the transition to a lower carbon economy, is therefore paramount.
For this purpose, Bank Negara issued the Climate Change and Principles-Based Taxonomy Discussion Paper in December 2019. The taxonomy is now undergoing further refinements, and a pilot implementation for selected financial institutions will commence this month.
He added Bank Negara values contribution and collaboration with various stakeholders. This includes the financial industry in planning an orderly transition towards a more climate-resilient economy.
He pointed out the Joint Committee on Climate Change (JC3) was set up in September 2019 as a platform for financial regulators and financial institutions in Malaysia to work together to deepen our understanding on climate risks and develop tools to effectively respond to those risks.
The JC3 is chaired by Bank Negara and the Securities Commission, with Bursa Malaysia and 19 financial institutions as members.
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