BIMB Research said companies that fail to address biodiversity risks may face higher financing costs or limited access to credit.
PETALING JAYA: Investors in Malaysia face significant financial risks from biodiversity loss, particularly in sectors that are highly dependent on natural ecosystems, such as agriculture, forestry, fisheries and tourism.
In a thematic note to clients, BIMB Research said that Malaysian public-listed companies (PLCs) are at a critical juncture where addressing biodiversity is essential for regulatory compliance, operational continuity and long-term competitiveness.
In sectors such as palm oil, mining, and manufacturing – key industries among Malaysian PLCs – biodiversity loss presents material operational risks.
“These include supply chain disruptions due to declining natural pollinators and reduced availability of key ecosystem goods like timber and fish, according to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services,” it added.
Biodiversity risks are increasingly being factored into the lending decisions by financial institutions.
A World Bank analysis highlighted that Malaysian commercial lending is linked to environmental pressures, including greenhouse gas emissions and intensive use of water and terrestrial ecosystems.
According to the research house, companies that fail to address biodiversity risks may face higher financing costs or limited access to credit.
In addition, reputational damage from unsustainable practices – particularly in the palm oil industry – has led to international consumer boycotts and investor divestments.
“These systemic risks underscore the importance of integrating biodiversity into business strategies.”
Supportive public policy will also help drive corporate action.
Malaysia’s Biodiversity Finance Plan encourages fiscal tools such as tax incentives to promote conservation investments.
Voluntary certifications like those from the Roundtable on Sustainable Palm Oil improve market access and can offer price premiums for certified producers.
Additionally, emerging biodiversity credit markets present new opportunities to monetise ecosystem services, though these mechanisms remain in early development in Malaysia.
Alignment with national policy is also vital, it further added.
“The National Policy on Biological Diversity (NPBD) 2016 to 2025 outlines targets to conserve 20% of terrestrial and inland water ecosystems and 10% of marine and coastal areas by 2025.
“Companies that align with these objectives not only ensure policy compliance but also enhance resilience, foster innovation, and build stronger stakeholder relationships – transforming biodiversity stewardship into a competitive advantage,” it said.
The NPBD offers a strategic policy framework to mitigate biodiversity-related risks and promote nature-positive investment aligned with global biodiversity goals, such as the Convention on Biological Diversity.
It outlines 17 national biodiversity targets.
BIMB Research said investors can support the goals of the NPBD by financing ecosystem restoration, sustainable agriculture, or forest management initiatives, which offer potential for long-term, stable returns while contributing to biodiversity conservation.
The research house also encouraged investors to advocate for stronger biodiversity disclosures among PLCs, especially under emerging frameworks like the Taskforce on Nature-related Financial Disclosures (T D).
“T D provides a structured approach for companies to assess, disclose, and manage nature-related risks and dependencies.
“Firms listed on indices such as FTSE4Good Bursa Malaysia often demonstrate stronger environmental governance, offering a proxy for responsible investment practices.”
