MALAYSIA has made meaningful progress in building the foundations for climate and nature finance. Financial institutions have stronger frameworks to assess climate risks, sustainability disclosure is becoming more established and businesses have greater access to tools and financing solutions to support their transition.
But foundations are only the start. The next and harder phase is execution, converting ambition into investable projects and measurable resilience for people and businesses.
The execution challenge
Recent events are reminders of how quickly environmental and physical risks can affect everyday life and economic activity. Devastating floods in Nepal have brought immense human loss and severe damage to homes, infrastructure and economic assets.
For Malaysia, similar shocks can translate into supply chain disruption, commodity price volatility, insurance losses and rising credit risk, placing resilience firmly on the financial agenda.
The World Bank estimates that climate impacts could reduce Malaysia’s gross domestic product by up to 16% by 2050, with extreme events pushing annual losses beyond 20% in a single year.
As a highly trade dependent economy, sustaining competitiveness will require managing these risks effectively while positioning to seize new transition-related opportunities.
This is why the next phase must be about converting progress into impact. Established in 2019 by Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC), the Joint Committee on Climate Change (JC3) has helped move the financial sector from climate-risk awareness towards implementation.
Recent work includes National Sustainability Reporting Framework (NSRF) guidance for financial institutions and the Climate Finance Innovation Lab, whose second cohort comprises 22 climate-and nature-related projects seeking RM1.73bil in funding.
These are important steps, but the harder challenge is turning promising pipelines into finance-ready, investable opportunities.
Mobilising capital
From both a banking and sustainability perspective, the financing challenge is increasingly clear. Capital does not move on ambition alone.
A promising climate or nature project must still demonstrate viable economics, appropriate risk allocation, credible data and the ability to execute.
Project owners need clearer pathways to finance, while financial institutions need investable propositions that meet risk and return requirements.
Where those conditions are harder to achieve, blended finance, catalytic capital and appropriate risk-sharing mechanisms can help bridge the gap. The same principle applies to information.
Credible disclosure is not simply an ESG reporting requirement; it is part of the infrastructure of a functioning market. Investors and lenders need comparable, reliable and decision-useful information to understand how climate and sustainability issues may affect a business, assess risk appropriately and direct capital with greater confidence.
The next challenge is ensuring that better disclosures translate into better decisions; in financing, investment, risk management and corporate strategy.
Earlier this year, BNM and the SC issued a call for feedback on the proposed structure and design of the Malaysia Taxonomy, which will adopt the Asean Taxonomy, to meet the growing demand for more detailed, sciencebased screening criteria to facilitate capital flows to sustainable activities.
Building information and risk infrastructure
Nature must increasingly be part of those decisions too. Malaysia’s economy depends on ecosystems that support water security, agriculture, infrastructure, supply chains and livelihoods.
A recent assessment by BNM, the World Bank and United Nations Development Programme’s Biodiversity Finance Initiative found that 54% of Malaysian banks’ sectoral lending is to sectors with high or very high dependencies on ecosystem services, while 36% is to sectors exerting high or very high impact on nature.
Nature related risk is therefore not separate from financial risk.
Measuring outcomes, not activity
We also need to become more demanding about how progress is measured. Success should increasingly be seen in capital mobilised, projects advanced, businesses supported, risks reduced and resilience strengthened – not simply in the number of frameworks or initiatives introduced.
Ultimately, climate and nature finance matters because of what it enables in the real economy: more resilient businesses, infrastructure better prepared for physical risks, small and medium enterprises able to respond to changing market expectations and communities better able to withstand disruption.
Achieving that will require regulators, financial institutions, investors, businesses and project owners to work more closely together.
Platforms such as JC3 can help connect these different parts of the ecosystem, identify where implementation is working and address barriers that no single institution can resolve on its own.
As the industry comes together at JC3’s Journey to Zero Conference next week, the focus shifts from making the case for action to delivering outcomes.
The conference is designed to catalyse capital, accelerate implementation and move from dialogue to real results – making it a valuable opportunity to get involved and help shape what happens next.
Malaysia has built stronger foundations. The harder part now is turning them into investable action and measurable resilience for our economy, our businesses and, ultimately, our people.
That next chapter is within reach, if we focus relentlessly on execution, making more projects finance-ready, turning disclosure into better decisions and integrating nature into mainstream financial risk and opportunity.
