AICB shaping the future of banking through ESG initiatives


AICB chairman Tan Sri Azman Hashim (eighth from left) together with Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz (ninth from left) and AICB chief executive Edward Ling (far right) with the bankers and invited guests at the 2nd Malaysian Banking Conference (MBC) 2023 held at Shangri-La Kuala Lumpur.AICB chairman Tan Sri Azman Hashim (eighth from left) together with Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz (ninth from left) and AICB chief executive Edward Ling (far right) with the bankers and invited guests at the 2nd Malaysian Banking Conference (MBC) 2023 held at Shangri-La Kuala Lumpur.

CLIMATE risk and banking are closely intertwined as the financial sector is not only exposed to the risks associated with heavy carbon emitting industries but also vulnerable to the broader impacts of climate change.

As such, financial institutions can play a vital role in advancing Malaysia's net-zero carbon goals by adopting effective strategies and policies.

This includes integrating climate risk assessment into their lending and investment decisions, supporting green and sustainable projects, and collaborating with stakeholders to drive sustainable practices across industries.

Through these efforts, banks can help catalyse the transition to a low-carbon economy and mitigate the risks posed by climate change.

Keeping this in mind, the Asian Institute of Chartered Bankers (AICB), as a dedicated sole professional body for the country’s banking industry, has jointly organised the two-day Malaysian Banking Conference (MBC) 2023 with the Association of Banks in Malaysia (ABM).

Themed “Banking and the ESG Revolution: Going Beyond Aspirations”, the second edition of MBC, which was held at Shangri-La Kuala Lumpur from June 26, featured insightful discussions, lively debates and generous knowledge-sharing sessions on current ESG initiatives by the industry.

It also mentioned key challenges faced by the financial institutions and the opportunities to develop practical, impactful solutions in transition financing and risk management, in order to accelerate the move to a greener, low-carbon economy.

As a platform to reinforce the importance of sustainable and responsible banking, the conference convened government agencies, regulators, financial industry leaders and sustainability experts for a timely discourse on various key topics.

This included Malaysia’s climate initiatives; climate, biodiversity and transition risks; carbon markets; transition financing; social capital; technologies to support a just transition and greening the value chain.

Azman delivering his welcome address at MBC 2023.Azman delivering his welcome address at MBC 2023.

At the MBC 2023, AICB chairman Tan Sri Azman Hashim, in his welcome address, said that “The financial sector plays a crucial role in driving the sustainable and climate agenda.

“As bankers, we have the power to reduce poverty, build communities, generate new job opportunities in green sectors, and nurture an ESG-focused, future-forward workforce.

“We can move the needle on climate action so that aspirations are translated into reality.”

He added: “To achieve this, we must, together as an industry, make a conscious effort to advance the practice of responsible and sustainable banking.”

He noted that the developments and initiatives relating to climate action as well as Environmental, social, and governance (ESG), would increase over the next several years.

“It is clear that financial institutions must step up and mobilise capital to support the rising demand for green and transition funds,” he pointed out.

Azman also explained that a well-structured and comprehensive plan to enrich the knowledge and capabilities of banking talent in key areas of ESG, sustainability, responsible banking and green financing, would be central to the industry’s pursuit of sustainability.

ABM chairman and Maybank group president and chief executive officer Datuk Khairussaleh Ramli, in his pre-recorded opening address, said, “Certainly in our own banking and financial services industry, the growth rate of ESG investing is accelerating, with global investment flows towards energy transition reaching US$1.1tril in 2022, up over 30% from the previous year.

“Banks in Malaysia have a critical role in shaping this narrative, not only in terms of our own operations but implications to our customers and stakeholders and the overall wider ecosystem.”

He added: “Banks can continuously play an active role in championing climate action by partnering their customers on their decarbonisation journey, recognising that each customer would be in a different stage in realising their own net zero commitments.

“Banks in Malaysia have already begun this journey with their customers, and I believe businesses will be compelled to broaden their perspectives — taking a financially-focused view to identify the impact of climate change on their business models beyond their own carbon footprint, and creating a domino effect across the entire value chain.”

He highlighted: “As banks lead the charge in realising a just transition for our customers, we often do so by addressing the ‘E’ (Environment) and ‘G’ (Governance), but we must also emphasise the ‘S’ (Social) in ESG – to take a holistic position and ensure that no one is left behind.”

Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz, in his keynote address, shared on Miti’s policy direction on getting the manufacturing and export sectors, particularly small and medium enterprises (SMEs), to embrace ESG, and how banks could support its vision to generate broad-based economic growth for Malaysia.

Speaking to reporters later, Tengku Zafrul said that “We’ll be launching our National Industry Environmental, Social and Governance framework (i-ESG) for the manufacturing sector.

“The framework will consist of four key components – standards, financial support and incentives, capacity building and market mechanisms.

“Our goal is to promote the manufacturing sector to embrace ESG practices,” he shared.

He added, “I asked financial institutions to consider allocating more resources to industries, especially SMEs to manufacturers, and our Malaysian companies and exporters in areas such as sectoral decarbonisation, electric mobility, hydrogen energy, carbon capture and storage (CCS), and others that can help our companies continue to be competitive in a world where expectation of ESG is increasing.”

He also shared that Islamic finance has a major role to play, adding that “we want the role to be accelerated, not to just cover the conventional large companies, but to go down the value chain, the supply chain as well. So that all can benefit from this.”

On the sidelines of the conference, several closed-door, high-level industry and media roundtables were held to dive deeper into the ESG narrative and issues in Malaysia.

AICB chief executive Edward Ling, Chartered Banker Institute chief executive officer and Sustainable Finance Education Charter chair Simon Thompson, International Finance Corporation (Singapore) Financial Institutions Group advisory services and upstream for East Asia and Pacific manager Christina Ongoma, AICB council member and Maybank Investment Bank Bhd chief executive officer Datuk Fad’l Mohamed and YTL-SV Carbon (Malaysia) chief executive officer and YTL Corporation Bhd sustainability executive director Ralph Dixon took part in the media roundtable session.

Ling responding to a question during the media roundtable session, on the sidelines of the MBC 2023. Together with him are (from second left) Thompson, Ongoma, Fad’l, Dixon and the session’s moderator.Ling responding to a question during the media roundtable session, on the sidelines of the MBC 2023. Together with him are (from second left) Thompson, Ongoma, Fad’l, Dixon and the session’s moderator.

Ling shared the importance of educating its members “to be better equipped with knowledge and skill sets in the ESG space.”

“We have lots of plans right apart from making sure that our syllabus and contents are ready with ESG elements and issues flow through in different areas within the banking itself. How to come up with courses or microcredentials that will benefit the banking professionals to get them ready for such an exciting space to be and to play a part in it.”

He stressed that continuous learning is important, adding that the ESG topics have also evolved from their last year’s conference.

“They (bankers) have to come to the conference to learn, and take back to their organisations, and then put it into their work.”

Asked on how AICB plays its effective role to encourage its members to optimise sustainable financing, he said they focus “to raise awareness on ESG, what is its impact and what actually we are doing. Not only do you need to buckle up on knowledge in the ESG areas, but also the banking side,’’ he said, adding that it involved the whole ecosystem.

On talent development, Ling said that they continuously work with their partners to come up with relevant courses needed in the market, such as certification on climate risk and green banking, as well as hold other leadership initiatives via other platforms including webinars, seminars and workshops for its members for their continuous learning.

Fad’l shared that, “As part of Maybank Group, we support the commitment to mobilise RM80bil in Sustainable Finance by 2025. As of December 2022, the Group has mobilised a total of RM34.37bil in sustainable finance.”

He explained that Maybank Investment Bank is the first Malaysian bank to establish a dedicated ICMA-certified regional Sustainable Finance team. “The team guides clients end-to-end in their transition journey, from advisory to structuring.

He added: “Sustainable finance taxonomies are tools which help investors understand whether an economic activity is environmentally sustainable and navigate the transition to a low-carbon economy.”

“In future, we hope that there will be clearer sector-specific thresholds for all sectors - especially for sectors which are currently still hard to abate - so that investors can have clarity to invest in transition finance instruments with greater confidence, and issuers too will be able to align with their own practices to the recommended low carbon standards, thresholds, and phase-out dates.”

Thompson said that “Every professional financial decision needs to take account of climate change and sustainability. That we need transition to become a stable financial provider.”

Ongoma said that there are tremendous opportunities for the banks to work with their partners to meet the ESG standards and profitably fund, such as on ocean conservation, as well as water and waste management.

MBC 2023 drew over 500 delegates from local and international financial institutions.

Building on the event’s momentum, AICB, as a founding member and board member of the Global Banking Education Standards Board (GBEStB), will host the 24th World Conference of Banking Institutes (WCBI) on June 28 in Kuala Lumpur.

This will drive conversations on building competencies that are crucial for the new-age banking workforce in a borderless world and inspire actionable strategies and ideas for banks and banking education institutes to transform, adapt and prepare for the future.

WCBI 2023 will see the introduction of two new standards, namely Treasury Risk Principles and Operational Risk and Resilience, which will provide additional guidance on essential knowledge and competencies that are fundamental to the career of a professional banker.

The new standards are closely aligned and build on the principles of GBEStB’s five existing standards that are mutually supportive and form a comprehensive guide to understanding core banking principles.

To promote responsible banking and professionalism, AICB encourages bankers to join as members to enjoy many benefits, including professional recognition, learning support and opportunities for personal and professional growth.

Those interested to sign up can visit https://www.aicb.org.my/membership.

For more on AICB’s upcoming events, go to https://www.aicb.org.my/events/upcoming.

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