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KUALA LUMPUR: Bank Negara Malaysia urges financial industry players and others in the private sector to play a more proactive role in increasing financing avenues for green and sustainability-related projects.
Bank Negara Deputy Governor Fraziali Ismail said that by intensifying those 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 the Malaysia Showcase during Climate Week NYC 2020 in New York on Thursday, he urged a strong commitment to combat climate change and take immediate action to take charge of future economic growth.
“For corporations and businesses, beyond the concerns about regulation and legal risks, is the need to commit to investing in doing the right thing for ‘people, profits and the planet.’
“Corporations and businesses that align their policy and advocacy agenda with climate action have an important role to play in avoiding a path to climate catastrophe,” he said.
Fraziali noted that as the world moves towards a climate-conscious future and for the entire system to change at the necessary pace and scale, policy makers must also step forward.
For emerging economies like Malaysia, there is a careful policy balance between transitioning to a low-carbon economy while simultaneously addressing the needs of society and businesses.
“This is aimed at minimizing the unintended consequences of channeling funding towards non-green and unsustainable practices and minimizing the risk of transition,” he added.
He said Bank Negara was aware of this when designing its strategies to respond to climate risk.
“Our commitment stems from the direct relevance that climate change has to our mandates to preserve monetary and financial stability.
“Approximately 11.7% of the assets of Malaysian financial institutions are potentially exposed to climate change. Our goal is to ensure that financial institutions measure, mitigate and build buffers against climate risk appropriately.
“Our goal is to make climate risk more visible in financial institutions’ risk management practices by 2022. Equally important is our determination to develop their capacity to become effective agents of change to ease the transition. towards a low carbon economy, “he said.
Fraziali noted that a common language for categorizing economic activities was paramount to help facilitate financial flows towards activities that would support the transition to a low-carbon economy, therefore it is paramount.
To this end, Bank Negara issued the discussion paper on climate change and principles-based taxonomy in December 2019. The taxonomy is being further refined, and a pilot implementation for selected financial institutions will begin this month.
He added that Bank Negara values the contribution and collaboration with various stakeholders. This includes the finance industry in planning an orderly transition to a more climate-resilient economy.
He noted that the Joint Committee on Climate Change (JC3) was established in September 2019 as a platform for financial regulators and financial institutions in Malaysia to work together to deepen our understanding of climate risks and develop tools to respond effectively to those risks.
JC3 is chaired by Bank Negara and the Securities Commission, with Bursa Malaysia and 19 financial institutions as members.
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