Initiatives : Product Innovation
Malaysia has been creating emphasis on sustainable finance and managed to gain high level support through policy tools, initiatives and incentives. The underlying issue of sustainable development is that companies must move beyond mere “green” that indicates relentless pursuit of short-term profitability towards long-term sustainability.
To bring sustainable finance to the next level, involvement of more key players such as state governments, municipals and banking institutions is needed while relevant stakeholders should also expand their scope.
Moving towards a more sustainable global economy requires a boost in the financing of investment that provides environmental and social benefits. Malaysia, to spur further growth, has adopted various initiatives such as the creation of incentives like grants and tax deductions on the issuance costs of SRI Sukuk and tax incentives for green industry can attract SRI issuers to invest in green technology activities in energy, transportation, building, waste management and service activities. This will support the demand for and popularity of sustainable financial products which has grown over the years since the launch of the Sustainable Responsible Investment (SRI) Framework in 2014.
| Solution / Innovation | Policy / Measure owner | Category | Summary | Implementation Date |
|---|---|---|---|---|
| Transition Strategy Toolkit | Capital Markets Malaysia | Database | The Transition Strategy Toolkit developed by Capital Markets Malaysia and Climate Bonds Initiative (CBI) is designed to guide ASEAN corporates on the underlying principles and elements to be incorporated when developing climate transition plans. This toolkit guides users through the Climate Bonds Initiative’s 5 Principles for an ambitious Transition. | March 2024 |
| LCOS Personal Carbon Footprint | Malaysian Green Technology and Climate Change Corporation (MGTC) | Database | The LCOS Personal Carbon Footprint Snapshot is a tool to help Malaysians quickly measure their carbon footprint. This calculator will cover emissions from electricity consumption, land transport usage and waste generated. | May 2023 |
| Bursa Carbon Exchange | Bursa Malaysia | Exchange Traded Fund (ETF) | Malaysia's voluntary carbon market (VCM) exchange facilitates the trading of carbon credits using standardised carbon contracts, enabling corporates to offset carbon footprints or finance greenhouse gas (GHG) emission reduction projects. | December 2022 |
| Climate Data Catalogue | Joint Committee on Climate Change (JC3) | Database | The data catalogue (DC) identifies available climate data sources to support various use cases by the financial sector, with a focus on Malaysian climate and environmental data, complementing the NGFSDirectory. | December 2022 |
| SRI Taxonomy for the Malaysia Capital Market | Securities Commission Malaysia | Governance framework | This framework helps market players properly identify and classify economic activities aligned with ESG and sustainability objectives via standardisation and guiding principles. | December 2022 |
| Greening Value Chain (GVC) Programme | Bank Negara Malaysia | Funding facilitation | The programme is to help Malaysian SMEs implement effective, long-term actions to go green by offering technical advice and transition financing from the Low Carbon Transition Facility (LCTF). | November 2022 |
| TCFD Guide for Malaysian Financial Institution | Joint Committee on Climate Change (JC3) | Governance and framework | The framework document is a JC3 initiative supporting the implementation of climate-related disclosures, referencing best practices from leading financial institutions and related studies, and made relevant to the Malaysian context. | June 2022 |
| Guidance Note on Managing Environmental, Social and Governance Risk for Fund Management Companies | Securities Commission Malaysia | Governance framework | The guidance note requires fund management companies (FMCs) to establish effective analysis and management of ESG risks by providing clarity of the SC's expectations for FMCs' responsible investment frameworks. | June 2022 |
| Climate Change and Principle Based Taxonomy | Bank Negara Malaysia | Governance and framework | This framework introduces a principle-based taxonomy and facilitates standardisation for financial institutions to categorise economic activities by environmental impact in transitioning to a low-carbon economy. | April 2021 |
| Malaysian Code on Corporate Governance 2021 | Securities Commission Malaysia | Governance and framework | The updated Malaysian Code on Corporate Governance (MCCG) focused on how boards and senior management address sustainability risks, recommending periodic refreshes among directors, with a tenure limit and two-tier voting. | November 2020 |
| Sustainable and Responsible Investment (SRI) Sukuk Framework | Securities Commission Malaysia | Governance framework, related to Islamic bonds | This framework was introduced to facilitate the creation of an ecosystem promoting sustainable investing, with SRI Sukuk exclusively putting its proceeds to funding any activities related to eligible SRI projects. | November 2019 |
| FTSE4Good and FT4Good Shariah Index | Bursa Malaysia | Stock indices | The two indices support investors in making ESG investments in Malaysian listed companies, highlighting companies with leading ESG practices, with the latter allowing for Shariah compliance. | December 2014 |