Sustainable finance is poised to play a bigger role as it supports Malaysia’s pledge to the Nationally Determined Contribution to reduce greenhouse gas emissions intensity of GDP by 45 percent before the year 2030. This is important in light of Malaysia’s commitments to the United Nations Framework Convention on Climate Change under the Ministry of Energy, Science, Technology, Environment and Climate Change.
A key step to creating a strong ecosystem is laying its foundation with a comprehensive set of guidelines. Malaysia has progressively demonstrated its leadership in sustainable Islamic securities with the introduction of policies, framework and roadmap. Furthermore, with the relevant guidelines in place at the ASEAN level, via the ASEAN Green Bond Standards, ASEAN Social Bond Standards and ASEAN Sustainable Bond Standards, the backdrop exists for sustainable finance market to grow further and to solidify the ecosystem.
Policies provide a regulatory framework to facilitate more green, social and sustainable financing which in turn would mainstream sustainable finance and drive Malaysia’s market to further diversify by encouraging more issuances from a wider range of sustainable projects.
Malaysia saw support from financial regulators such as the Malaysian bourse (Bursa Malaysia) that have also initiated a sustainability reporting requirement for large companies, and the Central Bank of Malaysia (BNM) that issued guidance documents which facilitated Value-based Intermediation (VBI) to re-orient Islamic finance business models towards realizing Shariah objectives through practices, conduct and offerings that generate positive and sustainable impact to the economy, community and environment.