Sustainable Finance in Malaysia
Malaysia is well established as a global leader in Islamic Finance, and this success has been largely developed over time with the efforts of the various players in enabling a facilitative ecosystem. In recent years, players, both in the conventional and Islamic finance space globally have accepted the alignment between sustainable and responsible investments (SRI), and Islamic finance investment and funding principles.
Both the banking regulator and capital market regulator have laid a strong regulatory and policy framework to support intermediaries to leverage on their Islamic finance depth of expertise and experience to further develop sustainable finance in Malaysia.
These efforts have been further strengthened by the significant participation of institutional investors who as early as 2014 incorporated sustainable finance as a priority in the Malaysia Institutional Investors Code. By 2020, Khazanah Nasional Berhad, the Retirement Fund (Incorporated) or KWAP and the Employees Provident Fund (EPF) have become signatories to the United Nations-backed Principles for Responsible Investment (PRI), signifying their commitment to a sustainable financial system on a global stage. The role of institutional investors is crucial to set the tone for ESG development domestically.
In addition, to drive the development of a sustainable economy and sustainable incentives, the Malaysian Government has put in place many different incentives to ensure Malaysia is on track to meet its commitments under the Paris Agreement in 2016.
To ensure that we maintain this momentum and to move forward, Malaysia needs to build greater breadth in its experiences in sustainable financing by creating diversified environmental and social projects that is funded or financed.