KUALA LUMPUR (Nov 29): Malaysia stands out when it comes to developing sustainable financing compared to other Asean countries, said World Bank senior economist (finance competitiveness and innovation) Tatiana Didier.
“Malaysia is spearheading change among the Asean-5 economies (including Indonesia, the Philippines, Thailand and Vietnam), and among some of the other peer countries that are relatively similar in terms of economic development.
“When it comes to developing sustainable finance, a lot of the building blocks are out there. I think Malaysia should be showcased to the rest of the world,” she told reporters after the Global Green Finance Leadership Program themed "Scaling-Up Sustainable Finance in Southeast Asia" on Tuesday (Nov 29).
In a report released on the same day, the World Bank Group said sustainable financial markets have shown impressive growth over the last five years across the Asean-5.
“The total amount of sustainable debt raised annually in the Asean-5 increased from US$0.25 billion in 2016 to US$6.75 billion in 2021, bringing the total amount of outstanding sustainable debt to about US$24 billion (RM108.19 billion). Green debt accounts for the largest share of sustainable debt among the Asean-5 economies, although there has been an expansion of other thematic issuances recently,” according to the World Bank.
Further, sustainable private equity markets have also grown markedly over the past five years, said the World Bank. The amount of private equity financing for clean and climate technologies in the Asean-5 is estimated at US$265 million in total from 2017 to 2021, less than 5% of the amount raised in sustainable debt markets, it said.
On the other hand, Didier also said that despite rising interest rates amid inflationary pressure, prospects for sustainable financing remain favourable as policymakers exert great pressure to develop and enable policy frameworks. Taxonomy and disclosure of information should be policy priorities, she said.
Taxonomy here refers to the adopted approach focusing on sustainability factors that have been considered in developed standards, such as climate mitigation and adaptation, along with social, biodiversity, and transition elements. Meanwhile, information disclosure is mainly to review regulatory actions in mandating sustainability disclosure requirements, informing future policy designs, and identifying the interconnections between regulatory incentives and market practices.
“With these policies, the environment will get easier because we are closing some of the data gaps. We are trying to build a better environment, where information is shared for greater transparency,” Titier added.
Malaysia released its principles-based approach to financial market taxonomy in 2021, which considered the state of economic development and the early stage of adoption of climate risk management practices within the country while allowing better alignment with international classification standards. It serves as guidance for policy formulation, prioritisation, and allocation of funds.
The Climate Change and Principle-based Taxonomy (CCPT) has five principles, and classifies economic activities into three main categories — climate supporting, transitioning, and the watch list — though it does not provide specific thresholds for the sectors concerned.
For sustainability-related financial frameworks, Malaysia has announced official plans for mandatory Task Force on Climate-Related Financial Disclosures (TCFD)-aligned climate disclosures among financial institutions, which are set to begin in 2024 and continue onwards.