12 May 2023
The Joint Committee on Climate Change (JC3) convened its tenth meeting on 9 May 2023 to review developments in the financial sector’s ongoing response to climate-related risks and related initiatives supported by JC3.
Supporting the credible, consistent and reliable implementation of the Climate Change and Principle-based Taxonomy (CCPT) continues to be one of the key priorities of JC3. Considerable variations in practice continue to be observed in the classification of assets and investments by financial institutions. Work by JC3 to publish guidance in the form of FAQs, expand use cases and develop due diligence and screening criteria are helping to converge practices. However, JC3 members noted that this needs to be complemented by further efforts to address prevailing data gaps and support capacity building within businesses themselves to assess the impact of their operations on climate outcomes and the broader environment. JC3 aims to substantially complete further work to align practices in the implementation of the CCPT by the end of 2023.
In light of the upcoming release of the general sustainability-related (S1) and climate-related (S2) disclosure standards by the International Sustainability Standards Board (ISSB), JC3 will review the TCFD[1] Application Guide for Malaysian Financial Institutions[2] which was published in June 2022 to take into account the requirements under these new standards. As the ISSB Standards are aligned with TCFD recommendations, the Application Guide will continue to serve as a useful practical reference for financial institutions in Malaysia – particularly in supporting enhanced sustainability and climate-related disclosures.
Members also discussed updates on the implementation of three initial green pilot projects and several capital market initiatives supported by JC3 that aim to expand sustainable and transition finance. The projects and initiatives focus on greening supply chains, scaling up green technology adoption in the agriculture sector, increasing climate resilience through parametric flood insurance and supporting the development of the sustainable sukuk and bond market.
Kamarudin Hashim, Managing Director of Securities Commission Malaysia and Co-Chair of JC3, stated, “As Malaysia transitions towards a low-carbon economy and a more sustainable future, it is critical that both companies and financial institutions play their part to facilitate this transition. JC3, through its initiatives, is actively exploring ways to assist companies to move towards a low-carbon economy in a just and orderly manner, while supporting financial institutions to accelerate capital allocation towards companies demonstrating credible climate transition pathways.”
As part of efforts to prioritise strategies and solutions that support transition by SMEs, an SME Focus Group has been established within JC3. Its immediate focus is on raising awareness, reducing the cost of transition in the area of green certifications and facilitating better disclosures by SMEs.
Jessica Chew, Deputy Governor of Bank Negara Malaysia and Co-Chair of JC3, said “60% of SMEs believe that strengthening ESG[3] practices can increase business opportunities and create long-term value. However, only 28% of SMEs have adopted elements of ESG practices in their businesses[4]. The formation of the SME Focus Group will enable JC3 to take a more focused and targeted approach in addressing the specific issues and challenges facing SMEs in order to close this gap.”
JC3’s biennial flagship conference on climate change will take place in October 2023. This regional conference will bring together a diverse range of climate experts, advocates, innovators and practitioners to discuss the practical applications of climate and nature finance, helping the financial sector and its customers move from theory to practice. Further details on the Conference will be made available to the public in due course.
JC3 continues to actively engage and collaborate with relevant Government ministries and agencies as well as industry associations to encourage greater alignment in the financial sector’s response to climate-related risks with national and business strategies. At this meeting, members welcomed an exchange of presentations by the Ministry of Natural Resources, Environment and Climate Change and the Ministry of Economy on climate-related plans and timelines which provided the financial sector with a better understanding and appreciation of the Government’s priorities.
Bank Negara Malaysia
Securities Commission Malaysia
12 May 2023
About the JC3
The JC3 is a platform established in September 2019 to pursue collaborative actions for building climate resilience within the Malaysian financial sector. The JC3 is co-chaired by Datuk Jessica Chew Cheng Lian, Deputy Governor Bank Negara Malaysia and Kamarudin Hashim, Managing Director Securities Commission Malaysia, with members comprising senior officials from Bursa Malaysia and 21 financial industry players. The JC3’s initiatives and priorities are undertaken by its five sub-committees, namely Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps.
Members: Allianz General Insurance Company (Malaysia) Berhad, AmBank (M) Berhad, Bank Islam Malaysia Berhad, Bank Pembangunan Malaysia Berhad, Bank Pertanian Malaysia Berhad (Agrobank), BIMB Investment Management Berhad, BNP Paribas Asset Management Sdn. Bhd., Bursa Malaysia Berhad, CIMB Bank, Etiqa Family Takaful Berhad, HSBC Amanah Malaysia Berhad, Kenanga Investors Berhad, Maybank Berhad, MIDF Amanah Investment Bank Berhad, MSIG Insurance (Malaysia) Berhad, RHB Islamic Bank Berhad, RHB Islamic International Asset Management Bhd., Standard Chartered Bank Malaysia Berhad, Swiss Re Asia Pte. Ltd. (Swiss Retakaful), Syarikat Takaful Malaysia Am Berhad, UOB Asset Management (Malaysia) Berhad and Zurich General Insurance Malaysia Berhad
[1] Task Force on Climate-related Financial Disclosures
[2] Released by JC3 in 2022
[3] Environmental, Social and Governance
[4] “ESG Insights from Malaysian SMEs: Building A Better Future Together” by Alliance Bank in partnership with UN Global Compact Network Malaysia & Brunei (UNGCMYB) and SME Corporation Malaysia (SME Corp)