The Joint Committee on Climate Change (JC3) held its sixth meeting recently to discuss the progress of its initiatives and priorities for the Malaysian financial sector in addressing climate risk.
IN summary, the members have supported the proposal for financial institutions to make mandatory the Task Force on Climate-Related Disclosures (TFCD) -aligned climate-related financial risk disclosures from 2024. This would mean that all financial institutions must minimally adopt the basic recommendations set out in the Application Guide and are encouraged to adopt stretch recommendations in line with their climate risk exposure and complexity of operations.
Financial institutions regulated by BNM are also expected to work towards adopting stretch recommendations that are fully aligned with TCFD disclosures by end 2024. Accordingly, this will not only provide greater transparency on how climate risk considerations are integrated into business decisions and risk management of financial institutions but will also help drive action towards more effective risk mitigation and better adaptation to climate change. JC3 on its part will seek feedback on the proposal as part of its consultation on the Application Guide and Reference Guide on Climate Risk Management and Scenario Analysis.
As part of its outreach programme, the joint committee has organised an engagement session with the CEO Action Network (CAN) to exchange views and identify opportunities for collaboration between the financial sector and the corporate sector in addressing climate risk. More sustainability-related financial products and solutions are also being offered among its members. Which includes the financing of green projects, green mortgages and sustainability-linked loans and protection. During the meet, members also identified the top three challenges in driving the sustainability agenda which were poor data quality and availability, lack of incentives, and low awareness of green finance solutions in the market.
The committee had agreed to publish a more detailed report in 2022 on the insights gained from its various engagements and surveys. The report will focus on opportunities and challenges for the financial industry to meaningfully support the climate transition.
On data work, members had endorsed the top climate-related data items that would be the focus of JC3 in developing a data catalogue for reference by the financial sector in 2022. Members also deliberated on the financial industry’s role in supporting Malaysia’s commitment to achieving Net Zero GHG Emissions at the earliest by 2050.
For 2022, it will be first to strengthen the capacity of the financial industry in managing climate-related risks and support the scaling up of green finance. Next, a Scenario Analysis and Stress Testing Workshop will be held in January. The joint committee will continue to support the transition journey of corporations and their supply chain towards sustainable practices and will engage and collaborate with the business community, government agencies, and relevant stakeholders.