JC3 Delved Deeper Into Supporting SMEs, Climate Risk Management, Climate-Related Financial Disclosures: BNM & SC

The 11th Joint Committee on Climate Change (JC3) convened its eleventh meeting on 20 September 2023 to review the progress and action plans of JC3.

Members also discussed the proposed deliverables and action plans of the newly established SME Focus Group within JC3. Working Groups on Physical Risk and Transition Risk have been formed under JC3 to support financial institutions’ implementation of the Policy Document on Climate Risk Management  and Scenario Analysis (CRMSA) issued by Bank Negara Malaysia.

Engagements with  industry are also being intensified to build capacity and accelerate preparations for the  upcoming industry-wide Climate Risk Stress Test (CRST).

JC3 also noted improvements towards more consistent and credible reporting by financial  institutions under the Climate Change and Principle-based Taxonomy (CCPT), although financial institutions continue to face challenges in obtaining information from their customers  and counterparties to enable appropriate classifications.

Improvements in interpreting guiding principles in particular Guiding Principle 3 (“no significant harm to the environment”) and   Guiding Principle 4 (“remedial measures to transition”) after the issuance of the Due Diligence Questions in assessing BNM   CCPT Guiding Principles 3 and 4 by CCPT IG in April 2023.

In addressing this challenge, JC3 will  facilitate the adoption of a standardised minimum due diligence questionnaire by financial  institutions and develop tailored guidance for SMEs to provide the information required by  financial institutions. 

JC3 is reviewing the TCFD2 Application Guide for Malaysian Financial Institutions 3 published in June 2022 and will make relevant updates to the Guide to take into account the International Sustainability Standards Board (ISSB) general sustainability-related (S1) and  climate-related (S2) disclosure standards. Members were also updated on the immediate  focus and priorities of the Advisory Committee on Sustainability Reporting.

This committee  was established with the endorsement of the Ministry of Finance and chaired by the Securities  Commission Malaysia to look into the implementation of the ISSB in Malaysia.

The newly formed SME Focus Group under JC3 will initially focus on enhancing awareness,  facilitating green certifications of SMEs and supporting better disclosures. This will complement existing initiatives by Government ministries and agencies to jump-start the  transition journey for SMEs. The SME Focus Group will work in close collaboration with FIs, relevant Government ministries and agencies, Credit Guarantee Corporation and SME trade  associations in this important effort.

Members also noted the positive outcomes from the Greening Value Chain (GVC) pilot  programme, an initiative rolled out by JC3 earlier this year. The programme, implemented in  partnership with four corporates, has enabled sixty participating SMEs within their supply chain to start measuring and reporting their greenhouse gas emissions.

In a Joint Statement by Bank Negara Malaysia and Securities Commission Malaysia issued today (Sept 27), Jessica Chew, Deputy Governor of Bank Negara Malaysia and Co-Chair of JC3, said, “It  is critical to ensure that SMEs are not left behind in the transition to a greener economy. Key  to this will be reducing the costs of transition for SMEs and leveraging strategic partners,  including FIs and large anchor corporates to support SMEs on this journey.”

At this meeting, members also had a fruitful exchange with the Ministry of Economy to gain  better insights on the National Energy Transition Roadmap (NETR) and the role of the financial  sector in supporting the flagship projects outlined in the NETR, as well as areas of  collaboration between the financial sector and Government. 

Datuk Kamarudin Hashim, Managing Director of the Securities Commission Malaysia and Co-Chair of JC3, stated, “Given the nature of climate-related projects, public sector  financing alone will not be viable. Blended financing can bridge the gap to make financing for  sustainable projects more feasible.

“In this regard, blended financing can accelerate the  implementation of projects and initiatives, including under the recently launched NETR by the  Ministry of Economy, which aims to accelerate the development of a sustainable, affordable  and resilient energy system to support Malaysia’s low-carbon transition.”

JC3 will soon organise its biennial flagship conference that will take place from 23 to 25  October 2023 at Sasana Kijang, Kuala Lumpur. This hybrid JC3 Journey to Zero Conference will focus on practical and actionable solutions, emphasising the critical role of the financial  industry in driving sustainable transformation. For those interested in participating in the JC3  Journey to Zero Conference, registration is now open at https://jc3conference.com/.

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