Net-zero forum addressed the various imminent risks on the macroeconomic, financial, and climate change fronts, exploring how Malaysia can thrive amid these risks and crossroads. Hosted by RAM Ratings, among the key takeaways was the lack of incentives by the government for DDI and FDI flows.
Datuk Kamaruddin Taib, RAM’s chairman said “While we may be too slow in cutting emissions, a herculean but not impossible whole-of-the-world approach” is needed to fight climate change and help meet the Parisian climate goals.
According to Prof Dr Evelyn Shyamala said, “Amid a growing interdependence between trade and geopolitics, the securitisation of supply chains by diversifying outside China is more pertinent. We should also look at regional arrangements beyond ASEAN in a multi-alignment strategy that hedges risk”. While Dr Apurva Sanghi, the World Bank’s Lead Economist for Malaysia acknowledged Malaysia has benefitted from the tensions, upping its share of semiconductor exports to both the US and China but the country “has not been able to move up the semiconductor value chain despite having 8% share of the global integrated circuit market but just 0.07% of the most advanced patents in the same.”
Economists on the panels urged the government to improve and strengthen supply chains with domestic firms, highlighting the lack of incentives for Direct Domestic Investment (DDI) relative to FDI. A pragmatic investment strategy to attract FDI that is aligned with the targeted supply chain is also needed. On the monetary front, panelists agreed that the ringgit is currently undervalued with its weakness primarily caused by high US interest rates, wherein the OPR is not an effective mitigating tool. Economists suggest the central bank look into allowing free float of the ringgit and other structural improvements to enhance its long-term valuation.
Panelists also agreed that clear regulations and guidelines are needed to guide companies to transition to net zero. While a plethora of new regulations has been introduced globally, Azreen Idayu Zainal, General Manager of Sustainability from the Securities Commission, Malaysia commented that “a phased and facilitative approach to implementing regulations” is desired, supported by “tone from the top where organisations need leadership on board governance, to drive sustainability”. She also added that in the area of sustainable financing, there are national and ASEAN-aligned regional standards, because the latter facilitates cross-border financing. Bertrand Jabouley, Asia-Pacific Head of Sustainable Finance at S&P Global Ratings Singapore Pte Ltd opined, “To be in a position to read the sustainability roadmap, you need a detailed diagnostic, and to do that, you need data…and regulation to impose quality disclosures as a key enabler to reach ESG objectives.”
They also agreed that given that ESG performance is now an inherent part of evaluation for financiers and asset managers, it is now a reputational risk for companies not to measure and disclose their ESG performance. Data and solutions need to be made more accessible especially to encourage MSMEs to adapt to a greener way of doing business, given cost is a hurdle for smaller companies.
