08/08/2025

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FRIDAY | AUG 8, 2025

‘Be bold in funding climate-related efforts’

Banks have stepped up climate financing efforts in recent years, says AmBank KUALA LUMPUR:

Malaysian banks have stepped up their climate financing ef forts in recent years, AmBank Group chief sustainability officer Amanah Aboobucker ( pic ) said, adding that the industry is now better equipped to classify, assess and support sustainable projects. “A turning point was in April 2021,

Ű BY HAYATUN RAZAK sunbiz@thesundaily.com

o Raja Muda Selangor says private sector, financial institutions and investors need to step up efforts as government cannot do it alone

KUALA LUMPUR: Malaysia needs the private sector, financial institutions and investors to move boldly in funding climate-related efforts, said Raja Muda Selangor Tengku Amir Shah Ibni Sultan Sharafuddin Idris Shah Alhaj. Tengku Amir said institutions such as Khazanah Nasional Bhd, Employees Pro vident Fund and Permodalan Nasional Bhd need to step up as governments cannot do this alone. “Imagine the impact if they increased their portfolio allocations towards renewable energy, low-carbon infrastructure, and nature based solutions,” he said in his speech at the Climate Finance Summit 2025 yesterday. He said Malaysia still needs policy support including more financial incentives, better ESG (environmental, social and governance) regulation and creative financing tools to make it easier for the private sector to fund climate-related efforts. “Let’s learn from Indonesia’s Tropical Landscapes Finance Facility, a powerful partnership mobilising over US$1 billion (RM4.23 billion) in blended finance for sustainable land use. Malaysia can replicate this model, adapting it to our needs,” Tengku Amir said. He added that funding still lags far behind what is needed, as Malaysia faces an annual shortfall of RM20 billion to meet its climate goals. “The 2021 floods alone caused RM6.1 billion in damage. Across Asean, the gap

from storms. He also noted that Malaysia has demon strated leadership in the past. In 2017, it became the first country in the world to issue a green sukuk, an Islamic financial instrument to fund renewable energy. “Tadau Energy’s green sukuk raised RM250 million to build a solar plant in Sabah. Since then, more issuances have followed,” Tengku Amir said. He added that Malaysia is home to the world’s first syariah-compliant carbon market, the Bursa Carbon Exchange, which merges ethics with climate ambition. He concluded that Malaysia should strive to become Southeast Asia’s climate finance hub, attracting global capital, driving regional solutions, and delivering on its net-zero 2050 commitment. “If you’re in finance, grow your green investments. If you’re a policymaker, clear the roadblocks to climate funding. If you’re a business, embed climate action into your model. And if you’re young, use your voice and your choices to demand change.” Tengku Amir called on the government, private sector and public to work together to make climate finance the engine of real, urgent and lasting change. “How many bonds can we realistically issue before the market starts asking, ‘Can this really be deployed and paid back?’ “Sure, some bonds can be rolled over, he said, but without a clearer picture of adapt ation costs, Malaysia is flying blind. “That could be significant, considering 70% of our population lives in coastal zones. That’s a lot to protect,” he added. Yin pointed to the 2021 floods, triggered by about a week of rain, which caused RM6.1 billion in damage, according to the Statistics Department. “We weren’t prepared. We’re still not prepared for that kind of cost. And RM6.1 billion is roughly what our Covid-19 vaccine programme cost.” Yin said he is not optimistic about the outlook stating that the way the United States has gone since 2024 is not en couraging. “And I’m not optimistic about the European Union either. It has traditionally been a climate champion, but it has now veered sharply to the far right and is talking more about missiles than climate.” It is incredibly frustrating that inter national climate action is slowing down and, as a result, the availability of international finance may also shrink, Yin said. “That means for us, we may have to shoulder even more adaptation costs our selves as time goes on.”

exceeds US$100 billion annually.” Meanwhile, Tengku Amir pointed out that Singapore avoided similar devastation through S$2 billion (RM6.6 billion) in preventive investments. “The lesson is clear. Inaction costs far more than action. Climate finance is not an expense. It is an investment in survival.” He said strategic finance must go towards solutions such as climate-smart agriculture, flood mitigation, and disaster preparedness, especially after tragedies such as the Batang Kali landslide. Tengku Amir stressed that climate finance must protect Malaysia’s most vulnerable, including farmers, fishermen and low-income communities. “The agriculture sector employs over 10% of Malaysians, yet it is severely impacted by rising temperatures and drought. In some areas, oil palm yields have dropped by 20%. Coastal fishermen in Terengganu and Kelantan face rising sea levels and declining catches.” However, he said there are also success stories. In Kuala Sepetang, Perak, decades of mangrove restoration have protected over 40,000 hectares of forest, boosted eco tourism, and shielded local communities

when Bank Negara Malaysia introduced the Climate Change and Principle-based Taxo nomy (CCPT). That became the foundation for how we assess the facilities we offer to participants in the real economy,” she said in a panel session at Climate Finance Summit 2025 yesterday. Amanah said the CCPT introduced a framework for banks to assess and classify economic activities based on their alignment with climate objectives. Under the CCPT, the industry is required to categorise financing into three buckets: climate-supporting, transitioning and watchlist. “Today the banking industry has a much better grasp of what qualifies as climate supporting, what falls under transition, and what goes on the watchlist. “From a product innovation perspective, this classification helps us strategically assess financing needs and opportunities,“ she said. When the guideline was first introduced, Amanah said, banks found it difficult to implement the taxonomy and meet its data requirements. “Many real economy players also struggled to provide the necessary disclosures. But through multiple iterations and engagements, we’ve collectively improved.” The industry’s goal is to grow the share of financing that falls under climate-supporting and transitioning categories, Amanah said. That said, she added, banks are not avoiding clients who fall under the watchlist. In fact, it sees the greatest opportunity in supporting those clients. “We engage with them, understanding their business models, and helping them progress from the watchlist to transition, and ultimately to climate-supporting. This is where our relationship managers play a key role.” Amanah said that while some may view this purely as risk management, banks also serve as barometers of the economy and need to strike the right balance in their approach every day. Furthermore, the industry is contributing to the Climate Finance Innovation Hub as part of Joint Committee on Climate Change. “We’ve just begun exploring potential pilot projects and working on developing inno vative financing solutions.” According to AmBank’s FY2025 sustain ability disclosures, it estimates that 39% of its non-retail loan portfolio, valued at RM51.9 billion, is tied to hard-to-abate sectors. These include palm oil, coal mining, power genera tion, oil and gas, cement, iron and steel, and commercial real estate. Collectively, they account for 45% of the bank’s total financed emissions.

Local banks, financial institutions must be ready to mobilise trillions of ringgit: Expert

KUALA LUMPUR: Malaysia’s banks and financial institutions must be ready to mobilise trillions of ringgit in climate financing, said Khazanah Research Institute deputy director of research Yin Shao Loong ( pic ). He highlighted that until 2023, Malaysia did not have a clear costed policy for its energy transition making it difficult to justify raising funds.

compared to trillions,” he said. Yin stressed that Malaysia has never attempted to mobilise funding at such a scale before. “One of the lessons we can learn from international climate finance is that 80% is domestically mobilised, and only 20% comes from international sources,” he said. This, he explained, is largely because there simply isn’t enough international funding available. “It’s a recurring point of con tention at every climate convention

“Because, why go out and look for funds when you don’t even know how to use them?” Yin said in a panel session at Climate Finance Summit 2025 yesterday. He said the introduction of the National Energy Transition Roadmap in 2023 provided Malaysia with its first rough estimate of the cost involved. “The estimated bill came to around RM1.3 trillion.” However, Yin noted that the cost of climate adaptation, which has received less attention, has yet to be determined. “It’s easy to imagine the total bill reaching RM3 trillion. That’s an eye-watering amount. It’s hard to even grasp,” he said. For context, Yin pointed to Malaysia’s pensions gap, which stands at around RM700 billion. He added that 1MDB, often cited as a major debt burden, involved only RM53 billion. “So those are double-digit billions,

in November and December. Last year’s convention, in particular, got very heated because not enough was promised.” Yin said there was a pledge to increase contributions from US$100 billion (RM423 billion) per year to US$300 billion, but people were asking for trillions. “The truth is, there simply isn’t enough available.” Now that Malaysia has begun quantifying the potential costs, Yin said, the country must begin seriously looking for financing. “And we haven’t even started on what it will take to conserve forests, which are expected to absorb 90% to 95% of our emissions let alone adaptation,” he added. Yin admitted he has doubts about whether Malaysia can raise that much money domestically.