The Joint Committee on Climate Change (JC3) held its eighth meeting on 29 August 2022.

The Committee reviewed the ongoing work of sub-committees^[1] established under JC3. It was noted that with greater awareness and efforts by financial institutions to strengthen their response to climate risk, this has led to an increased demand for practical tools and urgency to address key gaps needed to support transition.

The Committee will continue to focus on the following priorities:

• Financial institutions have submitted the first report on the application of the Climate Change and Principle-based Taxonomy (CCPT) to Bank Negara Malaysia. While financial institutions have demonstrated capability to assess new financing and investments based on the CCPT, JC3, through the CCPT Implementation Group (CCPT IG), is working with the industry and partners to further improve the consistency and quality of classifications under the CCPT for existing outstanding financing and investments. Information gaps for existing exposures continue to pose the biggest challenge. CCPT IG will publish and maintain a set of CCPT FAQs on application issues to promote more consistent practices across financial institutions, and has developed a due-diligence questionnaire together with World Wide Fund (WWF) Malaysia on selected CCPT guiding principles. The questionnaire aims to help financial institutions capture important information from their customers and counterparties in a more consistent manner. This will serve to promote robust classifications of climate supporting and transitioning activities and reduce additional burdens for customers and counterparties of banks to provide such information to multiple financial institutions.

• Following the issuance of the TCFD^[2] Application Guide for Malaysian Financial Institutions^[3], JC3 is now supporting Capital Markets Malaysia (CMM), an affiliate of the Securities Commission Malaysia, to develop an ESG Disclosure Guide (Guide) tailored to Malaysian Small and Medium Enterprises (SMEs). The Guide aims to improve the quality of and access to information on business resilience to ESG-related risks to ensure practical adoption by SMEs and larger businesses. Members emphasised the importance of ensuring alignment in the disclosure initiatives undertaken by JC3 with global disclosure frameworks, including that being developed by the International Sustainability Standards Board (ISSB), to promote comparability and minimise compliance costs for businesses and financial institutions going forward.

• JC3 welcomed the issuance of the Sustainable and Responsible Investment-linked (SRI-linked) Sukuk Framework by Securities Commission Malaysia on 30 June 2022 to facilitate companies to issue SRI-linked Sukuk to support their transition towards low-carbon activities. More financial institutions are also expanding their offerings of green products and solutions. To further scale up sustainable financial offerings by financial institutions, JC3 is actively exploring suitable pilot programmes to test new green solutions and instruments such as blended finance to support the development of climate-friendly projects.

• The Data Catalogue developed by JC3 remains on track for publication by end-2022. This will be accompanied by a brief report on the data availability, gaps and specific recommendations to bridge data gaps. The data catalogue is a key deliverable of JC3 to address the data needs of the financial sector by pointing users to credible sources of critical climate data needed to support identified use cases, noting however, that material gaps still exist within existing data sources. This is partly due to legal impediments to data sharing. JC3 also endorsed governance arrangements for maintaining and refreshing the data catalogue going forward. As data remains a key challenge, JC3 continues to actively engage and collaborate with relevant Government ministries and other stakeholders to improve the accessibility to good quality, comparable and consistent climate data. JC3 will continue to explore solutions to this end, including open data modalities and climate data platforms.

JC3 members also discussed The World Bank Group (WBG) and Asian Development Bank (ADB) – Climate Risk Country Profile: Malaysia Report (report can be found here). The report addresses climate risks faced by Malaysia, and highlights that the impact to communities, livelihoods and the economy from rapid onset and long-term changes in climate parameters are already underway. Members discussed the implications of this for financial institutions and their response to climate change, including adaptation priorities with a particular focus on human health, the agriculture sector and coastal zones.

Jessica Chew, Deputy Governor, Bank Negara Malaysia and Co-Chair of JC3, said “We are encouraged by the increasing focus and concrete actions being taken by financial institutions to manage climate-related risks. Further progress will however critically depend on key enablers, including accessibility to data and better disclosures being in place. The JC3 remains committed to addressing these challenges, alongside increased efforts to scale up transition finance.”

JC3 continues to engage with the relevant ministries, government agencies and corporates to identify climate and sustainable financing needs that can be mobilised through the financial sector. According to Datuk Zainal Izlan Zainal Abidin, Deputy Chief Executive, Securities Commission Malaysia and Co-Chair of JC3, “In progressing climate action in Malaysia, it is important for the JC3 to have close engagement and collaboration with relevant stakeholders. Towards this end, the JC3 has conducted a series of engagements, including a meeting with four key ministries in July to forge closer collaboration with the government. Such engagements have brought greater clarity on the national plans and initiatives that both the financial sector and Government can pursue and collaborate. Both parties can align their climate actions in developing an ecosystem that is conducive for sustainable finance to flourish.”

Bank Negara Malaysia
Securities Commission Malaysia
1 September 2022

About the JC3

The JC3 is a platform established in September 2019 to pursue collaborative actions for building climate resilience within the Malaysia financial sector. The JC3 is co-chaired by Datuk Jessica Chew Cheng Lian, Deputy Governor Bank Negara Malaysia and Datuk Zainal Izlan Zainal Abidin, Deputy Chief Executive Securities Commission Malaysia with members comprising senior officials from Bursa Malaysia and 21 financial industry players as well as relevant experts. 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] Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps

^[2] Task Force on Climate-related Financial Disclosures

^[3] Issued on 29 June 2022