Intro BNM Climate Risk
Climate Change and Our Functions
In line with our mandates to preserve monetary and financial stability, we are preparing the Malaysian financial system to be more sustainable and climate-resilient.
As at November 2019, about 11.7% of the assets held by financial players in Malaysia are in sectors potentially exposed to climate change.
Malaysian financial institutions need to manage climate risk to ensure that their ability to provide financial intermediation services is not significantly affected by the threat of climate change. If not dealt with effectively, climate change could affect the general economy, leading to potentially large economic losses.
Impact of Climate-Related Risks to the Financial System
We aim to:
- Put in place appropriate regulation and supervision to ensure that financial institutions are adequately measuring, mitigating and buffered against climate risks.
- Increase the capacity of financial institutions to be the catalyst in the transition to a low-carbon economy. This includes increasing their offering of green financial solutions that can help their customers to transition to greener practices and to better cope with climate-related events.
"The world is clearly moving more aggressively on building climate resilience in what is being described as the 'decisive decade for climate action'. Individual countries and firms cannot stand still. Not just because climate change has severe implications at a domestic level - more so for developing countries - but because global climate actions affect us directly through economic and financial linkages. How we respond is crucial."
Governor Nor Shamsiah
Keynote Address at the JC3 Flagship Conference, June 2021
"The effects of climate change are not merely an ecological problem for scientists and conservationists to worry about. It presents a major economic issue with direct implications on financial stability. It is for this reason that Bank Negara Malaysia, along with many other central banks around the globe, are giving serious attention to climate risk."
Governor Nor Shamsiah
Keynote Address at the Regional Conference on Climate Change,
Our approach and strategy
Our approach and strategy
Since 2019, we have taken a phased approach in responding to climate risk and put in place the building blocks for a strong foundation in climate risk management for the financial industry. Starting from 2021, we are integrating climate-related risk considerations in our regulatory and supervisory expectations, as well as macroeconomic and financial stability assessments.
Key thrusts of BNM's climate strategy:
Starting with ourselves
We ensure that our operations are consistent with sustainable practices. These include measures taken to adopt socially responsible investment strategies in our investment operations, sustainable currency operations, and reducing our carbon footprint in our day-to-day activities.
Engagement & capacity building
We work closely with the Government, experts, practitioners and opinion shapers to increase awareness and understanding on climate risks and their impact to financial stability. This is accompanied by initiatives to build capabilities within BNM and the financial sector to assess, manage and mitigate climate risks.
Integrating climate risk within macroeconomic & financial stability assessments
We will reflect climate risk developments and their impacts more prominently in its stress tests for the financial sector, ongoing surveillance of risks to financial stability, and macroeconomic forecasting models.
Strengthening regulatory & Supervisory expectations for managing climate risks
We expect financial institutions to effectively manage climate and environmental risks and reinforces these expectations through our supervisory activities. This includes improving disclosures in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Creating an enabling environment for green financing & investment
We work with the financial industry, Securities Commission Malaysia and the Malaysian Government to align financial sector and national climate strategies, and address barriers to green financing and investments.
A resilient and vibrant financial sector to support an orderly transition to a greener economy.
Our climate strategies both contribute to, and are informed by, Malaysia’s national strategies to meet national commitments made under the Paris Agreement 2015. BNM's approach to climate risk is supported by seven internal working groups.
These working groups aim to:
- Increase awareness and engagement both internally and with our key stakeholders, including the financial industry and Government agencies
- Deepen understanding and develop capacity to assess and manage climate risk and its transmission
- Lead by example and catalyse change by integrating sustainable practices within our investments, operations and culture
- Create an enabling environment for green financing and investment
Climate External Initiatives
We are involved in various initiatives in Malaysia as well as at the international levels.
Climate Change and Principle-Based Taxonomy (CCPT)
Joint Committee on Climate Change (JC3)
ASEAN Central Banks Initiative
Central Banks and Supervisors Network for Greening the Financial System (NGFS)
Our milestones in integrating climate risk management within the industry locally and globally
Advancing the Financial Sector's Response to Climate Risk – Fifth Meeting of JC3
JC3 Flagship Conference 2021 #FinanceForChange
Issuance of Climate Change and Principle-based Taxonomy (CCPT) Guidance Document
Towards Greening the Financial Sector – Fourth meeting of JC3
Forming greater collaboration with Government - Roundtable Discussion with Ministry of Environment and Water
Enhancing transparency on Sustainable and Responsible Investment (SRI) disclosure – Inclusion of input from BNM on its SRI management (BNM mentioned as one of the survey participants) in the NGFS Progress Report on the Implementation of Sustainable and Responsible Investment Practices in Central Banks’ Portfolio Management
Strengthening thought leadership - Appointment of Bank Negara Malaysia as additional NGFS Steering Committee member
Increasing funding for climate initiatives - Submission of climate-related proposal for inclusion in National Budget 2021
Positioning climate agenda in national plans - Submission of climate-related comments for RMK12
Approval received for Report on the Roles of ASEAN Central Banks in Managing Climate and Environment-related Risks
Accelerating climate action – Third meeting of JC3
Guiding industry on impact-based assessments for palm oil, renewable energy and energy efficiency sectors – Issuance of the Value-based Intermediation Financing and Investment Impact Assessment Framework (VBIAF) Sectoral Guides
Enhancing climate awareness and updates on BNM climate initiatives - Inclusion of climate change and green agenda in Board Presentation to Ministry of Finance
Roundtable Discussion with Mark Carney on 'The Role of Central Banks in Leading the Financial Sector Response to Climate Change Risks'
Strengthening global network - Participation of BNM in NGFS Plenary Meeting
Strengthening synergy with Government - Meeting with Ministry of Energy, Science, Technology, Environment and Climate Change (MESTECC)
Solidifying climate action plans – Second meeting of JC3
Raising industry awareness on taxonomy - Issuance of Discussion Paper on CCPT
Raising industry awareness on climate change - Inaugural Regional Conference on Climate Change
Enhancing regulatory-industry collaboration on climate change – First meeting of JC3
Enhancing visibility in NGFS supervisory work – Stock take on FIs’ risk differentials for default rates of “green” and “brown” assets & input to NGFS
Enhancing visibility in NGFS supervisory work – Stock take on FIs' climate risk management practices & input for NGFS Supervisory Handbook
Enhancing visibility in NGFS macroprudential work - Box article on Malaysia’s experience in Technical Supplement to the First NGFS Comprehensive Report
Know more about climate change activities
Stay abreast by accessing speeches, webinars, videos and engagements.
|23–25 June 2021||JC3 Flagship Conference #FinanceForChange
Assistant Governor Fraziali's panel session
|4 June 2021||Green Swan 2021: Coordinating Finance on Climate
Panel P: How can central banks, supervisors and regulators help to mobilise and coordinate with other actors (Treasuries, private sector) in the fight against climate change?
|30 November 2020||Climate Risk Asia Week 2020
Panel Discussion: The What and The How, with Governor Nor Shamsiah
|20 October 2020||Financing Climate Action Conference 2020|
|16 October 2020||Climate Change: Where We Are|
|14 October 2020||Sustainable Finance Forum: Financing the SDGs in Southeast Asia
Presentation on 'Managing transition to low-carbon economy - Malaysia's financial sector response' by Assistant Governor Fraziali Ismail
|06 October 2020||Sustainable and Inclusive Finance Forum|
|17 October 2020||Malaysia Showcase during Climate Week NYC 2020|
|23 October 2020||Central Banks, Climate Change and Stress Testing
Webinar with Deputy Governor Jessica Chew
Speeches & Interviews
Links to Related Organisations
Joint Committee on Climate Change (JC3) Members
Multilateral Institutions & Organisations
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