Individual pledges by NGFS Steering Committee Members to support the NGFS Declaration for COP26
In line with the recommendations from the NGFS' First Comprehensive Report on A Call for Action: Climate Change as a Source of Financial Risk, BNM is committed to:
Integrating climate-related risks into financial stability monitoring and micro-supervision, by:
- advancing preparations for industry-wide climate change stress tests, for implementation in 2024. This is supported by efforts within BNM to model the macroeconomic impact of climate shocks based on defined climate scenarios. Reference will be made to the NGFS scenarios and the NGFS Guide to Climate Scenario Analysis for Central Banks and Supervisors;
- incorporating, as part of its formal supervisory assessments, a review of actions taken by financial institutions to improve climate risk management practices and provide appropriate supervisory responses where actions are inadequate;
- developing a Reference Guide on Risk Management and Scenario Analysis for financial institutions to be published in 2022; and
- implementing structured climate-related technical training for its regulatory and supervisory staff. BNM aims to align its training plans with the NGFS’ proposed Training Roadmap and it will also leverage the NGFS’ ‘train the trainers’ programme for supervisors.
Integrating sustainability factors into own-portfolio management, by:
- further strengthening internal frameworks for integrating sustainability factors in its investment operations and reserves management; and
- assessing how climate change would feed into monetary policy as part of its periodic review of the monetary policy framework.
Bridging the data gaps, by:
- leading and providing dedicated resources for the newly set up Sub-committee on Bridging Data Gaps formed under the Joint Committee on Climate Change or JC3. The work focuses on meeting critical data needs to support the management of climate- and environment-related risks within the financial sector and structuring of green finance solutions, leveraging BNM’s membership in the NGFS Workstream on Bridging Data Gaps.
Building awareness and intellectual capacity and encouraging technical assistance and knowledge sharing, by:
- ramping up engagement and capacity building efforts to support climate action and risk management in the financial sector through the JC3. This includes maintaining a programme of dialogues, conferences and workshops on climate-related risks and opportunities and contributing to the formulation of national climate policies to promote alignment with the financial sector’s response to climate risks;
- expanding the suite of intermediate and advanced technical programmes on climate-related risks developed under JC3 to strengthen the knowledge and competencies of supervisory staff as well as financial professionals in climate risk management; and
- supporting NGFS capacity-building initiatives by contributing resources to events organised by NGFS and sharing relevant training materials developed for supervisors.
Achieving robust and internationally consistent climate and environment-related disclosure, by:
- taking further concrete steps to improve transparency on the management of, and exposures to, climate-related risks in the financial sector. In 2021, BNM will finalise plans for mandatory climate-risk disclosures by financial institutions in consultation with the financial industry;
- developing an application guide for financial institutions on climate-related financial disclosures informed by the Task Force on Climate-related Financial Disclosures (TCFD); and
- continuing to publish its initiatives and progress in managing climate risk, both in its capacity as an organisation and as a financial regulator in its Annual Report (under a dedicated chapter on Greening The Financial System which was introduced in BNM’s Annual Report 2020). The disclosures are guided by the recommendations of the TCFD.
Supporting the development of a taxonomy of economic activities, by:
- focusing on ensuring the consistent and credible implementation of the climate change principles-based taxonomy issued in April 2021 for application by the financial institutions. Financial institutions will commence reporting to BNM in line with the taxonomy from July 2022.
Other BNM Committed Initiatives
As we intensify our efforts to increase climate resilience, BNM understands that climate action begins with each of us. As such, BNM:
- is committing to continue reducing the carbon footprint in its own operations, through efficient energy management, environmental friendly food management, migration to e-payments, and environmental friendly management and production of banknotes. These initiatives would contribute towards supporting Malaysia’s commitment to become carbon neutral at the earliest in 2050.
- has established a dedicated Sustainability Unit in October 2021 to drive the green agenda and further develop thought leadership in this area. This unit is expected to lend greater impetus, prominence and traction to the sustainability work of BNM internally and externally.