Malaysia launches UK-funded sustainable finance platform

New initiative to play key role in Asian hub’s sustainable finance strategy

Malaysia has launched a regulator-backed platform called the Malaysian Sustainable Finance Initiative (MSFI) to provide technical assistance and training on sustainable investing for market participants.

The country’s securities regulator, the Securities Commission (SC), first identified the need for such a resource in 2019 when it released a set of 20 recommendations on accelerating the growth of Malaysia’s sustainable finance sector.

At the time, the SC called for “a multi-stakeholder entity to conduct business development initiatives such as engaging with issuers and investors, increasing awareness and conducting promotional activities as well as capacity building efforts”.

“Such [an] entity will also need to establish more international linkages with other global organisations that are leading the sustainable development and investments agenda,” it said. 

In line with that, the initiative has secured £15m (€16.5m) worth of funding from a UK government aid programme earmarked to support the development of green and sustainable capital markets. The UK will also provide policy support, and support the delivery of training programmes and an online portal.

As part of the broader push on sustainable finance, Malaysian regulatory and supervisory bodies introduced a framework defining eligible green economic activities earlier this year, similar to the EU’s high profile ‘green taxonomy’, and established a partnership with the UN Global Compact to improve the sustainability performance of Malaysian corporates.

The Deputy Governor of the Malaysian central bank Bank Negara, Jessica Chew, today said that the supervisor was looking to “build on” the taxonomy by offering additional incentives for green investing, noting that an estimated 12% of Malaysian financial institutions’s (FIs) assets were exposed to climate-related risks.

In a conversation with experts from the Climate Bonds Initiative and the Bank of England’s climate change lead Sarah Breeden, Chew said that Bank Negara had introduced a section on climate risks in its annual supervisory assessments of Malaysian FIs. This, and the publication of the taxonomy, has encouraged a number of FIs to integrate climate-related risks within their risk assessment and management frameworks, she said.

UK funding for the MSFI comes from a £1.2bn (€1.2bn) pot allocated to South East Asia under the UK’s Cross-Government Prosperity Fund, which seeks to “to create opportunities for international business including UK companies” through financing market reforms in developing middle-income countries.

John Glen, the UK Minister responsible for financial services, previously described “great potential and deepening market opportunities” for the two countries after the UK’s exit from the EU.

Despite supportive policies for sustainability-focused market reforms abroad, the UK was last week criticised by investors after indicating that it would not follow the EU in implementing a series of legislative packages standardising sustainable investing rules across the Bloc. City Minister Glen cited a lack of technical details around the EU legislation as cause for holding off on implementation.