‘Financial institutions will need to report climate risk exposure’

Malaysia’s central bank governor said financial institutions will be required to report their exposure to climate risks and the information it gathers could be used to set regulatory standards in Southeast Asia’s third-biggest economy.

Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus said the recent shroud of haze in Malaysia, Indonesia and Singapore from burning forests was a reminder of the environmental challenges facing countries.

“It presents a major economic issue with direct implications on financial stability,” she said at a regional conference on climate change, here.

“It is for this reason that Bank Ne- gara, along with many other central banks around the globe, are giving serious attention to climate risk.”

She said new reporting requirements for financial institutions would kick in once classifications on green assets were finalised with the Securities Commission and the World Bank.

“This framework aims to support informed decisions and analysis of exposures to climate risk in fund raising, lending and investment activities.”

Bank Negara expects to issue the first draft of the green assets classification by the end of this year for industry feedback.

“Information gathered through this process will be used by the bank to consider changes to prudential standards to better reflect risks from climate-related exposures.”

CIMB Group Holdings Bhd this week joined 130 banks worldwide to commit to align their business with the United Nations (UN) Sustainable Development Goals and the Paris Agreement on Climate Change.

CIMB said it was among 30 banks, and the only one from Southeast Asia, that drafted the principles of what is known as responsible banking under the UN Environment Programme’s Finance Initiative.

This framework aims to support informed decisions and analysis of exposures to climate risk in fund raising, lending and investment activities.

DATUK NOR SHAMSIAH MOHD YUNUS

Bank Negara Malaysia governor