Private capital funds key towards sustainability

Rm450bil needed to achieve net-zero emissions

“Various initiatives have been introduced since 2014 to develop a facilitative ecosystem for Sustainable and Responsible Investment (SRI) in Malaysia, to enable the domestic capital market to be part of the solution.”

Datuk Seri Awang Adek Hussin

PETALING JAYA: For the country to transform towards a low carbon economy, funds from public-sector alone is not sufficient, but must be complemented with private capital, says Securities Commission (SC) chairman Datuk Seri Awang Adek Hussin.

Awang cited an external study by Boston Consulting Group and WWF Malaysia which estimated that close to Us$100bil (Rm450.5bil) is needed over the next three decades for Malaysia to achieve net-zero emissions by 2050.

“This is a sizeable sum to be directed to sustainable economic activities in support of transition goals. And we are just talking about a single country.

“Hence, public finance alone is not enough. It must be complemented with private capital due to the scale required to fulfil the sustainable development goals and climate commitments,” Awang Adek said in a keynote address at the Global Green Finance Leadership Programme themed “Scaling-up Sustainable Finance in South-east Asia” organised by the World Bank Group and Institute of Finance and Sustainability.

During the event, World Bank launched a report on sustainable finance in South-east Asia, which shows the untapped potential for sustainable finance in regional financial markets.

Awang Adek said the SC recognised early on the need to fill this large financing gap, as well as the enormous potential it offers.

“Therefore, various initiatives have been introduced since 2014 to develop a facilitative ecosystem for Sustainable and Responsible Investment (SRI) in Malaysia, to enable the domestic capital market to be part of the solution,” he said.

From the perspective of sustainable finance, the SC is targeting to introduce Principles-based SRI Taxonomy for the Malaysian capital market by the end of this year, according to him.

Awang Adek said the SRI Taxonomy will provide guiding principles on economic activities that support environmental, social, and sustainability objectives.

He opined that transition finance is another important area to be nurtured, particularly for emerging economies.

“In this regard, the SC introduced the Srilinked Sukuk Framework in June this year.

“The intention is to facilitate the issuance of Sri-linked sukuk in Malaysia, enabling fundraising by companies to transition towards low carbon activities and better sustainability practices,” he said, adding that it complements the SRI sukuk segment in Malaysia – where proceeds are focused on green, social and sustainability objectives.

“Only through a transformational shift to climate action, as well as greater accessibility to sustainable finance, can we ensure that no individual – and business – is left behind in this net-zero journey,” Awang Adek added.

Meanwhile, World Bank East Asia and Pacific vice-president Manuela V Ferro said that East Asia has eight of the world’s 25th largest emitters, although on a per capita basis, Organisation for Economic Co-operation and Development countries still lead.

According to her, green debt issuance in many Asean countries are still concentrated in the energy sector.

“The energy sector is of course important, but it’s not sufficient to make progress on climate action.” she said.

“Bankable projects are also necessary and for this, governments need to introduce policies and institutional changes that make investments in sustainable activities more bankable,” she added.