27 Apr 2022
The Joint Committee on Climate Change (JC3) held its seventh meeting on 26 April 2022. Discussions centred on the progress of action plans and priorities for 2022, and effects of recent global developments on transition efforts and policy responses of countries.
JC3 members noted that these developments could heighten the prospects of delaying the progress of transition efforts, and underscore the need for the financial sector to strengthen its response to climate change.
Key updates on the work of sub-committees established under JC3 include:
Contributed to the exposure draft by Bank Negara Malaysia on Climate Risk Management and Scenario Analysis which was issued in December 2021. The exposure draft sets out regulatory expectations on the management of climate-related risks by banks, insurers and takaful operators. This will complement the implementation of the Climate Change and Principle-based Taxonomy (CCPT) by financial institutions as well as plans underway by Bank Negara Malaysia to conduct climate-related stress tests for the financial sector in 2024. The exposure draft is expected to be finalised in the second half of 2022.
Issued the Task Force on Climate-related Financial Disclosures (TCFD) Application Guide for Malaysian Financial Institutions in March 2022 for public consultation. The Guide outlines key recommendations and provides guidance to assist financial institutions in preparing for the climate-related disclosures.
Commenced work to develop a Climate Disclosure Guide for Malaysian Businesses. This Guide aims to improve the quality of and access to information on business resilience to climate related risks, in turn promoting financial flows to mitigation and adaptation actions, including among small and medium-sized enterprises (SMEs). Members also agreed to identify cross cutting and strategic issues stemming from the exposure draft issued by the International Sustainability Standards Board (ISSB) on Sustainability Disclosure Standards and consider providing a collective response, particularly from the perspective of a developing economy, to the ISSB.
Completed the first series of specialised level training programmes for the financial sector -- covering the implementation and application of the CCPT, scenario analysis and stress testing. The next series will focus on governance and reporting, with accompanying workshops on data applications and the implementation of TCFD.
Further progressed work on the development of a data catalogue for reference by the financial sector. The catalogue will identify and map available climate data sources to support the critical data needs for identified use cases that include investment and lending decisions, macroeconomic modelling, stress testing, scenario analysis and product development.
Published the Report on the Sustainable Finance Landscape in Malaysia capturing key insights from the extensive outreach programmes and a survey on sustainability practices among financial institutions in Malaysia undertaken by JC3 in 2021. The Report, released today, assesses the current state of sustainability practices and product offerings within the financial sector, and highlights the opportunities and challenges for the financial industry to meaningfully support the climate transition.
According to Datuk Zainal Izlan Zainal Abidin, Deputy Chief Executive, Securities Commission Malaysia and Co-Chair of JC3, "Financial institutions are initiating steps to embed climate risk in their strategy and risk management framework, and are making considerable progress in committing to Net Zero targets. There is also an increasing supply of green financial and investment products in the market. In driving the sustainability agenda, the top three challenges identified in the Report are poor data quality and availability, lack of incentives, and low awareness of green finance solutions in the market. Cohesive efforts are required in addressing these challenges to accelerate the pace of transition and support an orderly transition to Net Zero.”
Further commenting on the progress of other initiatives by the JC3, Jessica Chew, Deputy Governor, Bank Negara Malaysia and Co-Chair of JC3, said “The issuance of the draft Application Guide and work on the data catalogue are timely as financial institutions are preparing for mandatory TCFD-aligned climate-related financial risk disclosures in 2024. We expect financial institutions to adopt the stretch recommendations set out in the Application Guide to encourage positive cascading effects on economic activities that interact with the financial sector. Given the significant financial impact of climate-related risks, this will also improve market transparency on how financial institutions integrate climate risk considerations into business decisions and risk management”.
JC3 members also discussed the CEO Action Network (CAN) – Climate Governance Malaysia (CGM) Report on Exploring a Low Emissions Pathway for Malaysia, and considered further ways in which the financial sector can contribute to support a low emissions pathway for Malaysia, while noting that broader legislative and structural imperatives remain critical.
JC3 members welcomed plans by the Value-based Intermediation Community of Practitioners (VBI COP) to deliver the third cohort of VBIAF sectoral guides which will focus on the mining and quarrying, agriculture, transportation and storage, and waste management sectors. This complements the sectoral guides on six sectors/activities already issued thus far. JC3 will continue to actively promote alignment between the VBIAF and the CCPT.
At this meeting, JC3 members also welcomed the participation of two new members from the capital market and three new observers in the committee.
Bank Negara Malaysia
Securities Commission Malaysia
27 April 2022
About the JC3
The JC3 is a platform established in September 2019 to pursue collaborative actions for building climate resilience within the Malaysia financial sector. The JC3 is co-chaired by Jessica Chew Cheng Lian, Deputy Governor Bank Negara Malaysia and Datuk Zainal Izlan Zainal Abidin, Deputy Chief Executive Securities Commission Malaysia with members comprising senior officials from Bursa Malaysia and 21 financial industry players as well as relevant experts. The JC3’s initiatives and priorities are undertaken by its five sub-committees, namely Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps.
Members: Allianz General Insurance Company (Malaysia) Berhad, AmBank (M) Berhad, Bank Islam Malaysia Berhad, Bank Pembangunan Malaysia Berhad, Bank Pertanian Malaysia Berhad (Agrobank), BIMB Investment Management Berhad, BNP Paribas Asset Management Sdn. Bhd., Bursa Malaysia Berhad, CIMB Bank, Etiqa Family Takaful Berhad, HSBC Amanah Malaysia Berhad, Kenanga Investors Berhad, Maybank Berhad, MIDF Amanah Investment Bank Berhad, MSIG Insurance (Malaysia) Berhad, RHB Islamic Bank Berhad, RHB Islamic International Asset Management Bhd., Standard Chartered Bank Malaysia Berhad, Swiss Re Asia Pte. Ltd. (Swiss Retakaful), Syarikat Takaful Malaysia Am Berhad, UOB Asset Management (Malaysia) Berhad and Zurich General Insurance Malaysia Berhad.
 Risk Management; Governance and Disclosure; Product and Innovation; Engagement and Capacity Building; and Bridging Data Gaps
 Value-based Intermediation Financing and Investment Impact Assessment Framework
 Palm oil, renewable energy, energy efficiency, oil & gas, manufacturing, construction & infrastructure
 Kenanga Investors Berhad and UOB Asset Management (Malaysia) Berhad
 Life Insurance Association of Malaysia, Employees Provident Fund, Khazanah Nasional Berhad