Changes expected in Malaysia after its taxonomy

The harmful effects from heat traps and changes in perceptions are building a case against financing fossil fuel. UN Sec-General has urged banks to stop their financing towards it.

Bank Negara Malaysia published a paper of climate change and principle based taxonomy providing an overview of the crisis and its impact on the finance industry stating that it will act as a guideline to ensure that the industries acted towards the contribution for climate changes.

Malaysia’s taxonomy is based on international markets and national experiences to ensure that it’s fully in line with the international based practices and definitions. The various published reports all suggest that many banks are developing a National green taxonomy even the World Bank. In Malaysia, the absence of sustainable taxonomy was observed even in the local Islamic banks which affected the financial system. The paper further reported that 12 financial institutions will implement a taxonomy to classify the climate risk and firm up the resilience in the country as Bank Negara Malaysia viewed that climate risk impacted on various common risks such as liquidity, Insurance ,market ,credit risk etc. Developing taxonomy is necessary as it hold the stakeholders accountable for their contribution towards climate changes and Bank Negara is working closely with the financial industries through the Joint committee to develop collective response urging Asia’s policy makers to develop a harmonized framework in an order that it meets the standards set across jurisdictions at the same time provide transparent funds to emerging markets.

Despite the efforts Maybank, CIMb, RHB banks provided $4.9 billions of loans for coal projects plugging the gap of 45international banks which had distanced from financing fossil fuels and thus bucking the trend of decarbonisation. Activist groups like Greenpeace and 350.org have urged the banks not to support the projects and Bank Negara Malaysia has reminded that it might require all banks to report their exposures to climate risks. In response to combat climate change Malaysian banks are adopting a reasonable lending policy and creating awareness among customers on sustainability issues. CIMB allocated RM3 billion for loans in sustainability projects and renewable energy financing packages for smaller companies. RHB bank has also developed a phased approach into its decision making practices. CIMB joined a coalition of 130 international banks having a combined asset value of $47million to realign their financing development and the Paris agreement on climate change developing two group wide policies, one pointing the overall sustainability and the other on environmental and social risks in business lending. Interest rates have been reduced for consumers seeking energy-efficient commodities.