| 1. | A very good morning to all. Welcome to the second day of the JC3 Flagship Event themed Finance For Change. |
| 2. | The theme holds an important truth. Sir David Attenborough highlighted the power of financial markets in his message yesterday because finance is key to a sustainable future. It steers the direction of economic activities and sets the trajectory for future growth potential. |
| 3. | But this cannot be done in its current form. For finance to be a force for change, finance itself needs to change. To have the future we desire, we need a collective and coordinated response from all. |
| 4. | It is with this recognition that the JC3 was established by the Securities Commission Malaysia (SC) and Bank Negara Malaysia (BNM) in September 2019. It is a platform to pursue collaborative actions for building climate resilience within the Malaysian financial sector, as well as a focal point for engagements with the Government on broader national climate policies. |
| 5. | Yesterday, we focused on sustainability as a business strategy for financial institutions in Malaysia. Today’s sessions will share the outcomes of JC3 initiatives, as well as its implications for the industry. |
Advancing the climate change agenda Ladies and gentlemen, |
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| 6. | It is clear that we are currently facing an existential threat. The devastating impact of the climate crisis is already being felt in many parts of the world. And failure to address rising temperatures and extreme weather events will damage not only the ecosystem, but also to every living creature on the planet. By all accounts, if we do not act now, the harm humans will cause ourselves and this planet may be irreversible. |
| 7. | Thankfully, we are now witnessing a growing chorus of commitments across multiple fronts – at the global, regional and national levels - that have put climate action squarely on the global agenda. |
| 8. | For companies, failure to address climate risks will have serious long-term repercussions on their resilience. |
| 9. | Last year, we faced the profound impact of another risk event on corporate health. However, COVID-19 also showed that the world has the collective ability to tackle an existential threat, with vaccines produced within a year. This same determination must be brought to bear for climate change, which scientists have long warned will threaten future generations. |
| 10. | We cannot afford to delay the shift towards greener economies. As it is, economic uncertainty in 2020 has already widened the financing gap of SDG-related1 sectors in developing countries to US$ 1.7 trillion2. The private sector, including banks, institutional investors and asset managers, must step up to provide momentum for a durable and sustainable transition. |
| 11. | Sustainability must be at the heart of the financial system. The approach has to shift from avoidance to active participation, with financial intermediaries as the stewards of climate action. |
| 12. | Globally, financial regulators and independent international bodies have been at the forefront of efforts to mainstream climate risk disclosures. In the context of Malaysia, the work of the JC3 will be crucial in ensuring industry readiness and resilience against climate-related events. Recognising the urgency, the JC3 has intensified its initiatives to secure an orderly transition to a carbon neutral and circular economy. |
| 13. | Today, we will hear, among others, insights about how Climate Change and Principle-based Taxonomy can help the finance industry manage the risks posed by climate change. |
| 14. | We will also learn more about how sustainability risk disclosures and practices have evolved. Greater adoption of these and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), would be a game changer for the Malaysian financial industry moving forward. |
| 15. | It is vital for the financial and capital markets to assist businesses in their sustainability journey, as well as lead the nation’s sustainability agenda. Therefore, financial intermediaries must take it upon themselves to identify and enable conditions for innovation in sustainability-linked products and solutions to thrive. |
| 16. | Market-based instruments such as green, social and sustainability bonds and sukuk also provide opportunities for investors to participate in this emerging asset class. Tomorrow, we will hear more on how the private sector can adapt to growing investor expectations and changing ESG requirements. |
Next steps in the Malaysian capital market’s Sustainable and Responsible Investment (SRI) journey Ladies and gentlemen, |
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| 17. | Green practices should no longer be viewed as a cost of doing business. Rather, they must be seen as an essential component of a sustainable business. Management and boards cannot afford to ignore this reality. |
| 18. | Recently, the Malaysian Code on Corporate Governance (MCCG) was revised to encourage companies to address sustainability risks and opportunities in an integrated and strategic manner. While there is no explicit requirement for boards to set net zero targets, the MCCG highlights increasing stakeholder expectation for more action including lowering of carbon emissions. |
| 19. | Moving forward, adoption of MCCG 2021 as well as board buy-in will be crucial to meaningfully shift the needle towards reliable environmental and sustainability risk reporting. |
| 20. | Correspondingly, domestic intermediaries must be ready to support the fight against climate change. We can expect increased demand for green and sustainability funding across all types of businesses, including micro, small and medium-sized enterprises (MSMEs). |
| 21. | I would urge our intermediaries to work together with us to ensure continued funding access for our corporates. Concurrently, as partners in this journey, the industry must focus on continuously upgrading their skills and expertise to provide fit-for-purpose solutions. |
| 22. | It is also important to have a diverse issuer base. Currently, 64% of SRI sukuk issuances are for renewable energy projects. We need to expand this base by targeting transformative technologies and industries with high spillover benefits for the country. |
| 23. | Crucially, for finance to be inclusive and accessible to a broad range of issuers and investors, we need greater awareness. Towards this end, Capital Markets Malaysia has established three centres of excellence to inculcate the principles of sustainability in the wider ecosystem. In addition, the SC recently launched NaviGate, a Capital Market Green Financing series, to heighten corporate awareness on suitable market-based financing avenues. |
| 24. | We have identified SRI Taxonomy for the capital market as a critical building block to facilitate greater product diversity and accelerate the development of SRI as an asset class. This will give issuers, investors, intermediaries, and asset owners more clarity and guidance in identifying sustainable investment assets or activities. |
| 25. | The SC is currently in discussions with key industry stakeholders on guiding principles for the SRI Taxonomy, and we hope to release a public consultation paper before the end of the year. |
| 26. | We are also working with market participants to assess the benefits of positive screening that incorporates Shariah requirements with ESG standards. |
| 27. | The SC’s role in supporting the sustainable finance agenda is not limited to Malaysia but extends into the wider region. We cannot address this challenge by ourselves. Better cooperation and collaboration among regional regulators can push an orderly transition to low-carbon economies. |
| 28. | Through the ASEAN Capital Markets Forum (ACMF), the SC is involved in two key initiatives. The first is the ASEAN Taxonomy for Sustainable Finance, which also involves Bank Negara Malaysia. This seeks to identify economic activities that are sustainable and helps direct investments and funding towards a more sustainable region. The second initiative is the ASEAN Sustainability-linked Bond Standards to provide an avenue for issuers to raise funds to meet sustainability targets. |
| 29. | Ultimately, the goal is to reshape the fundamentals of finance to create a better and more inclusive future for all. In doing so, the economy can emerge fitter and stronger in the post-COVID landscape. |
| 30. | The pandemic has undoubtedly given the climate change agenda the impetus it needed to move into the mainstream. |
| 31. | By prioritising long-term and sustainable value creation, it will encourage more responsible businesses. Responsible companies and financial intermediaries are also able to manage risks better, whilst enhancing their resilience. |
| 32. | To work, this change calls for full and undivided support of all stakeholders. Only then can we lay a strong foundation for sustainable finance and sustainable change. |
Conclusion Ladies and gentlemen, |
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| 33. | As the saying goes, time and tide wait for no man. |
| 34. | The gravity of climate change and its inherent economic and financial impact requires the financial sector to prepare, adapt and intensify the drive to achieve sustainability. The window for us to make the necessary and fundamental change is narrowing. |
| 35. | All stakeholders – Government, regulators, financial institutions, investors, companies and their value chains – must play their part to help achieve the sustainability agenda. We are all in this together. |
| 36. | At this juncture, I would like to thank the Governor and the rest of the Bank Negara Malaysia team for their unyielding partnership towards this cause. |
| 37. | Let us seize this opportunity to learn from each other and work together to protect our future prosperity, to build a better and greener world for future generations. |
| 38. | We must be a force for change or risk being swept away by the tides of time. |
| 39. | Thank you and I wish you a productive conference ahead. |
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