Keynote Address at the Global Green Finance Leadership Program (GFLP)

Speaker: Dato’ Seri Dr. Awang Adek Hussin, Chairman, Securities Commission Malaysia
Location: Global Green Finance Leadership Program (GFLP)
Delivered: 29 November 2022

Note: This is the speech as drafted and may differ from the delivered version

Summary:

According to the SC Chairman, Dato’ Seri Dr. Awang Adek, it is crucial for ASEAN to accelerate its own climate action efforts. To be effective, a holistic sustainable finance ecosystem must be established. This includes scaling up innovative financial solutions, tools and policies, as well as enhancing market accessibility and expertise.

Here are highlights from his keynote address:

Recognising the funding gap and its huge potential, the SC has launched numerous efforts to develop a facilitative ecosystem for SRI in Malaysia
From a sustainable finance point of view, the SC is targeting to issue the Principles-based SRI Taxonomy by the end of 2022.
Transition finance is another important area and where the SRI-Linked Sukuk Framework introduced by the SC in June will enable fundraising by companies to transition towards low carbon activities and better sustainability practices.
The SC also plays a key role in the development of sustainable finance through its co-chair of ACMF.
In October the ACMF released the ASEAN Sustainability-linked Bond Standards and ASEAN Sustainable and Responsible Fund Standards, both of which should help ASEAN achieve its sustainability goals.
The SC will continue with policies and measures to deepen and broaden the domestic SRI ecosystem.

Speech:

His Excellency Charles Hay, British High Commissioner to Malaysia;

Ms Manuela Ferro, Regional Vice President East Asia and Pacific, World Bank Group;

Mr Yasuhiko Matsuda, World Bank Country Manager for Malaysia;

Dr Ma Jun, President, Beijing Institute of Finance and Sustainability;

Ms Cecile Niang, Programme Leader, World Bank Group;

Ladies and gentlemen;

Assalamu’alaikum warahmatullahi wabarakatuh salam sejahtera, selamat pagi and good morning.

First of all, I would like to thank the co-hosts, the World Bank Group Inclusive Growth and Sustainable Finance Hub Malaysia and the Beijing Institute of Finance and Sustainability, for inviting me to address today’s Global Green Finance Leadership Program.
The theme Scaling-up Sustainable Finance in Southeast Asia, is timely, given the recent conclusion of the 2022 United Nations Climate Change Conference. COP27 drove home the importance of empowering all stakeholders to bring about more inclusive climate action at all levels.

Bridging the sustainable finance gap
As we all know, climate change is seriously impacting every corner of the world. As many as 3.3 to 3.6 billion people are highly vulnerable to climate change, including populations in Asia¹
Global warming has hit this region hard this year, with Malaysia also not spared from its effects. More frequent flooding is expected for three quarters of Southeast Asian cities, potentially affecting tens of millions annually by 2030.²
Moving forward, it is estimated that approximately USD4 to 6 trillion per annum is required to shift the global economy towards a low carbon future.³ To make matters worse, the global pandemic has widened the Sustainable Development Goals or SDG financing gap for emerging economies by an estimated USD 1.7 trillion.⁴
COP27 also highlighted the alarming gap between the financing needs of developing economies and the actual support provided. Nations risk being left behind with an estimated USD 5.9 trillion needed by developing countries to implement their nationally determined contribution plans in this decade alone.⁵
While the establishment of a loss and damage fund to provide funding for climate disasters in vulnerable developing countries was a key outcome of COP27, I believe that it is also crucial for Southeast Asia to accelerate our own climate action efforts.
The growing number of climate pledges and commitments made by ASEAN countries, including Malaysia, is encouraging. According to the IPCC, Southeast Asia also has the potential to rapidly reduce up to 43% of its greenhouse gas emissions by 2050.⁶
However, implementing much-needed climate adaptation and mitigation measures requires the financial system to be ready to step up in supporting this transition.
I firmly believe that the financial industry has the necessary capabilities to navigate this journey. To be effective, a holistic sustainable finance ecosystem must be established. This includes scaling up innovative financial solutions, tools and policies, as well as enhancing market accessibility and expertise.

Capital market initiatives in Malaysia and ASEAN to further drive sustainable development
Ladies and gentlemen,
A study estimated that close to USD 100 billion⁷ is required over three decades for Malaysia to achieve Net Zero 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 fulfill the SDGs and climate commitments.
The Securities Commission Malaysia (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.
It goes without saying that the groundwork must be laid today. Clear standards and criteria on what they mean to be sustainable must be set to provide clarity to businesses.
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. The SRI Taxonomy will provide guiding principles on economic activities that support environmental, social, and sustainability objectives.
Transition finance is another important area to be nurtured, particularly for emerging economies. In this regard, the SC introduced the SRI-linked 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. This also complements the SRI sukuk segment in Malaysia – where proceeds are focused on green, social and sustainability objectives.
Within the region, the SC also plays a key role in the development of sustainable finance. We co-chair the Sustainable Finance Working Group of the ASEAN Capital Markets Forum or ACMF, a regional grouping of securities regulators. The ACMF is actively involved in the development of the ASEAN Taxonomy for Sustainable Finance. This will provide an overarching guide towards a more sustainable region.
In addition, the ACMF recently introduced the ASEAN Sustainability-linked Bond Standards and the ASEAN Sustainable and Responsible Fund Standards released in October this year. We hope this will facilitate ASEAN in narrowing the gap towards realising its sustainability ambitions.
The pathway towards a better future for this planet we call home is clear. It starts with each of us as stakeholders to take action.
Therefore, all domestic and regional stakeholders must play our role in advancing the sustainability agenda. Our success is dependent on collective efforts to address multi-stakeholder challenges and growth impediments, and ensure an orderly transition.
While it is undeniable that the journey towards low carbon and climate resilient economies will be costly for Southeast Asian countries, I believe it is a necessary burden for the greater good of future generations.
Malaysia will certainly pull out all the stops to ensure the scaling up of sustainable finance. The SC is fully committed to continue with ongoing policies and measures to further deepen and broaden the domestic SRI ecosystem.
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.
On that note, I hope that I have provided you with some thoughts to be considered in your deliberations.

Thank you