Welcome Remarks at 41st ASEAN+3 Bond Market Forum ‘Sustainable Finance and Role of Ethics’
Speaker: Dato’ Mohammad Faiz Azmi, Chairman, Securities Commission Malaysia
Location: Kuala Lumpur
Delivered: 28 October 2024

Key Highlights:

In his welcoming remarks, SC Chairman, Dato’ Mohammad Faiz Azmi expressed appreciation in hosting the 41st ASEAN+3 Bond Market Forum (ABMF) in Kuala Lumpur, noting it is the first time Malaysia is hosting the ABMF since 2010, also aligning with Malaysia’s upcoming 2025 ASEAN Chairmanship.

He reminded that finance is more than numbers, but a force for ethical, sustainable change and stressed the need for more private sector participation to achieve sustainability goals as government funding alone is insufficient.

Here are highlights from his welcoming remarks:

  1. Despite Malaysia’s strong regional position in sustainable finance, its share of the global ESG bond market remains modest, representing 0.3% of the total outstanding year-to-date.
  2. The SC is working with financial intermediaries to integrate maqasid al-Shariah principles into product development, while promoting inclusivity through initiatives such as the MSME and MTC Roadmap and the upcoming Social Exchange.
  3. Financially viable projects remain one of the main challenges, with at least 35% of sustainable infrastructure projects marginally bankable, with another 55% considered un-bankable.
  4. Blended finance can be used for funding sustainable projects, exemplified by Malaysia’s MyCIF initiative which have helped over 6,300 MSMEs.
  5. The forum of ASEAN Capital Market regulators, ACMF, is currently completing work on the ASEAN taxonomy principally on financing energy transition and exploring new areas such as a taxonomy for adaptation.

Full Speech:

Salutation


Yang Berbahagia, Datuk Johan Mahmood Merican
Secretary General of Treasury, Ministry of Finance Malaysia
Mr Saturo Yamadera,
Chairman of ASEAN+3 Bond Market Forum,
Mr Eugene Wong,
CEO of Sustainable Finance Institute Asia (SFIA)
SC Malaysia Board of Directors and management,
Distinguished speakers,
Fellow colleagues from around the region,
Ladies and Gentlemen,

Assalamualaikum warahmatullahi wabarakatuh, and a very good morning.

  1. On behalf of the Securities Commission Malaysia (SC), I would like to wish all delegates a warm welcome and hope that you are enjoying your short stay in Malaysia. I would like to thank Datuk Johan for gracing this occasion and agreeing to deliver remarks.
  2. We are honoured to host the 41st ASEAN+3 Bond Market Forum (ABMF) here in Kuala Lumpur. This marks the first time since the ABMF's inception in 2010 Malaysia is hosting this event and it comes at an important moment as Malaysia prepares to assume the Chairmanship of ASEAN in 2025.
  3. The theme for this Forum is “Sustainable Finance and the Role of Ethics”. It underscores the ability of finance to shape a sustainable future. Concurrently, we must not forget that our actions must be anchored on good morals and ethics.
  4. In Malaysia, we have always believe in aligning finance with ethical values. We have made progress, particularly in Islamic finance, but there is still much to do. The challenges of today, especially with climate change, demand that we continue to innovate. By doing so, we can ensure our financial system serves both people and the planet.

Ladies and gentlemen,

Promoting Sustainable Finance through the Malaysian Capital Market

  1. Malaysia’s capital market has been a key component of our financial system. It encompasses everything from our stock exchange, bonds and sukuk markets to newer digital fundraising platforms. This diversity and dynamism has given us the tools to make sustainability a real priority.
  2. While we are proud of what has been achieved so far- RM2.1 trillion or US$505 billion in outstanding bonds and sukuk, it is not just the numbers that matter to us. Our underlying desire is to build a capital market ecosystem that supports sustainable and inclusive economic development. It is also worth noting that our combined sukuk and equity market is now over 4 trillion ringgit and is larger than banking assets of about 3.7 trillion underscoring the importance of the Malaysian capital markets.
  3. The SC has been steadfast in integrating sustainability into market practices. We believe that through initiatives like the 5i-Strategy and frameworks for Sustainable and Responsible Investment (SRI), we have laid a strong foundation for responsible finance.
  4. Significant milestones include the introduction of our SRI Sukuk Framework a decade ago. Notably, Malaysia issued the world’s first green sukuk in 2017, and we are among the top ASEAN nations for sustainable finance.
  5. Despite this strong regional position, Malaysia's share of the global ESG bond market remains modest, representing 0.3% of the total outstanding year-to-date.
  6. Nonetheless, there has been a variety of SRI Sukuk offerings, in areas such as green buildings, affordable housing, education, and more.
  7. There is more to be done, but we are moving in the right direction.

Ladies and gentlemen,

Maqasid Al-Shariah: An Ethical Framework for Finance

  1. Last year, the SC introduced the Maqasid Al-Shariah Guidance for the Islamic Capital Market (ICM) to position Malaysia as a regional centre for Shariah-compliant SRI.
  2. These principles – focused on protecting faith, life, intellect, progeny, and wealth, offer a simple yet compelling framework to ensure finance benefits society as a whole and are based on Islamic Shariah principles. The best way to explain Maqasid al-Shariah is that it is a form of classification or taxonomy to define what is good and ethical behaviour in the context of the Capital Market and Islam.
  3. The Maqasid principles resonate with universal values and provide an approach for all of us, regardless of faith, on how finance can uplift communities and protect our world.
  4. These principles are embedded in our SRI Sukuk framework, which we intend to build on.
  5. For example, the issuance of SRI Sukuk for the development of solar energy farms, aligns with Principle 4 (fostering an ethical and learning culture) by promoting environmental stewardship and long-term community well-being.
  6. We are also working with financial institutions like Maybank Islamic and HSBC Amanah to integrate Maqasid principles into product development, while promoting inclusivity through initiatives such as the MSME and MTC Roadmap and the upcoming Social Exchange.
  7. Additionally, Islamic banks in Malaysia offer products that prioritise affordable housing and healthcare, upholding Principle 12 (accountability) in supporting responsible use of wealth in line with ethical and social objectives.

Ladies and Gentlemen,

Scaling Up Blended Finance

  1. One of the biggest issues we face in Asia is ensuring that sustainable projects are funded.
  2. Given the clear urgency and demand, why haven’t we seen the level of action required?
  3. One of the biggest obstacles is financially viable projects. At least 35% of sustainable infrastructure projects are only marginally bankable, with another 55% considered un-bankable. Unfunded projects could result in a climate finance gap of US$2 trillion annually, hindering Asia’s ability to achieve net zero by 2050.
  4. So, what is the solution? How do we ensure that capital flows where it is most needed in Asia, and stays on course?
  5. One way is to pool different forms of capital — from commercial investors to philanthropic funds — with the aim of financing critical projects. Blended finance is a prime example of this initiative.
  6. At its core, blended finance is about structuring and managing risks effectively. It enables senior or commercial capital providers to make risk-adjusted investments at scale while achieving the returns they need. The real conversation, then, must focus on mitigating risk for large projects.
  7. Let me share with you a successful local solution.
  8. In 2019, the Malaysian government established a co-investment fund known as the Malaysia Co-Investment Fund (MyCIF) to co-invest in micro, small and medium enterprises (MSMEs) through equity crowdfunding (ECF) and peer-to-peer (P2P) financing platforms. Since inception, MyCIF has co-invested RM930 million or US$226 million alongside private investors who have provided RM3.8 billion or close to US$1 billion. These amounts have collectively helped to spur the growth and competitiveness of more than 6,300 Malaysian MSMEs.
  9. MyCIF funding can also be targeted. An additional RM100 million or US$24 million was allocated in 2023 to encourage more MSMEs to contribute to environmental and social solutions. These small steps will hopefully lead to bigger changes.

Challenges and Areas for Improvement

  1. We are aware that, like many other developing countries, Malaysia faces challenges in the adoption of ESG standards. So far, the main driver of sustainability initiatives has been the government.
  2. Limited and uneven private sector participation has resulted in slower ESG adoption across industries, restricting the potential of market-driven sustainability investments. For Malaysia to achieve its climate and sustainability goals, there is a pressing need to deepen the involvement of private companies and the financial sector, empowering them to be more proactive in driving sustainable finance and climate adaptation initiatives.
  3. Recently, the IMF warned of potentially unsustainable global debt levels as rising borrowing costs weaken emerging economies. This may limit government-led sustainability measures, making the involvement of the private sector even more crucial.
  4. Therefore, I would like to call on more businesses and financial institutions to join us in championing the sustainability agenda to help alleviate the burden of government. The issue is a whole of society problem and the private sector and philanthropists should play their part.

Responsibility of ASEAN Countries and Conclusion

Ladies and gentlemen,

  1. As we look across the ASEAN region, the need for sustainable finance has never been greater. The good news is that we have started our first steps on this journey. Forums like ABMF offer participants the chance to collaborate, learn from one another and strengthen our collective efforts toward a greener, more sustainable future.
  2. Malaysia as the ASEAN chair for 2025 has as its theme, Inclusivity and Sustainability. Taking the cue, the forum of Capital Market regulators ACMF are currently completing our work on the ASEAN taxonomy principally on financing energy transition and are exploring some new areas such as a taxonomy for Adaptation called MARS and also how we can agree on a common set of rules for Carbon Credit programmes in the region.
  3. In closing, let us continue to work together to ensure that finance serves the greater good. Patience and persistence are required as we build a sustainable future that reflects our shared values and aspirations. And underlying all this, is the need for morals and ethics in whatever we do.
  4. On that note, thank you for listening and I hope you will find the sessions today engaging and productive.

ENDS
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