MOF In Big Push For Voluntary Carbon Market

Tengku Zafrul Aziz, Minister of Finance, says the Government, through the MoF, and all other Ministries and agencies, will equip Malaysia to accelerate the transition to a more sustainable economy and will push for the voluntary carbon market.

“To help drive and sustain this ambition, we have announced a number of sustainability-related initiatives that will be implemented and undertaken in Budget 2022.

“These initiatives require extensive collaboration and include the implementation of green technology tax incentives, as well as matching grants to further promote the use of sustainable raw materials and renewable energy by the country’s SMEs.

“This includes implementing specific financing measures such as a 1 billion ringgit Low Carbon Transition Facility, establishing a Voluntary Carbon Market by the end of 2022, and issuing Ringgit-denominated Sustainability Sukuk of up to 10 billion ringgit,” he said at the launch of Khazanah’s Sustainability Framework And Targets.

He says he hopes in addition to Budget 2022 measures, there is the recurring broad-based strategies and measures that will support our longer-term ESG-based aspirations.

Firstly, strengthening sustainability-related financing and investments, which complements the UN Sustainable Development Goals (SDGs) by coordinating initiatives and programmes that incorporate ESG elements.

These will include an overall effort from all to embrace the sustainability principle in public spending, the Government through MoF has tagged all programmes and projects under development expenditure to the SDGs in our annual budgets.

Voluntary Carbon Market

MoF will implement the Voluntary Carbon Market in collaboration with the Ministry of Environment and Water and Bursa Malaysia, before transitioning to the Domestic Emissions Trading Scheme.

Along with the announcement to establish the National GHG Centre to improve transparency in climate change data and reporting for the country, this will boost and attract low carbon investments.

In order to monitor and drive action towards meaningful change at the regulatory level, Bank Negara Malaysia and the Securities Commission have jointly issued the Task Force on Climate-related Financial Disclosures (TCFD) Application Guide for Malaysian Financial Institutions in March this year.

Following the TCFD’s recommendations, Bursa Malaysia has proposed changes to its Listing Requirements aimed at improving sustainability disclosures for listed companies across all sectors.

He says the MoF’s second main strategy is to empower SMEs in the area of ESG. Given the importance of the sector to the economy, developing the capacity of our SMEs is a key building block to achieving our ESG aspirations and our net- zero goal by 2050.

Principles of Good Governance

“Apart from targeted SME financing measures aimed at assisting and enabling SMEs to incorporate ESG principles into their operations, we have launched the Principles of Good Governance, which will be implemented by GLICs such as Khazanah.

“This will ensure that GLICs and the SMEs in their ecosystems are prepared to meet the growing demand of global markets,” he says.

The third main strategy is to institutionalise ESG measures. One notable example is the establishment of the Malaysia Sustainable Development Goals Trust Fund (MySDG Fund) earlier this year in collaboration with the United Nations (UN).

With an initial contribution of 20 million ringgit, this major funding collaboration demonstrates our strong commitment to incorporating SDG principles into Malaysia’s national development plans and policies, while also being transparent about the fund’s utilisation.

“I am also pleased to share that our position for 2023 remains firm in terms of enabling the implementation of ESG-focused development projects and programmes.

“We have outlined a few key priorities in our recently announced Budget 2023 Pre-Budget Statement, including Malaysia’s strategic transition from the current recovery phase to longer-term reforms,” he adds.

“These include facilitating better income opportunities and improved holistic wellbeing in order to achieve Keluarga Malaysia’s vision of more inclusive and sustainable development.

Sustainability efforts

While these are promising foundations, it cannot be done in isolation. “As mentioned by Dato’ Feisal, lasting and sustainable reforms can only be achieved by uniting the entire nation behind a common sustainability vision, with participation from all parties, including the private sector,” he says.

Having said that, he says the MoF is confident that both public and private sectors will play their respective roles and contribute to the success of Malaysia’s sustainability efforts and goals.

“It is thus encouraging to see that Khazanah, as well as other GLCs such as EPF, TNB, CIMB, and PETRONAS, embrace the sustainability agenda by incorporating ESG into their core strategies and embedding it throughout their operations and CSR initiatives. This is really walking the talk on leadership in ESG and sustainability.

“These GLCs contribute to the mainstreaming of ESG by serving as role models, catalysing change within their respective ecosystems, and encouraging the rest of Corporate Malaysia to consider how they behave and how their actions affect the communities and environment in which they operate.

“To other corporates out there, and as the CEO of a regional banking group before, I can assure you that these efforts will not only allow your companies to be more responsible but will also protect your company’s interests in creating value by mitigating potential ESG and regulatory risks,” says Zafrul.

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