Accelerating climate action through the financial sector – Joint Statement from BNM and SCM
BNM – The Joint Committee on Climate Change (JC3) held its third meeting on 14 September 2020. The meeting discussed the progress of initiatives under its four sub-committees (namely, Risk Management; Governance and Disclosure; Product and Innovation; and Engagement and Capacity Building), as well as the focus of priorities for the next 12 months.
Members affirmed the importance of climate change management given the significant risks and systemic impact that climate events can inflict on our lives and livelihoods. The current COVID-19 pandemic has highlighted the far reaching impact of similar global events, with demand and supply shocks spreading across borders. This has raised a further sense of urgency to the work of JC3 in supporting efforts to build resilience against climate and environmental-related events, and secure an orderly transition to a more sustainable economy.
The meeting discussed the completed deliverables of the sub-committees during the year and future work to be undertaken.
- Following the public consultation on Bank Negara Malaysia’s Discussion Paper on Climate Change and Principles-Based Taxonomy which was published in December 2019, comments and suggestions had been received from more than 80 institutions. A revised document, which will include enhancements to the classification system and scope of application, as well as additional guidance for implementation will be published in early 2021. In parallel, 12 financial institutions that are members of the JC3 will participate in a pilot implementation of the taxonomy scheduled to commence this month. Members also provided input on the development of reference documents on climate risk management and scenario analysis which will be undertaken by Sub-committee 1 over the coming months to further strengthen risk management practices in the financial sector.
- Members discussed the results of an assessment conducted on climate-related disclosure practices across a sample of financial institutions operating in Malaysia based on recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Insights from the assessment will inform planned work on developing an Application Guide on Climate-Related Disclosures which will commence shortly as part of initiatives to improve the quality of disclosures.
- Members exchanged views on the demand and supply conditions shaping the current green finance landscape in Malaysia. Key challenges noted by financial sector participants include the paucity and fragmentation of information, gaps in technology knowledge, coordination issues and low visibility on national strategies. Initial views were shared on measures to address these market gaps, which will be further developed by the Product and Innovation sub committee. Members discussed the important role of institutional investors in the development of products and services to address climate change and agreed to further engage with institutional investors to identify opportunities in this area.
- In pursuing JC3’s continuing engagement and capacity building efforts, three awareness and education programmes were organised despite constraints posed by the MCO. The programmes brought together financial service providers, Government ministries and agencies, education institutions, business corporations and NGOs to share experiences, develop technical knowledge and build networks in climate risk-related areas. The meeting also discussed plans to develop more structured technical capacity building programmes for financial industry participants.
As part of its priorities over the next 12 months, members committed to work towards wider adoption of the recommendations by the TCFD and advance concrete actions to pave the way for the adoption of disclosure standards by the industry in the immediate future. JC3 members also agreed to take up as part of its future work plan, the development of measures to help bridge current gaps in climate and environment risk-related information needed to support risk management and product solutioning by financial service providers.
