The Bank Negara Malaysia (BNM) highlighted that the Joint Committee on Climate Change (JC3) continues to advance initiatives to strengthen the financial sector’s capacity in managing climate-related risks. Post the August meeting of the Joint Committee, BNM and the Securities Commission Malaysia have published a joint statement on advancing the financial sector's response to climate risk. The statement notes that, this year, JC3 expects to publish the reference guides on climate risk management, scenario analysis, and climate-related disclosures. Following the successful virtual JC3 Flagship Conference "Finance for Change" in June 2021, the JC3 has also published a report on the key insights, discussion, and calls to action from the conference.
The JC3 continues to actively collaborate and engage with the business community to support the financing needs of corporates and their supply chains in their transition to sustainable practices. The following are the key highlights of recent developments in this area:
- Following the issuance of the Climate Change and Principle-Based Taxonomy (CCPT) in April 2021, a CCPT Implementation Group will be established to support its consistent and credible implementation by financial institutions. Twelve JC3 members have committed to early adoption of the CCPT, in advance of expectations for financial institutions regulated by BNM to classify and report their lending and investment activities in line with the CCPT from July 2022. The CCPT provides a common framework for the classification of climate risk-related exposures of financial institutions to support risk assessments and encourage financial flows towards greening the economy.
- JC3 members reviewed the progress of work undertaken to develop reference guides on climate risk management and scenario analysis and climate-related disclosures. The JC3 expects to publish the reference guides in the fourth quarter this year. Concurrently, work will be undertaken by the JC3 to produce relevant localized reference climate scenarios for Malaysia to improve the understanding of the physical and transition impact of climate change under different climate pathways. This in turn will support risk assessments, better alignment of business strategies with climate targets, and climate-related disclosures by financial institutions.
- Members further discussed plans for the mandatory climate-related financial disclosures by financial institutions and details on these plans will be released by year-end.
- The workplan of the newly established Sub-committee on Bridging Data Gaps was endorsed at the meeting. JC3 members supported the prioritization of the initial use cases by the Sub-committee, which include data to support investment and lending decisions, macroeconomic modeling, stress testing, scenario analysis, and product development. For the use cases, the Sub-committee will work with key public and private sector partners to identify critical data needs and map them to relevant data sources. The Sub-committee will create a catalog of climate data that can be accessed by the financial sector.
- Members discussed the recently launched Kuala Lumpur Climate Action Plan 2050 and agreed to engage with the Kuala Lumpur City Hall (DBKL) to explore the opportunities for the financial sector in addressing the sustainable financing needs of the city.
- Members also agreed to nominate JC3 representatives to the CEO Action Network (CAN), a coalition of corporate and SME CEOs committed to catalyzing and accelerating adoption of sustainable practices in corporate Malaysia and the business ecosystem.
Keywords: Asia Pacific, Malaysia, Banking, Climate Change Risk, ESG, Taxonomy, Sustainable Finance, Disclosures, Scenario Analysis, Stress Testing, Data Gaps, Macroeconomic Modeling, BNM
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)