The Bank Negara Malaysia (BNM) published a guide to facilitate the adoption of application of the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations on more effective climate-related disclosures.
The guide, which is issued by the Joint Committee on Climate Change (JC3), outlines key recommendations supplemented by the relevant descriptions, guidance notes, considerations, and examples that could be utilized as practical resources to facilitate the adoption of TCFD Recommendations by the Malaysian financial industry. Most recommendations made are applicable or relevant to a range of financial institutions. As for the recommendations that are more sub-sector specific, financial institutions should refer to the corresponding TCFD Supplemental Guidance for Banks, Insurance Companies, Asset Owners and Asset Managers, as deemed appropriate. This application Guide forms part of a broader range of JC3 initiatives to support the progressive implementation of climate-related disclosures that are aligned with TCFD Recommendations. BNM is also developing a set of guidelines for climate risk management as well as climate scenario analysis to further facilitate TCFD-aligned disclosures by Malaysian financial institutions. It is also noted that nearly 64% of Malaysian banks have indicated plans to adopt TCFD in the next two years. The primary underlying aim of the adoption guide is to support the financial institutions who are stepping up efforts to implement the TCFD Recommendations in phases, beginning from 2022.
The recommended timeframe for implementation of all Basic Recommendations is within a period of up to 24 months. For a financial institution that has yet to address any of the recommendations made, the assumption is that all Basic Recommendations could be adopted within 24 months. As Stretch Recommendations are linked to more sophisticated underlying practices, their adoption should be dependent on a financial institution’s overall climate risk exposure and/or complexity of operations. Hence, each financial institution is expected to conduct their own assessment on the extent to which they should adopt Stretch Recommendations and the corresponding timeframe for implementation. The Guide is designed for financial institutions (local and foreign), including commercial, Islamic, and investment banks; development financial institutions; conventional and Islamic insurance and reinsurance companies; fund management companies; and institutional investors. BNM also notes that, as an extension of this initiative, disclosure guides for Malaysian businesses will be developed in 2022.
Keywords: Asia Pacific, Malaysia, Banking, Climate Change Risk, Disclosures, Scenario Analysis, ESG, Securities, Insurance, TCFD Recommendations, BNM
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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