BNM Committee Furthers Work on Addressing Climate Change Risk
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.
Related Links
Keywords: Asia Pacific, Malaysia, Banking, Climate Change Risk, ESG, Taxonomy, Sustainable Finance, Disclosures, Scenario Analysis, Stress Testing, Data Gaps, Macroeconomic Modeling, BNM
Featured Experts
James Partridge
Credit analytics expert helping clients understand, develop, and implement credit models for origination, monitoring, and regulatory reporting.
Emil Lopez
Credit risk modeling advisor; IFRS 9 researcher; data quality and risk reporting manager
Nihil Patel
Data scientist; SaaS product designer; credit portfolio analyst and product strategist; portfolio modeler; correlation researcher
Previous Article
MAS Lifts Dividend Restrictions for Banks, to Hold Fintech FestivalRelated Articles
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
