The Bank Negara Malaysia (BNM) announced that the Joint Committee on Climate Change (JC3) issued the Climate Data Catalog and a report that outlines the key findings and recommendations with respect to bridging the gaps in climate risk data.
The data catalog contains critical data needed by the financial sector to support pre-identified use cases and includes data that are available, partially available, and unavailable, as well as observations on data gaps. The Data Catalog is compiled by the Sub-Committee on Bridging Data Gaps, of the Joint Committee on Climate Change (JC3). The data catalog is aimed at serving as a source of reference on climate and environmental data for the financial sector and represents a call to action for stakeholders to collectively improve the availability and accessibility of climate data. Moving forward, the Sub-Committee on Bridging Data Gaps will pursue efforts to collaborate with relevant stakeholders to bridge data gaps. An immediate area of focus for 2023 is to work with data providers to improve the availability of a number of the top priority data items.
The report on climate data takes stock of the climate and environmental data needs of the financial sector in Malaysia and reveals that that 49% of data items are available. Of these 49% of data items, only 18% are readily available. The remaining available data items suffer from gaps such as lack of granularity or accessibility. The accessibility of data either entails manual effort for data extraction or the data is proprietary, thus requiring subscription. The remaining data items are not published due to the confidentiality restrictions (11%) or are not available (40%). The report reveals that the identification of sources for critical climate data through the Data Catalog exercise has led to the discovery of several critical data gaps. Factors contributing to these gaps in public-sector data include methodological differences, legal impediments, and decentralized data compilation and publication. For the private sector, the main challenges are lack of capacity and motivation to collect and disclose climate data, particularly among the SMEs. The report notes that addressing these challenges will be important to collectively bridge identified data gaps. The report sets out the following key recommendations to bridge the data gaps:
- One recommendation is to implement common definitions and methodologies for key climate data to improve quality, reliability, and comparability of data. Common methodology to calculate emissions at the corporate level could be considered for adoption to improve the availability of entity-level greenhouse gas emissions data.
- Another recommendation involves alignment of disclosure requirements to established standards and frameworks. Disclosures can also be expedited to bridge data gaps through shifts to open data and the review of current data confidentiality restrictions.
- The public sector should consider using common interoperable data standards, application programming interfaces (APIs), and open data platforms. This will enable climate data to be organized in a manner that is easily accessible by users. Ideally a central body should be formed to lead the initiative, and subsequently enforce the implementation of open data across government agencies.
- Regulators may support and catalyze the establishment of an industry-led platform to accelerate climate data disclosure by companies. The coverage should extend beyond publicly listed companies, to also cover smaller firms such as the SMEs. The platform should ideally address the current fragmentation and uneven progress in disclosures. One means is by setting a low barrier to disclosure among the companies, thus improving the coverage of climate data disclosure for the use of financial sector.
- Yet another recommendation is for the financial sector to bridge the knowledge gaps through partnerships with academia and field experts.
- The financial sector can also explore incorporating existing data in their environment, social, and governance (ESG) rating methodology to rate and assess borrowers during onboarding and annual reviews of exposures as part of their climate risk management and assessment.
- Technology, existing data sources, and methodologies can be better leveraged to enhance the availability and quality of climate data. This could be achieved by utilizing global and open-source platforms, along with making better use of new technologies and APIs. Stakeholders in the climate data ecosystem may also consider using cutting-edge technologies, including machine learning and artificial intelligence, satellite imagery as well as statistical gap-filling approaches to bridge climate data gaps.
The findings from this exercise underscore the importance of ongoing collaborations between the public and private sector actors in the climate data ecosystem to prioritize, plan for, and ultimately close key data gaps, as part of a whole-of-nation strategy to support Malaysia’s orderly
transition to a low-carbon economy.
Keywords: Asia Pacific, Malaysia, Banking, Reporting, Basel, Climate Change Risk, ESG, Climate Data Catalog, Disclosures, Open Data Platform, Regtech, BNM
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