Closing Plenary By Minister of Finance for Joint Committee On Climate Change (“JC3”) Flagship Conference 2021

CLOSING PLENARY

YB SENATOR TENGKU DATUK SERI UTAMA ZAFRUL TENGKU ABDUL AZIZ
MINISTER OF FINANCE, MALAYSIA

JOINT COMMITTEE ON CLIMATE CHANGE (“JC3”) FLAGSHIP CONFERENCE 2021
“Fostering a Sustainability Landscape in Public Finance”

24 JUNE 2021 (THURSDAY)
5:15 pm – 5:30 pm

SALUTATIONS

YBhg. Datuk Nor Shamsiah binti Mohd Yunus, Governor, Bank Negara Malaysia

YBhg. Datuk Syed Zaid Albar, Chairman, Securities Commission Malaysia,

Members of the Media,

Ladies and Gentlemen,

Assalamualaikum w.b.t and a good evening,

INTRODUCTION

1. I would like to thank the Joint Committee on Climate Change (JC3) led by Securities Commission and Bank Negara – as the co-organisers and for hosting this important forum, as well as our distinguished speakers who have committed their time to drive discussions throughout this event.

2. I am pleased to know there are over a thousand registrants for this event, with representation from regulators, financial institutions, insurance companies, private sector companies and civil society. Your attendance demonstrates the financial sector’s collective commitment in championing climate change and sustainability issues, despite challenges from the triple threats of COVID-19 - namely the pandemic itself, the economic impact of containment measures, and consequences from the global recession brought on by this crisis.

3. As Malaysia accelerates economic recovery through the national immunisation program which is complemented by economic stimulus packages totalling RM380 billion, it is equally critical that we take the long view to ensure that financial sector and market participants remain focused in mitigating climate change risks. Because climate-related risks could produce similarly devastating, or worse effects on the real and financial sectors.

4. Like COVID-19, climate change knows no borders, and could manifest in multiple far reaching impacts. These include the emergence of health crises due to extreme weather events such as floods and droughts, as well as food security and supply chain issues, resulting in economic and financial instability which will disrupt our day-to-day life.

5. Unlike 50 years ago, climate change is no longer hypothetical, but a certainty. The good news is that we are well aware of the risks today. We know what needs to be done and we have the means to mitigate many of these risks. Moreover, the strategic options from climate mitigation and adaptation actions offer a host of new and profitable opportunities for transformative investments and green jobs.

6. However, the question remains whether we – as a country, be it the Government, businesses, communities or individuals, have the will to do what is required and before it is too late.

7. Acknowledging this, the Government has adopted a ‘whole of nation’ approach in addressing the impacts of climate change on financial stability and economic sustainability. Financial institutions and the private sector play a critical role in complementing the efforts by the Government to improve the nation’s overall preparedness to manage these impacts, as well as to foster sustainable growth and development plans in accelerating our transition to a low carbon economy.

8. While climate action is urgent, we must also ensure that decisions are made in a holistic manner to optimise the outcome for as many stakeholders as possible. For example, how do we pursue an allencompassing green development that also benefits future generations?. How do meet our aspiration of becoming a high-income economy in a way that improves living standards for the Bottom 40, and ensure inclusivity and the narrowing of wealth gaps?

Ladies and Gentlemen,

THE GOVERNMENT’S COMMITMENT TO THE SUSTAINABILITY AGENDA VIA PUBLIC FINANCE

9. In aligning our policy actions to the sustainability agenda, the Government has made meaningful progress, both at the global and domestic level. Beginning with signing the Paris Agreement on Climate Change, as well as being part of the United Nation’s Sustainable Development Goals (SDG), I myself am now part of the Coalition of Finance Ministers for Climate Action (CFMCA).

10. With the first meeting held during the World Bank and IMF 2021 Spring Meetings in April, issues discussed include the need for more green investments as part of a global shift toward an inclusive and resilient recovery from the COVID-19 pandemic.

11. The Coalition also shared perspectives on policies to make progress towards decarbonization and managing climate-related financial stability risks. Further reinforcing our commitment at the international level, we have pledged to the Helsinki Principles, which is a set of six common principles, that promote national climate action, especially through fiscal policy and the use of public finance endorsed by the CFMCA.

12. Closer to home, the recently-established Malaysian Climate Action Council (MyCAC), which met for the first-time last April, is a ‘whole of nation’ approach in addressing issues related to climate change. Chaired by the YAB Prime Minister along with the participation of economic-related ministers and chief ministers of all states, MyCAC provides a nationallevel platform to more systematically and comprehensively get all sectors and states to act.

13. During the first meeting, MyCAC outlined six key priorities that will underpin and strengthen national climate governance through the concerted efforts of all stakeholders to meet our commitments under the Paris Agreement. This includes developing a green recovery plan for Malaysia to be a hub for green economy, services and technology, and the implementation of various programmes to drive the climate change agenda by mobilising manpower resources and financial allocations.

14. Some of the initiatives we are working on through MyCAC include:

1. developing carbon market guidelines and carbon pricing policies to support a national emissions trading system;
2. implementation of a Low Carbon Mobility Development Plan 2021- 2030; and
3. developing a National Low Carbon City Masterplan as the basis of guidance and direction for Low Carbon Cities.

Ladies and gentlemen,

15. I am also pleased to inform everyone that the Ministry of Finance remains committed to ensure adequate financing for programmes and projects related to the SDGs. Beginning with Budget 2021, all annual budgets will be fully aligned to the SDGs. I can assure you that we will see more of this by strengthening and widening sustainability related financing in the upcoming Budget 2022. Moreover, we are now working with the UN Development Programme to establish an Integrated National Financing Framework, which comprises of platforms for innovation and reforms spanning from policy, regulation, financial instrument, institutions as well as greater public and private collaboration.

16. We have also volunteered to lead the Working Group on Finance for Sustainable Development under the national-level SDG Steering Committee to align financing flows and policies with economic, social and environmental priorities and ensures that financing is stable and sustainable.

17. As a matter of fact, the Government’s commitment in widening sustainability financing include our recent success in pricing and issuing the world’s first sovereign US Dollar Sustainability Sukuk totalling 1.3 billion US dollars which garnered overwhelming interest with an oversubscription of 6.4 times.

18. Overall, the issuance is a testament of the market’s confidence in Malaysia’s economic recovery and growth prospects, despite the COVID19 challenges.

19. Another example I would like to highlight is Malaysia’s 666 million Ringgit fully digital Sukuk Prihatin launched last year, which emphasises on social aspects and had a donation feature embedded. This issuance was awarded the prestigious 2020 IFN Global Overall Deal of the Year.

20. While these issuances set a new benchmark and showcase Malaysia’s global leadership in Islamic finance, our country’s position as the world’s largest sukuk market as well as the industry’s innovative capabilities in structuring deals is reinforced. This is particularly important for us to advance our SDG-focused policies, as well as pave the way for other Malaysian issuers to tap into this funding base to address ESG concerns.

21. I would also like to take this opportunity to inform everyone that we are now at the tail end of launching a MySDG Trust Fund in collaboration with the UN to complement the development allocation towards the SDGs in order meet any financing gaps. The jointly-managed Fund would enable the creation of a bigger pool of funds that is sourced not only from the Government but also the private sector, individuals and entities all over the world to contribute towards SDG-related programmes and projects in Malaysia. This will also enable us to leverage the expertise of the UN through its best practices in managing similar funds globally.

Ladies and gentlemen,

MALAYSIA GEARING UP ON SUSTAINABLILITY AND CLIMATE FINANCE

22. The role of the financial services sector in accelerating sustainable business practices cannot be understated. It is the financial institution’s responsibility to ensure that their services do not cause harm to the people and planet.

23. Moreover, they play a key role in channelling capital towards a low-carbon economy, which will create greater economic opportunities in new jobs and better resource management, while reducing emissions and protecting the vulnerable groups. Financial institutions, as providers of capital to the private sector, have the potential to play a key influencing and catalytic role in accelerating the adoption of sustainable business practices.

24. I am glad to see the rapid development and maturing of sustainability within the financial services sector, with the JC3 platform established in 2019 to pursue collaborative actions for building climate resilience within the Malaysia financial sector. Being one of the members when it started, I am very encouraged by the significant progress achieved so far.

25. Just within the last two years, Bank Negara has issued its PrinciplesBased Taxonomy, which will form the critical backbone towards identifying, measuring and catalysing climate-aligned activities, as well as its VBI Sector Guides which set out specific sector requirements for key sectors such as palm oil, renewable energy, and energy efficiency.

26. Meanwhile, SC has also updated the Malaysian Code of Corporate Governance 2021 and introduced new and enhanced practices for boards and senior management to manage ESG risks and opportunities, as well as communication strategies, priorities and targets for both internal and external stakeholders.

27. In the industry, we have also seen our largest institutional investors, EPF, KWAP, and Khazanah, who are signatories to the UN Principles for Responsible Investment, highlighting their commitment to sustainable investments, while Malaysian banks have been active in facilitating sustainable financing instruments such as sustainable bonds and sustainability-linked loans.

28. All this has not gone unnoticed – official data show that Malaysia is improving rapidly in a number of dimensions, particularly ESG integration into products and services. What’s encouraging to note is the private sector has essentially started driving climate action. A study by EY noted that over 60% of the top 100 Malaysian public listed companies have committed to climate action in 2020. Most notably perhaps, is our home-grown energy firm Petronas declaring in October 2020 that it will be carbon neutral by 2050, making it the first oil company in Asia to set a net zero target.

29. On this note, I would like to encourage all Malaysian businesses to ride on Malaysia’s well-developed financial market, global leadership in Islamic finance and Government’s initiatives such as the Green Technology Financing Scheme (GTFS) 3.0 to drive sustainable finance and generate maximum benefits based on the People, Planet, Profit principle.

Ladies and Gentlemen,

CONCLUSION

30. I hope that through all these, the country’s intentions and deep commitment towards sustainable development is clear. However, for us to achieve our climate commitments, we need all businesses, financial institutions and members of society to embrace a mindset and behaviour shift that prioritises not just profits and gains for today, but also safeguards the future for our children.

31. With this, I would like to conclude with a clear call to action to both the private and public sectors, and all present. Capacity building events, such as this conference, is critical in enhancing the management of the impacts of climate change. However, given the urgency of the climate emergency, we need to quickly move from awareness to commitment and action.

32. Therefore, I urge the financial services players here today to identify areas where they can make an impact, and set targets to achieve them. Importantly, targets must be set in alignment with national priorities, such as Malaysia’s Paris Agreement commitment to reduce greenhouse gas intensity by 45% by 2030, and other science-based targets.

33. Each of us has a role to play. For me, the COVID-19 crisis has demonstrated that urgent, decisive and coordinated actions can help turn crises into recovery opportunities. The pandemic has also shown the incredible agility and resilience of the human race, when the need for change is clear. We have had great challenges and great opportunities, and with everyone’s contribution, I am confident we will achieve our aspirations, especially in charting a better future for everyone.

34. On that note, I would like to thank the organisers again for inviting me, and for successfully organising this event – with many prominent speakers and international thought leaders such as Sir David Attenborough, Mr Lewis Pugh, and Miss Maykee-Aimee Damen. I hope everyone has found the conference meaningful, and I wish you a wonderful day ahead, thank you.