Malaysian Rating Corporation Berhad (MARC) 360: Sustainable Development Financing 2022

KEYNOTE ADDRESS

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

(DELIVERED BY YBHG. DATO’ SERI ASRI BIN HAMIDON, SECRETARY-GENERAL OF THE MINISTRY OF FINANCE)

MALAYSIAN RATING CORPORATION BERHAD (MARC) 360: SUSTAINABLE DEVELOPMENT FINANCING 2022

Yang Berbahagia Datuk Jamaludin Nasir
Group Chief Executive Officer, Malaysian Rating Corporation Berhad

Esteemed speakers and panelists of this conference

Members of the media

Ladies and gentlemen,

INTRODUCTION

1. First and foremost, I would like to thank the Malaysian Rating Corporation Berhad (MARC) for inviting me to deliver this keynote address at the MARC 360: Sustainable Development Financing 2022 conference. It is a great honour and privilege to address all of you today on the topic of sustainability, which is by far one of the most pressing challenges facing humanity and our civilisation today.
   
   
2. As many of you are aware, I spent last week in London meeting with members of the business and investment communities, as well as rating agencies and key international media stakeholders. Overall, Malaysia’s sustainability policies and initiatives captivated the interest of many, particularly those relating to sustainable financing. Alhamdulillah, based on the feedback we have received so far, they believe Malaysia is on the right track.
   
   
3. However, we must never become complacent in the face of these complex challenges. One thing is certain, sustainability, especially sustainable development, is no longer an after thought. The recent floods, for example, serve as a stark reminder of the physical threat that climate change poses to our people’s lives and safety.
   
   
4. This has strengthened MOF’s commitment to sustainable development and building resilience in order to create a stronger and more inclusive economy. While much remains to be done for Malaysia to meet the UN Sustainable Development Goals (SDG), we have made significant progress, particularly in areas such as poverty eradication, public health and well-being, as well as quality education.
   
   
5. Therefore, in today’s address, please allow me to discuss some of these challenges and share with you what we at the MOF have been working on, as well as future opportunities.

Ladies and Gentlemen,

GLOBAL OVERVIEW AND SUSTAINABLE DEVELOPMENT IN NATIONAL RECOVERY

6. It has been over two years since COVID-19 has had an unprecedented impact on countries all over the world. According to the IMF, the pandemic will cost the global economy 12.5 trillion US dollars through 2024, where governments around the world have spent more than 20 trillion US dollars in fiscal stimulus to cushion the impact.
   
   
7. Malaysia, like the rest of the world, reacted swiftly to the twin health and economic crises. We took bold steps, implementing eight stimulus packages totalling more than 530 billion ringgit, as well as two historic expansionary annual Budgets to protect the lives and livelihood of the people, ensure business continuity and support the economy.
   
   
8. All these have supported our economic growth, which increased by 3.1 percent in 2021, compared to a contraction of 5.6 percent in 2020.
   
   
9. In the near-term, I want to emphasise that Malaysia is firmly in recovery mode as our international borders reopen and we gradually enter the endemic phase of COVID-19 beginning April 1 st. Overall, this will support the growth momentum this year, where we are on track to grow at a rate of 5.5 to 6.5 percent, in line with forecasts by both the World Bank and the IMF.
   
   
10. However, we must acknowledge that the pandemic and the resulting socio-economic crisis have not only caused much pain but have also hampered global efforts to achieve the 2030 Agenda for Sustainable Development, which Malaysia has also adopted. It has exposed social fault lines and widened social gaps as millions lose jobs, income, as well as health issues which are burdening our public healthcare systems.
    
    
11. It pushed millions into extreme poverty and hunger, putting millions of lives in jeopardy. The pandemic has also derailed various sustainability efforts. Worse, various issues is slowing the economy, including new COVID-19 variants, labour market and supply-chain challenges, and rising inflationary pressures.
    
    
12. Developing countries and vulnerable groups have been hit the hardest by these. Developing countries, which face higher interest rates and service fees, are struggling to service their debts. Many are also using public funds for debt repayment.
    
    
13. And all this is before the ongoing Ukrainian and Russian conflict, which have already disrupted major supply chains and may disrupt the global economic recovery.
    
    
14. In order to achieve our economic recovery goals, we must take advantage of the crisis to strengthen our economic foundations. To rebuild our economy better and stronger than before the pandemic, we must embed and embrace sustainable development principles.
    
    
15. The 11th Malaysia Plan and the 12th Malaysia Plan both sowed the seeds of mainstreaming sustainable development. Our measures in Budget 2021 and Budget 2022 are also strategically aligned with the UN SDGs. A holistic and inclusive recovery can only be achieved if sustainability is at the core of our post-COVID strategy.

Ladies and Gentlemen,

SUSTAINABLE DEVELOPMENT FINANCING IS CRUCIAL TO BUILD SOCIO-ECONOMIC RESILIENCE

16. There can be no recovery without sustainability, and there can be no sustainability without recovery. This is why the MOF, in collaboration with other regulatory bodies such as BNM and SC, has been developing a comprehensive framework for sustainability, with the goal of establishing Malaysia as a Sustainable Financial Hub.
    
    
17. We have pursued aspects such as SDG Tagging of Development Expenditure, the establishment of the MySDG Trust Fund, the introduction of the Sustainability Sukuk, and Government Green Procurement through the Integrated National Financing Framework (INFF).
    
    
18. In terms of public finance, beginning with Budget 2021, we have aligned our budget measures with the SDGs in order to fund SDG-related projects. According to the UN, Malaysia is one of the ten countries in the world that has fully aligned its national budget with the SDGs. This reflects the government's unequivocal commitment to doing so right away.
    
    
19. Our Prime Minister, YAB Dato Sri Ismail Sabri Yaakob, recently established the Malaysia Sustainable Development Goals Foundation (or MySDG Foundation), which will manage the MySDG Fund in collaboration with the UN. To advance Malaysia's sustainable development agenda, the private sector and other parties can contribute to the fund.
    
    
20. With key measures such as the establishment of a Voluntary Carbon Market (VCM) by Bursa Malaysia, matching grants via a Low Carbon Transition Facility to encourage SMEs to embrace sustainable practices, and allocating 450 million ringgit for initiatives such as nature conservation and ecological fiscal transfer, MOF took bolder steps towards facilitating and financing the sustainability development agenda in Budget 2022.
    
    
21. I am also pleased to announce that we will be issuing our Sustainability Sukuk of up to 10 billion ringgit later this year to fund projects focusing on socioeconomic and environmental sustainability. The Sustainability Sukuk's main goal is to direct funds toward recovery initiatives that also build long-term resilience.
    
    
22. In addition to these high-level policy initiatives, there are other key supportive initiatives, such as the Joint Committee on Climate Change (JC3) of the Securities Commission (SC) and Bank Negara Malaysia (BNM) to build climate resilience in Malaysia's financial sector.
    
    
23. BNM has also been proactive, releasing the Value Based Intermediation Financing and Investment Impact Assessment Framework (VBIAF) on palm oil, renewable energy, energy efficiency, oil and gas, manufacturing, construction, and infrastructure in 2021, as well as the Climate Change and Principle-based Taxonomy (CCPT). SC, too, has issued their Sustainably Responsible Investment (SRI) taxonomy, which will be finalised by this year.
    
    
24. Collectively, these initiatives will help Malaysia achieve its goal of becoming a net zero carbon nation by 2050.

Ladies and Gentlemen,

MOVING FORWARD: MAKING SUSTAINABILITY ASPIRATIONS A REALITY

25. It is clear that the MOF and its agencies have paved the way for sustainable development financing. In living up to the whole-ofnation concept, I am confident that the financial sector will contribute to the success of the nation’s sustainability journey. To that end, three key factors must be prioritised:
    
    
    1. Firstly, we must all work together to ensure that funds for sustainable development are available. Financial institutions, as the lifeblood of the economy, should embrace the sustainability agenda and deliver their commitments, whether through financing or through their operations and CSR initiatives, such as prioritising vendors and partners who also commit to the sustainability agenda.
       
       
    2. Secondly, because we are racing against time to mitigate the effects of climate change or other future shocks, financial institutions must assist the government in mainstreaming the sustainability agenda across as many sectors and industries as soon as possible. MOF has already begun budget-tagging specific measures to ensure that various ministries spend in accordance with our sustainability expectations. To maintain the momentum of this mainstreaming process, financial institutions must share key data on how each industry has ‘shaped up’ in terms of sustainability, so that future policies can be tweaked accordingly to improve our climate adaptation and crisis mitigation strategies as quickly as possible.
       
       
    3. Thirdly, financial institutions must assist the government in enabling and improving the adaptive capacity of households and businesses. Apart from providing incentives, we must also remove barriers, such as lack of information and financing, as well as behavioural biases and imperfect markets. We can support the right innovation and technologies to mitigate climate and other risks if we work together to make this information available. We want to ensure that financing is available for environmental or social solutions that may have high upfront costs by enabling start-ups through platforms like Penjana Kapital. Furthermore, we will continue to provide direct assistance to the poorest, who cannot afford to invest in adaptation initiatives. However, they are the most vulnerable to the terrible effects of climate change and other shocks such as another pandemic.
       
       

Ladies and gentlemen,

CONCLUSION

26. Finally, I must emphasise that sustainability is a shared responsibility. Globally, climate change and another global pandemic are the two most important issues that could shape, make, or break this century. As a result, Malaysia must do everything possible to promote sustainable development, and the lowest hanging fruit is the financial sector, the lifeblood of our economy.
    
    
27. Before I conclude, I would like to thank MARC once more for this invitation to deliver the keynote address on the important topic of sustainable development financing, which highlights not only our recovery, but also our future resilience. Let us all work together to strengthen our resolve, and use our collective knowledge to achieve our sustainability goals sooner rather than later.
    
    
28. On that note, I wish everyone a fruitful discussion throughout the course of this conference. Thank you