The Cooler Earth Sustainability Summit Facilitating A Just Transition

THE COOLER EARTH SUSTAINABILITY SUMMIT
FACILITATING A JUST TRANSITION

20 SEPTEMBER 2022 (TUESDAY)

REMARKS BY MINISTER OF FINANCE, TENGKU DATUK SRI ZAFRUL AZIZ

FOR THE MINISTERIAL PANEL: ACCELERATING CLIMATE ACTION & JUSTICE

Her Excellency Ibu Sri Mulyani Indrawati, Minister of Finance, Republic of Indonesia,

Her Excellency Karima El Korri, UN Resident Coordinator Malaysia, Brunei Darussalam and Singapore,\

Datuk Nasir Ahmad, Chairman CIMB Group,

Dato’ Abdul Rahman Ahmad, Group CEO of CIMB Group, Distinguished guests, Ladies and gentlemen,

1. It gives me great pleasure and honour to be here today for this year's The Cooler Earth Sustainability Summit. Thank you CIMB Group, for inviting me to be part of this summit.
   
   
2. Now in its fourth year, the summit has grown in importance as a platform for engagement between various stakeholders. I'd like to congratulate CIMB on its ongoing commitment to advocating for and embracing sustainability.

A CRITICIAL NEED FOR JUST GREEN TRANSITION

Ladies and gentlemen, esteemed guests,

3. Climate change poses a greater threat than ever before. We have witnessed heatwaves, violent floods, and devastating droughts all over the world. Summer temperatures in Europe, for example, reached record highs. Pakistan is experiencing the worst floods it has ever seen. Closer to home, we had the December flood, with losses estimated at RM6 billion.
   
   
4. All of these events, according to Bloomberg’s latest findings, are linked to a prolonged La Nina phenomenon, which has been the driver of extreme weather events since mid-2020. The world is expected to suffer losses and damages totalling USD1 trillion by the end of 2023. All of these have had an impact on livelihoods and displaced a large number of people. Homes were destroyed, crops ruined, shipping activities disrupted, and lives lost. Just like the pandemic, the most vulnerable groups are the least able to bear the consequences.
   
   
5. More recently, as geopolitical tensions persist, new challenges have emerged as energy prices remained high, forcing some countries to reconsider and subsidise hydrocarbons. It is a delicate balancing act – having to choose between energy security and affordability, as well as environmental sustainability at the same time.

MALAYSIA’S SUSTAINABILITY JOURNEY TO ADDRESS KEY ISSUES OF SOCIO-ECONOMIC EQUITY AND CLIMATE CHANGE

6. While the world appears to be embracing the energy transition, it is critical to recognise that each economy is not at the same stage of development, with own distinct national economic and energy goals. And the pandemic has widened the inequality between rich and developing nations to move this agenda forward.
   
   
7. Hence, at the upcoming 27th Conference of Parties, or COP27 in November, richer Governments around the world must contribute to addressing the pandemic-induced setback to our sustainable development goals, as the entire world faces a new struggle to strike a balance between supporting inclusive economic development and growth, ensuring secure and reliable energy access, and promoting environmental sustainability.
   
   
8. To make the transition, we must be more bold, ambitious, and just, in addressing issues such as compliance costs and capacity building for developing nations.
   
   
9. According to ILO estimates, transition to low-carbon and circular economies could create 100 million new jobs by 2030. Energy efficiency, renewable energy development, and green mobility will all result in job creation.
   
   
10. However, we must not underestimate the magnitude and difficulty of the transformations that will be required, especially in developing countries. It is critical that we consider the quality of employment in addition to the quantity of jobs that we seek to create, to make up for the potential jobs which will be displaced. This also means that the policies shaping the green transition must also promote social and economic equity.
    
    
11. In Malaysia, our whole-of-nation approach towards a green transition and being carbon neutral by 2050 is guided by the MOF’s 3R principles:
    
    
12. First, it is about being Responsive to the impact climate change has on people’s livelihood and welfare; second, we must also be Responsible in formulating policies that ensure no one will be left behind as we shift towards a greener economy. Third, we must also be Reformist in our policies that must address structural challenges, while also facilitating a just transition.
    
    
13. In achieving this, I want to talk about the progress the Government has made in the last two-and-a-half years, which clearly sets out our vision and action plan to move the green agenda forward. These include the following:
    
    
    1. First, setting up our National SDG Council, which plans and monitors the SDG implementation, setting the national agenda and SDG milestones. Progress on this includes establishing the National SDG Centre to empower, intensify and track progress of SDG programmes nationwide; targeting to finalise the carbon market framework by end- 2021; and the preparatory work for tabling the bill on climate change to Parliament next year.
       
       
    2. Secondly, establishing the Malaysian Climate Action Council (MyCAC), which is our national-level coordination to encourage green growth in the country. It brings together all economic ministries and state governments to align policies on the green agenda, including, most importantly, adaptation efforts. Progress made includes the National Adaptation Plan (MyNAP), which is building the country's resilience to the effects of climate change and flooding, as well as strengthen the public health sector. We are also developing projects to reduce the risk of flooding, with an estimated allocation of RM400 billion over 78 years.
       
       
    3. Third, just yesterday, our Prime Minister launched our National Energy Policy 2022 – 2040, Sets out the Government’s commitment to transition to a low-carbon energy through green mobility, renewable energy, and hydrogen as our primary energy source.

FINANCING MALAYSIA’S SUSTAINABILITY JOURNEY

14. One of my key responsibilities is to ensure that all these initiatives and transitions will receive the necessary budget allocations for us to scale up quickly on our green agenda, and this is where sustainable finance will play a significant role.
    
    
15. In facilitating this, MOF has risen to the occasion and will continue to do so , to mobilise capital and fiscal resources responsibly. So far, the MOF has initiated several achievements:
    
    
    • First, we successfully issued the world's first sovereign Sustainability Sukuk worth USD800 million last year to finance sustainability- related programmes and projects.
      
      
    • Second, through Budget 2022, the Government will also issue up to RM10 billion in ringgit-denominated Sustainability Sukuk starting in Q4 this year to fund eligible social or environmentally friendly projects.
      
      
    • Third, we have enhanced the Government Green Procurement policy to encourage the use of green products and services. The GGP aims to incorporate environmental considerations into government-based procurements.
      
      
    • Fourth, just as we fully integrated sustainability aspects into Budgets 2021 and 2022, we will do the same and in fact, give a much higher priority to sustainability in the upcoming Budget 2023.
      
      
    • Fifth, the MOF also initiated the establishment of the MySDG Foundation, which allows various stakeholders, both within and outside of Malaysia, to contribute to the national effort to achieve the SDG goals.
      
      
    • Sixth, the MOF has also introduced various tax and non-tax measures under Budget 2022 to support our sustainability agenda such as exemption on the import duty, excise duty and sales tax for EVs and tax relief for individuals for charging facilities; RM450 million allocation for environment and biodiversity; RM100 million allocation matching grants to NGOs for community empowerment; and expanding the scope for green technology tax incentives to include Rainwater Harvesting System projects for the Green Investment Tax Allowance (GITA) and Green Investment Tax Exemption (GITE).
      
      
16. So, you see, as much as the 12th Malaysian Plan and other policies were designed to prepare Malaysia for the future, it is the National Budget and its measures that operationalise and breathe life into our longer-term plans.
    
    
17. Moving forward, the MOF is finalising the Integrated National Financing Framework, which is tailored to the country's needs and requirements. In addition, we are also developing a more comprehensive, unified, and explicit framework for sustainable finance through the Sustainable Finance Roadmap.
    
    
18. For the upcoming Budget 2023, we have issued six Public Consultation Papers, where THREE are related to sustainability and ESG:
    
    
    • Application of ESG Principles in Investment by GLICs and MOF Inc (9 August 2022);
      
      
    • Improvement of the Government's Green Procurement (24 August 2022); and
      
      
    • Financing Framework Initiative for Sustainable Development (8 September 2022)
      
      
19. In terms of initiatives, we hope to work together with the private sector. Most importantly, we must ensure that our people who are most vulnerable to the transition are protected through our on-going and continuous effort in areas such as facilitating employment opportunities in new and transitional industries; providing opportunities for reskilling; investing in the alleviation of energy poverty, especially in rural areas; and making clean, affordable, and secure energy more accessible to all.

MALAYSIA’S SUSTAINABILITY JOURNEY IS THE WHOLE NATION’S RESPONSIBILILTY

Ladies and gentlemen, esteemed guests,

20. We have also reached significant milestones on a number of fronts through our whole-of-nation approach to sustainability. The Government sees the private sector and businesses as partners in ESG leadership, whether it's adapting to climate change, addressing social inequalities, or conserving our natural environment.
    
    
21. One of the ways we are doing is through the mobilisation of savings, and ensuring access to such investments.
    
    
22. For example, at least 44 of the 54 SRI funds approved by the Securities Commission have been launched over the last two years. As at end December 2021, 94% of Malaysia's top 50 listed companies had ESG strategies in place, and 68% had policies to reduce emissions.
    
    
23. International investment communities have also focused on ESG-related risks and opportunities. Global ESG assets are on track to exceed USD53 trillion by 2025, accounting for more than a third of the projected total assets under management of more than USD140 trillion. As a result, in order for our companies to remain competitive on a regional and global scale, ESG considerations are no longer a choice, but rather a requirement as a means to access financing.
    
    
24. In ensuring transparency of climate-related financial risks, our Central Bank and the Securities Commission have established the Joint Committee on Climate Change (or JC3). Together with the entire financial industry, they work together to ensure transparent disclosures through this platform.
    
    
25. Meanwhile, our corporations have followed suit through the CEO Action Network where corporate leaders accelerate sustainable business practises, leading by example, and work together towards a carbon neutral economy.
    
    
26. Similarly, our financial institutions are also prioritising lending and investments towards sustainability related projects. We have encouraged the banking sector to join the UN Principles for Responsible Banking (of which CIMB is one of the initial drafters) and the Net Zero Banking Alliance.
    
    
27. Our Sovereign Wealth Funds and Institutional Investors have also signed the UN Principles for Responsible Investment. We have urged them to join the Net-Zero Asset Owners Alliance in order to reduce portfolio emissions in the future, a move which will encourage their investee firms to do the same. Our SWF, Khazanah Nasional, has launched their Dana Impak worth RM6 billion aimed at catalysing new growth sectors, which will focus on sustainable investments.
    
    
28. Overall, these efforts will help Malaysia in developing a more comprehensive sustainable finance industry, complementing the Government's efforts to achieve the SDGs while also ensuring the creation of quality jobs.

CLOSING 

Ladies and gentlemen, esteemed guests,

29. As we rebuild our economies and societies, we must resist the temptation to rebuild old structures. We simply cannot afford to return to business as usual.
    
    
30. Instead, we should seize this opportunity to rebuild a more sustainable economy while ensuring a just transition. No doubt, it will take time, and for some of us, we may not be able to benefit from it at all. However, we owe it to the next generation. As the saying goes, “a society grows great when the older generation plant trees in whose shade they know they will never sit”.
    
    
31. I am confident that we will be able to successfully address the climate crisis and ensure a just transition together. But, in order to do so effectively, we must confront some unpleasant realities. And, as will be discussed throughout this summit, I believe these uncomfortable truths can be addressed by science, technology and innovation.
    
    
32. The current crisis teaches us all a lesson in resilience: when faced with adversity, we must be prepared, stay ahead of issues, and act decisively to protect our people and economy, and a just transition is no exception.

Thank you.