Marzunisham Omar: a rising green financial market development
Opening remarks by Mr Marzunisham Omar, Deputy Governor of the Central Bank of
Malaysia (Bank Negara Malaysia), at the Green Financial Market Conference, Kuala
Lumpur, 3 August 2023.
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Assalamualaikum and a very good morning, Ladies and Gentlemen,
Like a butterfly's wings, climate change sets off a storm of consequences. Scorching
temperatures, exceptionally heavy rainfall, freak storms, increased incidences and
intensity of floods and droughts, water scarcity - these seem all too familiar to us of
late. These are only a few of the many undesirable effects of climate change felt not
only here in Malaysia but globally. These effects have consequences on the financial
sector, economy and society as a whole.
With these effects being increasingly felt, the theme of today's conference, 'A rising
green financial market development', is very apt and timely. The financial sector is
centrally positioned in our economy. Your responses will make a difference in helping
us in mitigating the escalating effects of climate change. This entails two critical roles of
greening finance
the financial sector, namely, first, - by building your institution's
resilience against climate change; and second, financing green - by channelling funds
to decarbonise the economy.
all hands
The extensive ramifications of climate change on lives and livelihoods require
on deck,
including the public and private sectors, similar to the whole-of-nation
approach that our country took in tackling the Covid-19 pandemic. Failure to work
collaboratively could result in the economy being exposed to excessive physical and
transition risks, thus risking our ability to achieve the transition to a greener and
lowcarbon economy that is inclusive and orderly. Bank Negara Malaysia is committed to
this journey and has been working closely in partnership with the financial sector and
the government to lay the necessary financial ecosystem and infrastructure.
The Joint Committee on Climate Change (JC3), which is jointly chaired by Bank Negara
Malaysia and Securities Commission Malaysia, has been a key platform in stepping up
financial sector readiness. As you are aware, the JC3 has been focusing its efforts on
five key areas, namely (i) boosting risk management capacity; (ii) enhancing
governance and disclosures; (iii) facilitating rollouts of innovative financial products and
solutions; (i) taking steps to bridge gaps in data; and (v) building the technical capacity
of the sector and engagements with the government. Just a couple of months ago, the
JC3 took a step further, focusing its attention on assisting the SMEs to decarbonise
their operations.
Having a common language among the financial sector players and their clients is key.
Not only will this allow the financial sector to understand their clients and nudge them to
decarbonise their business, it will also allow the financial institutions to respond as
appropriate to the specific needs of their clients. As such, two years ago, Bank Negara
Malaysia issued a transition taxonomy, that is the Climate Change and Principle-based
Taxonomy (CCPT), as a tool to help financial institutions identify and classify economic
activities that contribute to climate change mitigation and adaptation in a consistent
manner. Implemented effectively, such a framework, along with the mandatory
expectations on climate disclosures in 2024, will contribute towards minimising the risk
of greenwashing.
Ladies and Gentlemen
Transitioning to a low-carbon economy is not all doom and gloom. As the economy
decarbonises and as businesses green their operations, there are abundant
opportunities available, ready to be seized. Huge sums of investments are needed. For
instance, a whopping RM1.85 trillion in new investments are needed up to 2050 just for
the Malaysian energy sector alone! Sustainable finance is, therefore, pivotal. All of you
in this room today have a pivotal role.
For this, we are delighted to collaborate with Bank of China Malaysia, the sole
appointed Onshore Settlement Institution for Renminbi Settlement Services in
RENTAS, in organising today's event. I believe the speakers that have been lined up for
this event will provide useful insights into the Environmental, Social, and Governance
(ESG) landscape in Renminbi and the global capital markets, as well as share their
perspectives on the global financial market outlook and prospects of Renminbi market
development.
Let me briefly touch on the Malaysian capital markets. Our capital market is among the
most developed in this region. We have, over the decades, continued to strengthen the
financial market infrastructures. Our bond market is supported by bond settlement and
depository provided by Bank Negara Malaysia. Our capital market is also one that has
consistently demonstrated its resilience over the many episodes of financial market
shocks. For example, despite the pandemic, bond and sukuk issuances have continued
to rise. In 2021 and 2022, the total Ringgit bonds and sukuk issuances by the
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government and corporates were RM377 billion and RM435 billion, respectively . Of
this amount, a total of approximately RM25 billion or 6% was in the form of SDG, green,
and sustainability-linked capital market instruments. We continue to make progress in
the sukuk market. In 2021, Malaysia issued the inaugural sovereign US Dollar
Sustainability Sukuk that was oversubscribed by 6.4 times. This reflects the significant
demands for such instruments globally.
As we forge ahead, the capital market is key to meeting our green and greening
investment needs. We urge market participants such as yourselves to actively leverage
our financial market infrastructure to issue and deposit foreign currency capital market
instruments in Malaysia. We are proud to state that since 2018, RENTAS has secured
the top position being the world's largest Sukuk depository. As at the end of 2021, there
was close to USD279 billion worth of Sukuk issued and deposited in RENTAS. Let us
work hand in hand for the Malaysian financial system and Malaysian banks to play a
larger role in facilitating and intermediating both domestic and international economic
activity, particularly in sustainability initiatives.
Ladies and Gentlemen
The challenges posed by climate risks are real and are already present. We can no
longer be passive. We must embrace courage. We must be resolute. The seeds of
concrete actions we sow today are key to cultivating a more sustainable future for our
generations to come. I trust that this conference will contribute to this rapidly growing
sustainable debt market. On that note, I wish all of you a fruitful and engaging session
today.
Thank you.
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Source: FAST and INSIDES, BNM