KUALA LUMPUR: The recent global developments can heighten the prospects of delaying the progress of the financial sector’s transition to undertake sustainability efforts and underscore the need for the sector to strengthen its response to climate change, said the Joint Committee on Climate Change (JC3).

       JC3, which is co-chaired by Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC), comprises Bursa Malaysia Bhd and 19 other industry participants.

       The committee held its seventh meeting on Tuesday with discussions centred on the progress of action plans and priorities for 2022, and effects of recent global developments on transition efforts and policy responses of countries.

       SC deputy chief executive Datuk Zainal Izlan Zainal Abidin, who is also co-chair of JC3, said financial institutions are initiating steps to embed climate risk in their strategy and risk management framework and are making considerable progress in committing to net zero targets.

       There is also an increasing supply of green financial and investment products in the market, he said.

       Zainal Izlan said, in driving the sustainability agenda, the top three challenges identified in the Report on the Sustainable Finance Landscape in Malaysia are poor data quality and availability, lack of incentives, and low awareness of green finance solutions in the market.

       "Cohesive efforts are required in addressing these challenges to accelerate the pace of transition and support an orderly transition to net zero,” he said in a joint statement today.

       The Report, which was released today, captures key insights from the extensive outreach programmes and a survey on sustainability practices among financial institutions in Malaysia undertaken by JC3 in 2021.

       It assesses the current state of sustainability practices and product offerings within the financial sector, and highlights the opportunities and challenges for the financial industry to meaningfully support the climate transition.

       Commenting on the progress of other initiatives by JC3, Jessica Chew, BNM deputy governor and co-chair of JC3, said the issuance of the draft Application Guide and work on the data catalogue are timely as financial institutions are preparing for mandatory Task Force on Climate-related Financial Disclosures (TCFD)-aligned climate-related financial risk disclosures in 2024.

       "We expect financial institutions to adopt the stretch recommendations set out in the Application Guide to encourage positive cascading effects on economic activities that interact with the financial sector.

       "Given the significant financial impact of climate-related risks, this will also improve market transparency on how financial institutions integrate climate risk considerations into business decisions and risk management,” she said.

       TCFD Application Guide was issued last month for public consultation, outlining key recommendations and provides guidance to assist financial institutions in preparing for the climate-related disclosures. - Bernama