LAST Wednesday, Sir David Attenborough said: “If we are to live in harmony with nature, we need a world in which every financial decision takes climate change into account.” His words should have resonated with all the 1, 500 participants of the Joint Committee on Climate Change (JC3) flagship conference.

       This sentiment certainly dovetails with the work that financial regulators worldwide are taking to ensure industry readiness and resilience against climate-related risks.

       In the context of Malaysia, the JC3 was established by the Securities Commission (SC) and Bank Negara in September 2019 as a platform to pursue collaborative actions for building climate resilience within the Malaysian financial sector.

       It also serves as a focal point for engagements with the government on broader national climate policies.

       The financial system is like the central nervous system of the economy. It coordinates and allocates resources within the economy.

       It steers resources to areas of growth and redistributes economic gains to savers. The capital market is an integral part of this system. And thus, this foundational role of the capital market makes it an effective and, if I may say, an obvious platform to drive sustainable change.

       As a whole, it could be argued that the financial sector is perhaps coming to the party a little late, but that also means we are not going to start from scratch, but have the opportunity to build on the foundations laid by others.

       Over the last decade, the call for corporates to look at the real impact of their activities on the world has become louder.

       Today, we in the financial sector can do more than call for change, we can be agents for the change that is needed.

       Regulating change

       Discussions on environmental, social, and governance (ESG) tend to tilt towards the “E” and “S” pillars, but we have to understand that the “G”, or good governance, underscores corporate responsibility in environmental stewardship and social responsibility.

       In fact, the bar is rising as companies are now assessed on how they handle environmental and social issues connected to their businesses.

       The recent revisions to the Malaysian Code on Corporate Governance highlighted that companies and boards must address future sustainability risks and prospects.

       The full adoption of MCCG 2021 will need buy in from boards to meaningfully shift the needle towards reliable environmental and sustainability risk reporting.

       At the same time, capital market intermediaries must be ready to get on board and support the fight against climate change too.

       We can expect increased demand for green and sustainability funding across all types of businesses, including micro, small and medium-sized enterprises.

       On the other side of the same coin, there will also be investor demand for intermediaries to impose more stringent standards to encourage better corporate behaviour.

       I would urge our intermediaries to work together with us to ensure that we are meeting the demands of this changing world.

       As partners in this journey, the industry must focus on continuously upgrading their skills and expertise to provide fit-for-purpose solutions.

       It is also important to have a diverse issuer base.

       Currently, 64% of SRI sukuk issuances are for renewable energy projects.

       We need to expand this base by enabling and encouraging transformative technologies and industries with high spillover benefits for the country.

       Crucially, for finance to be inclusive and accessible to a broad range of issuers and investors, we also need greater awareness.

       Towards this end, capital markets Malaysia has established three centres of excellence to inculcate the principles of sustainability in the wider ecosystem.

       In addition, the SC recently launched NaviGate, a capital market green financing series, to heighten corporate awareness on suitable market-based financing avenues.

       Another important factor is the development of sustainable and responsible investment (SRI) taxonomy for the capital market, as a critical building block to facilitate capital market constituents, public listed companies and investors in identifying sustainable economic activities.

       We are currently in discussions with key industry stakeholders on the guiding principles for the SRI taxonomy.

       The end game

       The SC’s role in supporting the development of sustainable finance is not limited to Malaysia but extends into the wider region.

       We cannot address this challenge by ourselves.

       Cooperation and collaboration among regional regulators is critical to push an orderly transition to low-carbon economies.

       Through the Asean capital markets forum, the SC is involved in the development of the Asean taxonomy for sustainable finance and the Asean sustainability-linked bond standards, to provide an avenue for issuers to raise funds to meet sustainability targets.

       Ultimately, the goal is to reshape the fundamentals of finance to create a better and more inclusive future for all.

       While the pandemic raged around the world, so did the burning reality of the climate crisis, giving us food for thought about our priorities.

       The global response to the pandemic gave us a glimpse of what a disrupted world could look like and how ill-prepared we are for such a crisis.

       Finance is key in any response to the crises we face as the human race.

       It steers the direction of economic activities and sets the trajectory for future growth potential.

       However, this cannot be achieved in its current form.

       For finance to be a force for change, finance itself needs to change.

       To have the future we desire, we need a collective and coordinated response from all – governments, regulators, financial institutions, investors, companies and their value chains.

       On our part, the SC is committed to refocusing the capital market towards advancing a sustainable economy.

       While we need to rebuild resilience into the ecosystem given today’s challenges, we will do so with a longer-term view.

       There is a post pandemic world that lies ahead – one that would still be facing glaring social inequity and a climate crisis.

       Datuk Syed Zaid Albar is the executive chairman of the Securities Commission. This article is adapted from his keynote speech at the Joint Committee on Climate Change flagship conference. The views expressed here are the writer’s own.