BNM: Orderly, just transition to greener financial system crucial to avoid major economic, societal impacts

BNM: Orderly, just transition to greener financial system crucial to avoid major economic, societal impacts
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KUALA LUMPUR (March 30): Bank Negara Malaysia (BNM) said on Wednesday (March 30) that the central bank spent 2021 is focused on stepping up its response to and driving collective action on climate risks within the financial sector in a move deemed crucial to build a financial sector that is resilient to climate change and one that lends support towards greening the economy. 

In BNM's latest 2021 Annual Report published on Wednesday, the central bank said the effects of climate change would continue to be widespread and increasingly visible as it impacts Malaysia's economy and financial system. 

BNM said “an orderly and just transition (towards a greener financial system) is crucial for Malaysia to avoid major economic and societal impacts and reap green growth opportunities”.

According to BNM, a just transition means being “fair and inclusive with due consideration and adequate support for affected segments".

"There is a growing consensus that urgent actions are needed to decarbonise the global economy to mitigate the rising impact of climate change. 

"Towards achieving this goal, many nations have committed towards net zero GHG emissions in the next three to four decades. For Malaysia, the government has pledged to achieve this target by 2050,”  BNM said.

BNM said the term GHG refers to greenhouse gases, such as carbon dioxide, methane and nitrous oxide.

"Specifically, we continued to play a formative role in building the capacity of our financial institutions. This included strengthening capabilities to measure, mitigate and protect against climate risks. Within the bank (BNM), we continued to take steps to 'green' our operations.

"At the macro level, we focused on aligning the financial sector’s response to climate risks with national policies and strategies. This included supporting sustainability-related policies as outlined in the 12th Malaysia Plan and the national budget. We also actively provide emerging market views on climate issues on regional and international fronts, especially in relation to climate equity,” BNM said.

BNM said that almost three years into the regulator’s climate risk management journey, the central bank continued to strengthen its organisational approach to climate risk. 

This led to the setting up of the Sustainability Unit (SU), which is tasked with driving BNM's efforts to integrate the green agenda across the central bank’s functions and operations.

"Reporting directly to the governor and senior management of the bank (BNM), the SU coordinates and oversees the bank’s overall climate strategy and key initiatives. It provides technical and capacity building support to the six tracks of the bank’s key functions.

"The SU also interacts with the bank’s board on climate-related strategies, tapping on their knowledge and experience. At the senior management level, a deputy governor serves as the executive sponsor to provide broad guidance and direction to the SU. These developments support a sustained focus on and effective execution of our climate strategies.

"Today, climate risks are regularly discussed at senior management and board deliberations. This reflects growing consideration of climate-related risks in all aspects of our operations and functions,” BNM said.

Read more stories from the BNM Annual Report 2021 here.

Chong Jin Hun