KUALA LUMPUR (Sept 21): Malayan Banking Bhd (Maybank) said it plans to run a pilot climate stress test in 2022 to better understand how its business strategy and performance will be affected by climate change.

"We have explored a number of ESG (environmental, social and governance)/climate stress testing tools to support our scenario analysis capabilities and plan to run a pilot climate stress test in 2022 to better understand how our business strategy and performance will be affected by climate change," Maybank said in its latest corporate presentation.

Maybank, which did not specify the timing of its planned pilot climate stress test in its Sept 1, 2022 corporate presentation, said the group is addressing Malaysia's upcoming regulatory requirements on climate stress testing.

According to Maybank, the group has been engaging with stakeholders, including regulators as well as those involved in business and support functions, in an effort to develop a prototype climate-scenario analysis.

"A cohesive national and/or regional data and taxonomy to support banks is necessary to identify and measure climate-related risks and impact," said Maybank, which had not responded to emailed enquiries from The Edge at the time of writing.

Maybank said in its corporate presentation that it had completed the discussion paper for the 2024 Climate Risk Stress Testing (CRST) exercise published by Bank Negara Malaysia at the end of June 2022 for industry feedback.

According to Maybank, expected requirements of the CRST include the need to complete the CRST across the bank's local and overseas operating entities.

"[The CRST is expected] to cover at least 60% of exposure (for Maybank, this would include Malaysia, Singapore and most likely Indonesia).

"[The CRST is expected] to use three adverse scenarios [namely] current policy scenario, nationally determined contributions scenario, [and] delayed transition scenario," Maybank said.

Maybank said it proactively addresses key climate change considerations as countries and businesses recognise the need to increase efforts in combating climate change following “The 2021 United Nations Climate Change Conference".

According to Maybank, its commitment and approach in combating climate change include the mobilising of RM50 billion in sustainable finance by 2025 and no new financing of thermal coal mining and related activities.

Maybank also highlighted its "no deforestation stance", the criteria of which, if not met, will mean Maybank is unable to proceed with borrowers' credit applications or loan-renewal process.

"Almost 50% of (Maybank's) RM50 billion sustainable finance target met by mid-2022," Maybank said.

Maybank said high ESG risk sectors, including the palm oil, forestry and logging besides mining industries, contribute 56% of total financed emissions.

"Sectors with significant ESG risks are subject to ESG risk acceptance criteria detailed in sector position papers.

"Additional sectors will be added, while palm oil will be expanded into agriculture," Maybank said.

At Bursa Malaysia on Wednesday, Maybank's share price closed up three sen or 0.34% at RM8.73 for a market capitalisation of about RM104.5 billion.

Maybank has 11.97 billion outstanding shares, according to the company's latest quarterly financial report.