KUALA LUMPUR (Oct 28): The Securities Commission Malaysia (SC) asserts that initiatives like the 5i-Strategy and Sustainable and Responsible Investment (SRI) frameworks have created a solid foundation for sustainable finance.

Chairman Datuk Mohammad Faiz Azmi said significant milestones include the introduction of the SRI Sukuk Framework a decade ago.

“Malaysia issued the world’s first green sukuk in 2017, and we are among the top Asean nations for sustainable finance.

“Despite this strong regional position, Malaysia's share of the global environmental, social and corporate governance (ESG) bond market remains modest, representing 0.3% of the total outstanding bonds year-to-date,” he said in a speech during the 41st ASEAN+3 Bond Market Forum here on Monday.

Mohammad Faiz noted that there has been a variety of SRI Sukuk offerings, in areas such as green buildings, affordable housing, education, and more.

During the forum, he highlighted that one of the issues faced by Asia is ensuring that sustainability projects are funded.

“One of the biggest obstacles is financially viable projects. At least 35% of sustainable infrastructure projects are only marginally bankable, with another 55% considered un-bankable.

“Unfunded projects could result in a climate finance gap of US$2 trillion annually, hindering Asia’s ability to achieve net zero by 2050,” he added.

Thus, he reckoned that one of the solutions is to create a pool of different forms of capital — from commercial investors to philanthropic funds — with the aim of financing critical projects.

He cited blended finance as a prime example of this initiative, noting that blended finance is about structuring and managing risks effectively which enables senior or commercial capital providers to make risk-adjusted investments at scale while achieving the returns they need.

The real conversation, then, must focus on mitigating risk for large projects, Mohammad Faiz said.

At the same time, he noted that Malaysia is encountering challenges in adopting ESG standards, as limited and uneven private sector participation has resulted in slower ESG adoption across industries, restricting the potential of market-driven sustainability investments.

“In order for Malaysia to achieve its climate and sustainability goals, there is a pressing need to deepen the involvement of private companies and the financial sector, empowering them to be more proactive in driving sustainable finance and climate adaptation initiatives,” he said.

Mohammad Faiz highlighted that across the Asean region, the need for sustainable finance has never been greater, thus he called for cooperation at the Asean level to work together to ensure that finance serves the greater good.

“Patience and persistence are required as we build a sustainable future that reflects our shared values and aspirations,” he added.

https://www.theedgemarkets.com/node/731886