00:07Malaysia has made significant progress in building its sustainable finance ecosystem.
00:13In 2024 alone, RM13.3 billion was raised through sustainability-related instruments,
00:20while the financial sector has also committed significant financing towards ESG activities.
00:25But increasingly, the question is not simply whether there is enough capital.
00:30It is whether we have enough investment-read projects that can actually absorb that capital.
00:35Through the Climate Finance Innovation Lab, or CFIL, 30 projects have now been onboarded,
00:43with funding needs exceeding RM4 billion.
00:47So what will it take to turn climate and nature ambitions into projects
00:51that commercial investors are actually prepared to finance?
00:54Joining us is Yang Mulya Raja Ameh Shah Raja Azwar,
00:58Chair of JC3's Subcommittee on Engagement and Capacity Building
01:04and the CEO of HSBC Amanah Malaysia Berhad.
01:08Thank you very much, Raja, for joining us.
01:10Firstly, maybe you can share with us from a financial perspective,
01:14what makes a climate or nature project bankable beyond a credible revenue model
01:20and predictable cash flows, and what other features can give investors confidence
01:24and help unlock capital for the transition?
01:28Sure, thank you.
01:30A very good morning to the team at Awani.
01:33I mean, ultimately, you know, cash flow...
01:40Reliability is a good imagine.
01:42So a climate or nature project becomes specifically bankable when investors are able to
01:48and manage its risks with reasonable confidence.
01:52This means, apart from, you know, apart from the contractual overlay,
01:56we need to have credible sponsors in the project.
01:59There needs to be proven technology, secure permits, as well as strong contracts
02:04in the form of an off-take agreement.
02:06The project also needs to demonstrate transparent impact measurements
02:10so financiers are able to see how the project would benefit society at large.
02:15This would include robust community as well as environmental safeguards,
02:20resilience to ensure that any changes in policy, climate, as well as market
02:24is taken into consideration.
02:26Ultimately, investors need confidence that the project can deliver credible,
02:31risk-adjusted returns, as well as measurable real-world impact over the longer term.
02:37And for newer areas such as nature-based solutions, climate adaptations,
02:42and emerging low-carbon technologies,
02:44how are traditional risk and credit assessments models evolving?
02:47And what innovations in finance and even risk evaluation could help identify
02:53and even support these opportunities responsibly?
02:58Yeah, so yesterday we had the JC3 conference,
03:01which just concluded on the 29th of September.
03:05One of the topics and one of the dedication of the days was a nature-specific day.
03:10So, you know, things which were discussed on that particular day
03:13was the potential inclusion or the potential development
03:16of a non-financial disclosure for nature,
03:20which is nature-related financial disclosures, TNFD.
03:24And just for context, you know, in Malaysia, 54% of banks' sectoral lending
03:31is currently to sectors highly dependent on ecosystem services.
03:35What is ecosystem services?
03:37Ecosystem services are services which depend on a highly functioning natural environment,
03:44which means that, you know, these businesses can only thrive if the environment is in a safe condition.
03:50So with that, initiatives such as the TCFD,
03:54which is the Task Force on Climate-Related Financial Disclosures,
03:57and the potential imposition of the TNFD,
04:01will, you know, require financial institutions to expand on its traditional underwriting,
04:06taking a position on forward-looking views of how environmental risks,
04:10as well as opportunities could impact cash flow, collateral creditworthiness,
04:15as well as portfolio risks.
04:17So with this, you know, we expect that this will strengthen the case for investment in newer areas,
04:22such as nature-based solutions, climate adaptation,
04:26as well as emerging low-carbon technologies.
04:29And would bringing banks and investors into the conversation earlier
04:32help strengthen project bankability?
04:35If so, what would effective collaboration look like
04:38while preserving the project developer's expertise and leadership?
04:43Exactly, precisely.
04:45Early engagement will definitely be helpful
04:47because it will allow the financial institutions to identify any gaps
04:52in the business model of the developer,
04:56you know, any permit shortfalls, technology,
04:59as well as contracts and risk allocation,
05:02while there is still time to address them.
05:04Now, we do not want to take away the expertise of project developers.
05:07They know the project the best,
05:10but we as financiers would be able to provide constructive challenge.
05:14We would be able to bring our sector expertise in
05:17and we would be able to potentially group,
05:19you know, the project developers with potential capital partners.
05:22So at the end of the day,
05:24the developer should remain in the driving seat
05:26with financiers helping strengthen the proposition
05:29rather than directing its delivery.
05:31Roger, Malaysia is also moving towards closer alignment
05:35with the ASEAN taxonomy.
05:37While companies are responding to growing expectations
05:39around sustainability disclosures,
05:42as ESG data becomes more widely available,
05:45how can we continue improving its credibility,
05:49comparability and decision usefulness,
05:51enabling financiers to make informed decisions,
05:55direct capitals towards transition activities
05:57and even support sustainable growth?
06:02ESG information across the board needs to be consistent,
06:06needs to be reliable and decision useful.
06:10So ultimately, yes, as you mentioned,
06:12disclosure is increasing.
06:14So it needs to, you know,
06:15the disclosure that is provided
06:16should ultimately help financiers understand
06:19the implications for cash flows of the company,
06:22understand better credit risk,
06:24resilience as well as the transition plans of the company.
06:27Ultimately, stronger governance,
06:29common taxonomies, consistent definitions,
06:32as well as appropriate assurance
06:35can improve confidence from the financial community
06:38in the disclosures being provided
06:40by corporates and financial institutions alike.
06:43So at the end of the day,
06:44the objective is not disclosure for its own sake.
06:47It is for better decision making
06:49as well as the ability to therefore use that information
06:53to deploy credible capital flows.
06:58This is one of the upgrades that we need to do.
07:00And what would you look for as evidence
07:02that Malaysia is successfully translating
07:04climate finance commitments
07:06into capital being deployed across the real economy
07:10and especially with sectors or projects
07:12or even partnerships could demonstrate this progress
07:14most clearly?
07:17Well, success should be measured
07:19by projects reaching financial close,
07:22assets being built,
07:24as well as private capital being mobilised.
07:27Emissions need to be reduced
07:29and resilience need to be strengthened.
07:31So if I take anything as a report card
07:33in terms of this measurement,
07:35I would say Malaysia's new economic transition roadmap
07:39has already publicly disclosed
07:41that it requires an estimated 1.2 to 1.3 trillion ringgit
07:46of investments,
07:47including in the near term 210 to 240 billion ringgit
07:52between the years of 2023 as up to 2029.
07:57So therefore, in my opinion,
07:58progress should be visible across renewables,
08:01energy efficiency, grid infrastructure,
08:04storage adaptation and nature-related projects.
08:07And we should be benchmarking ourselves
08:09against the deployment that we do
08:13against the netter.
08:16Obviously, our conversations on climate finance
08:18is getting wider,
08:19but we also know we still have a lot to do.
08:22So looking ahead over the next three to five years,
08:25what is the most important change
08:26Malaysia can make across the climate finance ecosystem
08:30to turn more promising projects
08:32into investment-ready opportunities
08:34and unlock significantly more private capital
08:37for the transition?
08:40Well, Malaysia should strengthen
08:42its project preparation as well as risk sharing.
08:45That means technical assistance,
08:47feasibility funding,
08:49standardised contracts,
08:50guarantees and appropriately structured
08:52concessional capital.
08:54We at JC3,
08:55again, JC3 is a collaboration
08:56between Bank Negara,
08:58the Securities Commission
08:58as well as the financial industry.
09:00We believe that we can help
09:02identify recurring barriers
09:03across the financial system
09:04and support practical solutions
09:06that improve project bankability.
09:09Development finance institutions
09:10can also come into these transactions
09:13to help address early-stage risks
09:16as well as provide that crowding
09:18to private investors
09:19as projects mature.
09:20The priority now is turning
09:22a promising pipeline
09:23into projects that reach financial close.
09:26And that brings us
09:28to the broader ecosystem
09:29because even if individual projects
09:32become more bankable,
09:34scaling the transition
09:35will still require
09:36stronger coordinations
09:37across the entire market.
09:39So lastly,
09:40before we end conversation,
09:41maybe Rajah can help share with us
09:43how can Malaysia build
09:44on the progress
09:45already being made
09:46by policymakers,
09:48financiers and businesses
09:49to create a more connected
09:51climate finance ecosystem
09:52on that support,
09:54one that supports innovations,
09:56manages risk responsibly
09:57and accelerates
09:59practical transition outcomes.
10:02Well, it's,
10:04I mean,
10:04Malaysia needs stronger coordination
10:05across the whole ecosystem.
10:07You know,
10:07that means policymakers,
10:09regulators,
10:10financiers,
10:11investors,
10:12businesses,
10:12as well as project developers.
10:14Again, at JC3,
10:16we believe we can serve
10:17as a practical bridge
10:18between these stakeholders.
10:20We'll be able to,
10:21for example,
10:21help identify barriers,
10:23share market insights
10:24and coordinate solutions.
10:26A shared project pipeline,
10:28clearer feedback loops
10:29as well as consistent information
10:30will be better for us
10:32to be able to support
10:33project penetration,
10:34stronger risk management,
10:36as well as hopefully ensure
10:38that more capital
10:39reaches the real economy.
10:41So clearly,
10:42the challenge ahead
10:43is not simply
10:44about finding more capital,
10:46but making sure
10:46there is a strong pipeline
10:48of projects
10:49that are credible,
10:51commercially viable
10:52and ready to receive it.
10:53Raja Amir Shah Raja Azwar,
10:55thank you very much
10:56for joining us
10:57and sharing your insight.
10:58Definitely,
10:58all of this discussion
10:59will be featured
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11:03Please stay tuned with us
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11:11Thank you very much.
11:20Transcription by ESO.
