Malaysia pushes for climate leadership with transition finance at the core

MALAYSIA reaffirmed its climate leadership ambitions at the third National Climate Governance Summit (NCGS 2025) held at Sasana Kijang in Kuala Lumpur.

The five-day summit which ended on April 11 brought together over 90 speakers from across the globe, including policymakers, financial institutions, corporate leaders, civil society and sustainability experts. 

Organised by Climate Governance Malaysia (CGM), the theme this year is “Transition Finance: The Foundation of the Transition Economy” — aligned with Malaysia’s ASEAN Chairmanship priority on inclusivity and sustainability. 

For Malaysia, it was more than just a thematic gathering. The country used the summit to signal its bid to become South-east Asia’s (SE Asia) transition finance hub, leveraging its maturing climate governance frameworks, central bank oversight and state-linked institutional influence.

CGM council chair Dr Gary Theseira noted that Malaysia is ready to lead, not only through policy frameworks but also by creating financial mechanisms to support the shift to a low-carbon economy.

The summit included high-level plenaries, deep-dive panels and three days of workshops and masterclasses.

The workshops explored topics like biodiversity integration, boardroom-level climate competence, ESG (environmental, social and governance) disclosure practices and updates on global taxonomies and voluntary carbon markets. 

Much of the discourse circled back to one key point, which is, transitioning the economy requires credible capital — and fast. 

Strategic Climate Push 

On the first day of the event, Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad highlighted Malaysia’s recent advancements in climate policy, including the launch of the National Climate Change Policy 2.0 and the finalisation of the National Climate Change Bill.

He announced plans to introduce the Nationally Determined Contributions Roadmap and Action Plan (NDC-RAP) and the Long-Term Low Emissions Development Strategy (LT-LEDS) within the month. 

These initiatives aim to guide Malaysia toward achieving net-zero emissions by 2050. He emphasised Malaysia’s commitment to global climate leadership, noting the country’s role as ASEAN Chair in advocating for a stronger regional voice in international climate negotiations.

He also mentioned ongoing efforts to develop a domestic emissions trading system and the introduction of a carbon tax by 2026, in collaboration with the Finance Ministry. 

Furthermore, Nik Nazmi discussed the importance of the forthcoming National Adaptation Plan (MyNAP), set for completion next year. 

He stressed that while Malaysia’s global emissions are relatively low, the country must prioritise adaptation strategies to address the increasing frequency of climate-related events such as floods and heatwaves. 

These announcements underscore Malaysia’s proactive stance in addressing climate change and its dedication to fostering a sustainable future both domestically and within the ASEAN region. 

Since signing the Paris Agreement in April 2016, Malaysia has pledged to reduce its greenhouse gas intensity by 45% by 2030. It also targets net-zero emissions by 2050. 

Several recent policies, from the National Energy Transition Roadmap (NETR) to the Green Technology Tax Incentive and the launch of the Bursa Carbon Exchange, have laid foundational support.

But as CGM and its partners reminded participants throughout the week, implementation now matters more than announcements.

“The summit shows that Malaysia is not just making commitments — it is working through the mechanics of delivery,” said Climate Governance Initiative co-director Emily Farnworth, who called for clearer transition pathways in the corporate sector. 

Meanwhile, S&P Global Sustainable chief sustainability officer Lauren Smart explained that investors globally are watching how countries like Malaysia structure transition finance frameworks, particularly as green-washing scrutiny rises. 

“It is not enough to slap a green label on a bond. Investors want data, disclosure and real outcomes,” she said.

Asia Investor Group on Climate Change (AIGCC) CEO Rebecca Mikula-Wright added that sovereign-level credibility is essential. 

“We are looking at national policies to guide how institutional investors allocate long-term capital. Countries that walk the talk will win,” she said.

Regional Banks On Course as Western Peers Retreat

Despite growing political pushback against ESG in the West, SE Asian banks are doubling down on climate financing.

At the summit, representatives from HSBC Malaysia Bhd, Malayan Banking Bhd (Maybank), OCBC Bank (M) Bhd and others said they remain committed to financing clean energy, supply chain decarbonisation and sustainability-linked loans. 

HSBC Malaysia chief sustainability officer Raja Amir Shah Raja Azwa pointed out that Malaysian exporters now face environmental scrutiny from buyers abroad. 

“Sustainability is no longer optional. If you are selling to Europe or the US, your entire supply chain needs to comply,” he said. 

To support the initiative, HSBC has developed green supply chain financing mechanisms, offering lower interest rates for verified low-carbon activities. 

Raja Amir shared that Wan Chong, a local cocoa firm, was among the beneficiaries after validating its sourcing practices. Other deals involved the import of electric vehicles (EVs) into Malaysia with embedded environmental benchmarks. 

Meanwhile, Maybank chief sustainability officer Shahril Azuar Jimin noted that while global markets are volatile, climate priorities remain intact in Asia. 

“Political shifts elsewhere may cause doubt, but in this region, the fundamentals are unchanged. Our economies are exposed, and our people are at risk,” he said. 

He added that Bank Negara Malaysia’s (BNM) new climate risk guidelines are pushing financial institutions to strengthen internal governance. Maybank itself continues its work under the Net-zero Banking Alliance framework. 

“There is enough money available for green projects. The challenge is on the demand side — more companies need to step up and seek this financing,” he said. 

On the other hand, OCBC Bank group chief sustainability officer Mike Ng explained that risk-sharing remains a sticking point. Banks are ready to fund high-risk climate projects, but only with proper safeguards. 

“If you want financing for offshore wind or CCS (carbon capture and storage), governments must step in to de-risk,” he said. 

The discussion also agreed that small and medium enterprises (SMEs) must be included in the green transition, further noting that banks have introduced simplified sustainability support tools tailored for small businesses.

They also proposed a “green yield curve” that would allow banks to price loans based on carbon intensity — making high-emission projects more costly to finance while rewarding cleaner ones. 

Insurance Sector Urged to Evolve

As climate-related events grow more erratic, Malaysia’s insurers are under pressure to do more than just write cheques. 

General Insurance Association of Malaysia (PIAM) CEO Chua Kim Soon said risks are not just floods anymore. 

“We are seeing climate-related health effects, cyber vulnerabilities, artificial intelligence (AI) misuse — and insurers must be prepared,” he said. 

Generali Insurance Malaysia Bhd has already stopped underwriting high-carbon sectors, even at the cost of short-term revenue. 

CEO Fabrice Benard said sustainability is not just policy — it is performance. “At Generali, even my own bonus is tied to green targets,” he said. 

By 2025, the firm aims to have 40% of its investments in green or transition-aligned assets. But smaller players face steeper hurdles. 

Apart from that, many Malaysian insurers still lack the tools to evaluate future climate scenarios. Chua urged them to seek partnerships with international reinsurers and adopt global best practices. 

Awareness remains a key issue. Chua further highlighted that most claims came from the West Coast, even though the East Coast is more flood-prone — suggesting people in rural areas either lack coverage or are unaware of their risks. 

“It is a sign that people in rural areas either cannot afford insurance or do not understand it,” he said. 

Meanwhile, BNM’s updated climate stress test guidelines are pushing change, but more cooperation is needed between insurers, banks and regulators to pool data and improve risk modelling. 

The panel’s call was clear, which is that insurers must take the lead in protecting communities and the economy from worsening climate threats.

Petronas Scales Up CCS as Regional Storage Provider

In one of the summit’s most anticipated keynotes, Petroliam Nasional Bhd (Petronas) head of CCS Emry Hisham Yusoff outlined the company’s ambition to make Malaysia a regional hub for carbon capture and storage. 

“CO2 does not care about borders. If we have the geology, we must use it,” he said. 

Petronas has cut its own emissions from 60 million tonnes in 2019 to 46 million in 2024. It aims to halve that by 2025 and reach net zero by 2050. A big part of that will come from CCS. 

The company is now building three CCS hubs — in Kerteh (Peninsula), Hibiscus (East Malaysia) and Bintulu (Sarawak) — to store carbon from offshore platforms, liquefied natural gas (LNG) plants, and industrial facilities. Crucially, this is not enhanced oil recovery (EOR). 

“We are not injecting to boost oil production, we are storing carbon for good,” Emry Hisham said. 

CCS is expensive. Capture accounts for over 50% of the total cost, and transporting CO2 across long distances makes projects less viable. 

“Without carbon pricing or government incentives, it will not scale,” he added. 

To support this, Malaysia is drafting a CCS Bill to clarify legal frameworks, liability periods and monitoring duties. Petronas is already monitoring its Kasawari site using fibre optics and seismic imaging and plans to do so for 10 years post-closure. 

Emry Hisham confirmed that regional interest is growing. Singapore recently approached Petronas to store carbon from its Jurong Island decarbonisation project. Japan and South Korea are also exploring cross-border CCS solutions. 

“CCS is not the answer to everything, but for hard-to-abate sectors, it is a vital piece of the puzzle,” he said.  

Faster Transition and Clearer Incentives

Malaysia’s top industrial players said the energy transition must now accelerate, or risk becoming irrelevant.

FGV Holdings Bhd, one of the country’s largest plantation groups, plans to deploy methane capture systems across all 67 of its palm oil mills by 2027. These systems turn waste into biogas, supplying energy to surrounding communities. 

Chief sustainability officer Nurul Hasanah Ahmed Hassain Malim noted that Scope 3 emissions are the biggest problem. 

“We can manage our mills, but what about 100,000 smallholders? Most do not have access to emission tracking tools,” she said. 

MISC Bhd, energy-related shipping company, is exploring ammonia fuel, hybrid power systems and carbon transport services in collaboration with Petronas. 

However, its chief strategy and sustainability officer Raja Azlan Shah Raja Azwa said shipowners are bearing the cost alone, without policy support. 

Yinson Holdings Bhd, on the other hand, has set 30 targets for 2030, including rolling out EV chargers and expanding into offshore renewables, but internal buy-in remains a challenge. 

“We have to show the finance team the returns. Otherwise, the project will not fly,” said its group head of corporate sustainability Dr Renard Siew. 

Carbon credits were also raised as a key tool for high-emission industries, but speakers warned that low-quality projects and weak standards are damaging trust. They called for a stronger, standardised ASEAN carbon credit framework. 

Panellists also supported stronger nature protection as part of corporate climate strategies. FGV, for example, has designated 12,000ha of land as protected conservation areas. 

The session ended with a common message: Malaysia has what it needs to lead in clean energy — but success depends on better policies, clear incentives and stronger collaboration. 

Need for Stronger Boardroom Integration 

Nevertheless, Malaysia needs clearer policies and more room for innovation if it wants to lead in clean energy and sustainability. 

Experts agreed that Malaysia’s climate governance efforts are gaining traction but still face roadblocks. 

However, speakers noted that outdated rules often slow progress. For instance, a company was penalised for trying to export coal tar — a by-product used in medicine — because it was classified as hazardous waste under current regulations. 

Panellists said this highlights the need for regulatory “safe spaces” where companies can test new ideas without fear of being penalised. 

Instead of prescribing fixed methods, they said the government should focus on clearly defining its policy goals. This would allow businesses the flexibility to determine the most effective ways to achieve those outcomes. 

Boardrooms were also urged to treat climate risks as seriously as financial or safety risks. Experts stressed that the science behind climate change is clear and well-documented, making it a predictable threat that should be embedded in corporate governance frameworks. 

They also warned that companies should look beyond direct climate threats like floods and heatwaves and consider broader, indirect effects such as inequality, political instability and demographic shifts. Businesses that fail to anticipate these risks may find their markets and operations severely disrupted. 

To fully embed sustainability, panellists said it must become part of the company’s culture and operational systems, similar to quality control or safety practices, through ongoing training, regular reviews, and involvement at all levels of the organisation. 

Speakers also recognised the contributions of grassroots groups involved in climate action, such as those leading river clean-ups and community restoration projects. These efforts, they said, should be acknowledged and supported through proper links to national climate policies. 

Call for Shared Leadership in SE Asia

The session concluded with a strong call for clear and consistent government direction, deeper climate integration in boardroom decision-making and stronger collaboration across sectors — from local communities to national institutions. 

The summit wrapped up with the final message of urgency and shared responsibility. Climate change is not just an environmental issue — it is an economic, social, and exisential threat. For Malaysia and its regional peers, success will depend on coordination,  not competition.