KUALA LUMPUR (July 24): Malaysia has not been spared from the impact of climate change, from the intense heatwaves of recent months to the coming flood season. If the country does not change its course, economic growth will be at a standstill, said Natural Resources, Environment and Climate Change Minister Nik Nazmi Nik Ahmad at the Climate Finance Summit last Thursday (July 20).
Nik Nazmi, who gave the keynote speech at the summit, shared his experience witnessing the sea level rise and coastal erosion in Malaysia.
“You can see the sea rising year by year…I’ve seen what’s at stake, and what we risk losing,” he said.
In 2022, Malaysia recorded RM622 million in losses due to floods, which was about 0.03% of nominal gross domestic product, Nik Nazmi added. For Malaysia to fully adapt to climate change, an estimated US$85 billion (RM389.38 billion) is required.
He stressed the importance of mitigating and adapting to the climate crisis, and the importance of moving financial resources towards these efforts.
The minister acknowledged that the government had to do more in climate finance, and that they aim to demonstrate further national climate action through ambitious mitigation and adaptation measures at the 28th Conference of the Parties (COP 28), with the government delegation led by Prime Minister Datuk Seri Anwar Ibrahim.
The ministry will establish an advisory panel on climate change with civil society organisations to provide expertise and guidance on climate change related matters, assured Nik Nazmi.
The panel following Nik Nazmi’s speech brought together Bank Negara Malaysia assistant governor Fraziali Ismail, country head of the World Bank for Malaysia Yasuhiko Matsuda, and Tan Sri Abdul Wahid Omar, the chairman of Bursa Malaysia and WWF Malaysia.
Fraziali highlighted key advantages Malaysia had compared to other developing countries, including high gross domestic savings, a sophisticated banking system, and its integration with global markets.
Owing to these factors, Fraziali said that Malaysia had the means to make the low-carbon transition. However, it needs to be an orderly one, and banks must be ready to handle the challenges such a transition will bring.
Another issue in play when it comes to getting the resources needed is the contribution of the private sector, Matsuda added.
“There are trillions and trillions of dollars that are potentially out there to be tapped. It’s private money. So, the fact that the balance is 50/50 (between public and private finance for mitigating climate change) is not a good balance,” said Matsuda.
Meanwhile, Abdul Wahid shared that Malaysia must be selective with its investments, especially those that could negatively impact the country’s natural resources, especially its forest reserves.
This was followed by a session on the role of banks in climate financing. Asilah Azil, a partner at McKinsey & Co Singapore, highlighted that there are currently three biggest trends in financing: Major investments being dedicated to green or climate technology for innovative solutions; investments in transition assets; and the shift of green bonds to sustainability-linked bonds.
Luanne Sieh, the head of group sustainability at CIMB, went on to explain the challenges banks are facing. The key issue is that most companies that subscribe to sustainable finance are already leaders in the field. The challenges is convincing mid-tier companies to follow suit. This is where regulations like carbon taxes come in handy, said Sieh.
Datuk Omar Siddiq, the chief executive officer of HSBC Malaysia, said he believes governments will implement policies that will enable the transition to happen, which will make it more economically viable.
In the closing keynote speech given by Professioner Dr Jomo Kwame Sundaram, a senior adviser of Khazanah Research Institute, the prominent economist criticised the lack of real commitment shown by global leaders.
“Although everybody has signed on to net zero and all that, it means next to nothing. Let's face it, climate agreements [such as the] 2015 [Paris Agreement] are voluntary. There is nothing internationally binding in international law. It's very different from the Kyoto Protocol, which rich countries have basically ignored," said Jomo.
The Kyoto Protocal was a legally binding treaty signed during the COP 3 in 1997 at the United Nations Framework Convention on Climate Change, which aimed to reduce greenhouse gas emissions. Of the major emitters, only Japan and the European Union signed the protocol, with the US, China, and Australia ignoring it.
Jomo continued to talk about the limitations governments had in climate action due to following corporate interests, leading to the importance of public investments to crowd private investments to lead the market, because private investments need to be motivated to do what needs to be done.
Investments need to be guided to address climate finance. The economics is well established, but another element of climate finance is the urgency, Jomo said.
He stated that urgent action is needed to avert and slow down the current acceleration of climate change that is already taking place. While 90% of financing is spent on mitigation, more needs to be spent on adaptation, as the effects of climate change are already taking place.