KUALA LUMPUR (Oct 25): The adoption of the Global Biodiversity Framework in December 2022 made clear that nature conservation demanded capital investments beyond the typical philanthropy by the private sector.

This was the heart of the discussion at the panel titled “Conservation reinvented: Modern era conservation strategies” at the JC3 Journey to Zero Conference 2023, held at Sasana Kijang in Kuala Lumpur on Wednesday. 

The biennial JC3 Conference, organised by the Joint Committee on Climate Change (JC3), brings together various stakeholders to discuss climate and nature finance.

The JC3 was established in 2019 to build climate resilience within the Malaysian financial sector, and is co-chaired by Bank Negara Malaysia and the Securities Commission Malaysia. JC3’s members comprise senior officials from Bursa Malaysia and financial industry players.

Kristina Anguelova, head of sustainable finance of the World Wildlife Fund Singapore, shared on how the Global Biodiversity Framework (GBF) acted as a call to action to the private sector to take action on biodiversity, as the framework triggered companies to reflect on their practices and make conservation part of their business and investment strategies.

A variety of channels for private capital to support biodiversity initiatives are available, she added, whether it is blended finance — which combines public and private capital; projects that generate biodiversity credits, or “bankable” nature solutions that can generate sustainable revenues. 

However, Country Director for Wildlife Conservation Society Mark Rayan Darmaraj believes that more details on measurement metrics and impact are needed. 

“With all of these financing instruments, it is very difficult for us to have a clear understanding of what that actually means for biodiversity and how we are going to measure that,” said Darmaraj.

Nature-based solutions (NBS), which utilise natural solutions to tackle socio-environmental issues like climate change, water pollution, food security, biodiversity loss, and management of natural disasters, should be explored by businesses as a key strategy. 

Rashyid Redza Anwarudin, chief sustainability officer at Sime Darby Plantation Bhd, shared how NBS are integral to the plantation company, which benefits greatly from biodiversity. The company relies on natural predators to remove pests, he said, and reforests areas that are no longer suited for palm oil plantation.

He also shared that their customers are now increasingly interested in co-funding reforestation projects within the company’s concessions, as both parties would enjoy the environmental benefits. However, when it comes to generating carbon credits from NBS, there needs to be better tracking and measurement of these benefits.

“For us to solve all these global challenges, there needs to be shared responsibility across all actors within the supply chain. The key point I wanted to make is that the challenge with regard to financing is the sharing of the benefits of the environmental attributes. If that’s something that we can track, then we will be able to see more bankable projects,” said Rashyid.

The value-based intermediation (VBI) framework championed by the Islamic financial industry has similar values with environmental, social and governance (ESG) principles, with aims to generate positive and sustainable impact to the economy. 

As such, the VBI Community of Practitioners has launched six sectoral guides to help financial institutions apply sustainability screening in their investing and financing decisions. The newest set of sectoral guides is expected to be published later this year, said Rizal ll-Ehzan Fadil Azim, CEO of Alliance Islamic Bank Bhd.

“It’s a simple tool for the identification, measurement, mitigation and reporting of ESG risks in banks, as well as businesses at a general or even granular transactional level,” said Rizal during the fireside chat, titled “VBI to support climate transition”.

The sectoral guide compiles relevant ESG standards and simplifies it for businesses in different sectors. The previous guides covered the oil and gas, manufacturing and energy sectors, among others. The latest sectoral guide will cover the agriculture, mining and quarrying, agriculture, road transportation and waste management sectors.

The VBI Report 2022, which was also released on Wednesday, showed that the Islamic banking industry intermediated RM16.51 billion in green financing and RM61.55 billion in social financing. 

The focus on social issues is important under the VBI framework as well, said Datuk Mohd Muazzam Mohamed, group CEO of Bank Islam Malaysia Bhd. This involves addressing areas such as financial inclusion, affordable housing, public transportation and education.

“We set up a dedicated centre for social finance. We set up our Sadaqa House for us to be able to get funding differently, so we can do our financial inclusion and be able to serve the underserved segments. We also created our own centre for digital experience, for example, again, to go into the underserved segment and use technology as a means for us to be able to serve the underserved segment,” said Mohd Muazzam. 

Raja Amir Shah Raja Azwa, CEO of HSBC Amanah Malaysia Bhd and chair of the JC3 sub-committee on engagement and capacity building, stressed that to keep global warming within the 1.5 degrees Celsius limit, emissions need to be reduced by at least 43% by 2030 and 60% by 2035, compared to 2019 levels, according to the Intergovernmental Panel on Climate Change.

“As financiers and facilitators of risk capital, of which we are [part of], the banking, finance, fund management, insurance and takaful sectors carry an even greater responsibility,” said Raja Amir in his call-to-action speech at the end of the conference.

He called for companies to take action based on three core principles, which is to make public, transparent and firm targets within their own businesses, and within value chains and with clients, in line with scientific pathways towards the low-carbon transition. 

“Secondly, we will focus on our efforts in funding and facilitating capital towards the transition to net zero,” said Raja Amir, who added that biodiversity issues must also be prioritised.

“Finally, we will ensure a just, fair and inclusive transition to ensure that no one is left behind in this journey towards a net zero future,” he added.