This article first appeared in Forum, The Edge Malaysia Weekly on January 5, 2026 - January 11, 2026

Climate change is already causing severe disruption across Asia, and this is expected to intensify. Our research finds that 14% of Asia’s gross domestic product (GDP) is at risk by 2050 due to climate impacts.

Companies are exposed to physical impacts of climate change, such as heatwaves, floods, storms and droughts. All of these can undermine productivity, damage infrastructure and crops, threaten critical supplies of energy and water, and disrupt supply chains, leading to economic losses.

At the same time, there are “transition risks” to contend with. As markets respond, companies that fail to act are faced with higher costs of capital, increased insurance premiums and reduced market share.

It is clear that climate change presents a significant financial risk to companies. Meanwhile, companies transitioning to low-carbon business models can harness economic opportunities.

Investors are also integrating climate into their corporate governance practices. For example, in our research into 10 of Malaysia’s most significant institutional investors, with RM2.56 trillion (US$575 billion) in collective assets under management, the Asia Investor Group on Climate Change (AIGCC) found that 50% of them are integrating climate into their corporate governance oversight.

Investors are willing and ready to allocate their capital behind climate solutions, and these are opportunities for companies to be first movers in this space. At the same time, investors also want to see their portfolio companies actively managing mounting exposure to climate and nature-related risks that threaten long-term value.

This is where corporate boards become essential. As stewards accountable to investors, board directors must ensure their companies are capitalising on opportunities in the climate transition as well as effectively managing climate risks.

We can already see progress but it is not always consistent. Recent results that assess the world’s highest emitting companies show mixed progress globally. These findings come from Climate Action 100+, the world’s largest investor engagement initiative focused on addressing climate change.

Focusing on Asia, companies in this region showed improvement in corporate governance, with 86% of companies having shown evidence of board oversight on climate and 19% demonstrating a high level of commitment by linking executive remuneration to climate performance.

Evidence on board-level commitment and action often help to inform investors on their engagement with portfolio companies for their ability to fully integrate climate into business strategies.

So, are board members in Malaysia prepared to respond to the increasingly sophisticated nature of investor expectations?

Board members’ appreciation of the impact of climate risks on their business and foresight on necessary action on climate and energy transition is crucial to the successful integration of climate into business strategies. Available frameworks are becoming increasingly sophisticated, with some designed to enhance climate capability at board or senior management level. One would find relevant insights from Climate Governance Initiative Principles for Effective Climate Governance, addressing crucial elements such as board competency, structure, business strategy and accountability, and the Transition Pathway Initiative methodology, which ranks “management quality” in carbon management practices and governance.

Only with a strong command of the most material climate issues can board members make informed decisions and provide strategic oversight for their businesses to navigate the net zero transition.

Business as usual is no longer an option.

Early movers in high-carbon industries, such as energy, mining, steel and transport, and key industries in local economies are uniquely positioned to play an influential role in the low-carbon transition. Key players in the economy may be well resourced to take the lead in driving the low-carbon transition, however, forward thinking corporate strategies may sometimes be found where it is less expected.

ESteel Enterprise Sabah, a subsidiary of Singapore-based Green ESteel, is an example of a company that is making a strategic decision in the context of climate and making decarbonisation a focus of its business strategy. After the company officially launched the first phase of a large-scale Direct Reduced Iron (DRI) project in Sabah, with a capacity of 2.5 million tonnes of hot briquetted iron per year, it then introduced the use of forward-looking DRI technologies.

ESteel Enterprise Sabah seeks to use gas as a reducing agent, instead of metallurgical coal, as one of the initial steps to reducing emissions. The project positions Sabah as Malaysia’s first major green steel hub with opportunities for job creation and paving the way for the company’s future potential to transition to hydrogen-based smelting, which would bring emissions close to zero.

Another company that demonstrates a comprehensive energy transition strategy is Tenaga Nasional Bhd. Tenaga is focusing on accelerating power generation decarbonisation, building flexible and cross-border grids, and empowering customers through green electrification solutions. This showcases the board’s oversight on integrating climate change considerations into business strategy. In 2023, Tenaga established a board sustainability and risk committee and appointed its first chief sustainability officer to oversee the group’s sustainability framework. Since then, Tenaga has linked climate-related key performance indicators (KPIs) to C-suite remuneration, which is systematically monitored via a structured Sustainability Scorecard.

Tenaga aims to support Malaysia’s national target of 70% renewable electricity generation capacity by 2050, setting its own goal to expand renewable energy capacity to 22GW by that time.

These examples show how companies of different sizes are starting to decarbonise. Boards that are ready to act on climate can effectively identify opportunities as companies develop transition plans.

Investors often engage with companies to ensure that climate is integrated into core business strategies. This typically refers to credible climate transition plans that include robust decarbonisation strategies. For example, strategically transitioning away from fossil-fuel-based assets and transforming high-emitting processes while supporting affected workers, local communities and other stakeholders could create climate-related opportunities for businesses.

Ultimately, informed and climate-competent board members are best positioned to advocate for policies that help lower the barriers to transition for their industries in the markets in which they operate.

Critical conversations between institutional investors concerned about climate risk and business decision-makers could galvanise further support from policymakers.

The message from investors is clear: the cost of inaction to climate risk is increasingly significant, but companies taking early action now can reap the rewards. Investors are ready and willing to work with companies to integrate climate risk into business strategy and implement responsible climate transition plans. They are keen to work in partnership.

As the long-term custodians of their companies, board members have an opportunity — and a fiduciary duty — to lead the way.

Rebecca Mikula-Wright is CEO and Valerie Kwan is director of stewardship at the Asia Investor Group on Climate Change (AIGCC), the leading network of investors in Asia focusing on risks and opportunities in climate and nature.

This column is part of a series coordinated by Climate Governance Malaysia, the national chapter of the World Economic Forum’s Climate Governance Initiative. The CGI is an effort to support boards of directors in discharging their duty of care as long-term stewards of the companies they oversee, specifically to ensure that climate risks and opportunities are adequately addressed.

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