No Match Found
Malaysian banks are stepping up in their ESG journey but is adoption up to the mark? PwC Malaysia’s inaugural survey on environmental, social and governance (ESG) readiness among Malaysian banks indicate that there is still room for improvement.
The level of awareness is encouraging but banks are not without their challenges when it comes to implementing ESG.
21% of survey respondents say they have embedded all three ESG-related frameworks1 introduced as guidance for banks, into their organisations. Navigating Bank Negara Malaysia’s Climate Change and Principle-based Taxonomy (CCPT) in particular has its complexities, ranging from absence of client data or information, challenges in translating principles-based guidelines into practice, and difficulty in measuring indirect environmental impact, to lack of ESG expertise.
Overcoming the challenges involved in operationalising ESG requires a holistic approach driven by a strong tone at the top at the board level. Investing in capability and capacity building is critical, as is the need for strong sustainability governance cascading through all three lines of defence.
1Climate Change and Principle-based Taxonomy (CCPT), Value-based Intermediation Assessment Framework (VBIAF), Task Force on Climate-related Financial Disclosures (TCFD)
say they have considered Climate Change risks
have yet to apply the CCPT’s Guiding Principles to categorise their customer portfolio
have assigned a department to operationalise ESG
Board-level training has been conducted or is being planned
have not defined metrics to monitor progress against their overall business strategy and risk appetite
Consider a strategic approach to climate risk management by setting a science-based target or Net Zero strategy which is aligned to the overall corporate strategy of your bank, whilst considering the business opportunities created by climate change.
Establish an ESG risk management framework, which is comparable to the established frameworks for financial risks, whilst also accounting for and reporting to the Board for ESG risk specific nuances where necessary.
Consider incorporating ESG factors into risk rating models and frameworks to make credit risk appraisal decisions which are aligned to the bank’s overall strategy.
Investing in upskilling and capacity building programmes is critical, but more importantly, ensure that it aligns with your vision of the culture, capabilities, knowledge and competencies that your workforce should have.
Identify reliable internal and external data sources to accurately reflect your exposure to climate risk, in order to facilitate robust risk monitoring and risk management.