Thursday, August 13

Taken to task on climate risks


The conversation of climate change and sustainability in the corporate world has made some progress this year, as can be seen by September’s Global Climate Strike forcing countries and multinational corporations to address climate risks and pledge new goals to combat the crisis.

According to the Global Climate Strike website, over the course of seven days, a record number of 7.6 million people took to the streets to strike for climate action.

Tun Dr Mahathir Mohamad

From September 20 to 27, millions of students, parents, trade unions, businesses, health workers, scientists, celebrities, people of all backgrounds, ages, regions and faiths came together all over the world calling for climate action.

More than 6,100 events were held in 185 countries, with the support of 73 trade unions, 820 civil society organisations, 3,000 companies and 8,500 websites.

“After the global mobilisation on Friday September 20 appeared on front pages around the world, escalating actions throughout the week culminated with a second global day of action this Friday September 27,” it added.

Ahead of a United Nations (UN) Summit which took place on September 23, almost 90 big companies in sectors from food to cement to telecommunications pledging to slash their greenhouse gas emissions in a new campaign to steer multi-nationals towards a low-carbon future, Reuters reported organisers saying in September.

The ripple effects of the Global Climate Strike also reached the shores of Malaysia, with both the public and private sectors introducing environment-friendly initiatives.

Thus, it was timely of Prime Minister Tun Dr Mahathir Mohamad when he said the government will establish the National Council of Climate Change Action to address matters concerning this pressing issue.

He underscored the importance of gearing the country to be climate change resilient and ready to face the impact of climate change such as rising sea levels, disruption to food change, healthcare and others, Bernama reported.

“A national Climate Change Centre is required to do climate change-related data collection, risk analytics, policy coordination among different levels and aspects of government to ensure Malaysia does not only survive but thrive as the globe inevitably warms in the future,” he said at the opening of the International Greentech and Eco Products Exhibition and Conference Malaysia (IGEM 2019) earlier this month.

Programme in place for lateral action

In addition, Malaysia External Trade Development Corporation (Matrade) has recently taken a leadership role to champion adoption of sustainable practices among Malaysian companies in the export business by launching a Corporate Shared Values (CSV) programme called Sustainability Action Values for Exporters (SAVE).

According to Matrade’s statement, the objective of SAVE is to influence the adoption of sustainability practices based on United Nation’s Sustainable Development Goals (SDGs) among Malaysian exporters as a strategy to give them a strategic advantage in export.

The SDGs are a collection of 17 global goals set by the UN General Assembly in 2015 for the year 2030 named AGENDA 2030.

SAVE Programme, also in line with the recently launched Shared Prosperity Vision 2030, will be executed in phases and this year the Programme will be focusing on capacity building initiatives to address the low awareness on sustainability and responsible business among local exporters.

“There is a need prepare Malaysian exporters with the knowledge and information they need so they can make a strategic and responsible decision in their sustainability practices.

“Additionally, we are also preparing our internal staff to be more exposed to areas of sustainability so they can provide the right guidance to Malaysian export community,” chief executive officer (CEO) Datuk Wan Latiff Wan Musa said.

Matrade is collaborating with several key strategic partners to ensure the success of SAVE.

These include Global Compact Network Malaysia – the Malaysian chapter of the UN Global Compact, and CIMB Islamic who will play an advisory role in the areas of sustainable financing, and on the adoption of business best practices in sustainability.

Banking on sustainability measures

Also addressing the impact of climate change on the country’s financial system and economy is none other than Bank Negara Malaysia (BNM).

BNM governor Datuk Nor Shamsiah Mohd Yunus in her keynote speech at the Regional Conference on Climate Change last month highlighted that the recent shroud of haze in Malaysia and neighbouring countries is a timely reminder of the environmental challenges confronting our generation and the generations to follow.

Datuk Nor Shamsiah Mohd Yunus

She further highlighted that with the passing of time, these challenges have become more pressing, and their consequences more dire.

“Yet, our response – at the industry, national and global level – is only just beginning to catch up to the enormous task we face,” she remarked.

“As described by the former UN Secretary-General, ‘we are the last generation that can take steps to avoid the worst impacts of climate change’.

“Climate change does not just threaten polar bears in the Arctic. It also threatens our socio-economic prosperity here in Southeast Asia. It poses risks to the fiscal position of governments, the viability of businesses and the living standards of individuals.

“As such, the effects of climate change are not merely an ecological problem for scientists and conservationists to worry about. It presents a major economic issue with direct implications on financial stability.”

Among the key priorities identified by BNM towards building climate resilience include the need to develop the tools and capacity for identifying climate risks relevant to financial business.

“Getting to grips with issues such as weather patterns, groundwater management and sustainable palm oil go well beyond the remit of traditional cash flow projections, credit loss modelling or interest rate yield curves,” she said.

“To this end, the Bank and SC, are collaborating with the World Bank to develop a principles-based taxonomy to enable financial institutions in Malaysia to classify green assets consistently.

“This framework aims to support informed decisions and analysis of exposures to climate risk in fund raising, lending and investment activities.

“The Bank expects to issue the first draft of the taxonomy by the end of this year for industry feedback prior to its adoption.”

The second key priority encompasses the need to develop a more complete understanding of the impact of climate-related risks to the Malaysian financial system and economy.

In this regard, Nor Shamsiah said BNM is actively involved in working together with the Central Banks and Supervisors Network of Greening the Financial System (NGFS) to develop an analytical framework to assess such risks.

“This entails sizing the impact of climate change on our financial system and economy, both in the central case and tail-end scenarios. This exercise also aims to estimate the relevant time frames in which these risks may materialise.

“Ultimately, this exercise would provide valuable insights on how to best integrate climate-related risks into the Bank’s macroeconomic and financial surveillance activities and feed into wider policy responses to climate change.”

On the third key priority, Nor Shamsiah said that BNM will need to address the appropriate treatment of climate risks within the prudential and supervisory frameworks for financial institutions.

She pointed out that as a start, BNM will require financial institutions to report their exposures to climate risks once work on the green taxonomy has been finalised.

“Information gathered through this process will be used by the Bank to consider changes to prudential standards to better reflect risks from climate-related exposures.”

As for the fourth key priority, it entails the need for the central bank to strengthen the use of disclosures more broadly, to provide greater transparency on how climate risk considerations are integrated into business decisions.

“Such disclosures, by both financial institutions and non-financial firms, will help drive action towards more effective risk mitigation and better adaptation to climate change.

“To this end, the Bank will work with the industry to implement the recommendations of the FSB Task Force on Climate-related Financial Disclosures (TCFD) in Malaysia.”

Lastly, the governor stressed that the financial industry will need to step forward and facilitate an orderly transition for households, businesses and governments to adapt to the physical and transition risks of climate change.

“This involves different players in the financial ecosystem – including banks, insurers and takaful operators, venture capital and private equity firms – to ideate and innovate solutions that would help the economy face the imminent climate-related risks.

“There is an urgent and critical need to develop sustainable financial solutions, including funding and investment structures with appropriate incentives and support mechanisms, to catalyse greater climate resilience for firms and households.”


RAM sustainability plays its part

Within the corporate ecosystem, climate change awareness has definitely come to the forefront for governments, regulators, investors, corporates and businesses, globally as well as in Malaysia, said RAM Sustainability Sdn Bhd’s (RAM) head of Sustainability Services Gladys Chua.

Gladys Chua

“In Malaysia, the financial ecosystem has evolved towards a more responsible one as our financial regulators – the Securities Commission Malaysia (SC), Bank Negara Malaysia (BNM) and Bursa Malaysia – led the development in their respective areas,” Chua said in an email interview with BizHive Weekly.

“Since 2014, the regulators have guided the market with the announcement of the Sustainable & Responsible Investment (SRI) Sukuk Framework, formation of a Joint Committee on Climate Change comprising financial institutions, and the listing requirement for sustainability reporting by listed companies.”

According to Chua, institutional investors, such as Khazanah Nasional Bhd, Kumpulan Wang Persaraan (Diperbadankan) (KWAP) and Employees Provident Fund Malaysia (EPF), through their respective commitments under UN’s Principles for Responsible Investment (PRI), will closely look at environment, social and governance (ESG) factors in all their investment process.

“Additionally, financial institutions are also shifting to more responsible financing approaches and some have signed up to the UNEP FI Principles for Responsible Banking.

“It is also encouraging to see corporates leading innovation and sustainable development within their field.”

On RAM’s part, since 2017, RAM Sustainability has played a pioneering and catalytic role in sustainable finance with the launch of its Sustainability Rating service.

“We expect all the initiatives by the key players in the sustainable finance ecosystem to continue to influence decision making and fuel sustainable development in the country going forward.”

Banks up for the challenge

Among the banks which have taken up BNM’s challenge to combat climate change is CIMB Bank Bhd (CIMB).

On October 1, CIMB launched its renewable energy (RE) financing for micro and small SMEs in Malaysia, as part of its RM15-billion SME allocation for 2019 to 2020 and CIMB Group’s sustainability commitment.

As per its statement, CIMB Bank has allocated RM100 million to the CIMB SME Renewable Energy Financing programme.

“One of the first initiatives under this programme is to provide smaller SMEs with 100 per cent financing to cover the cost of solar photovoltaic (PV) systems and installation on their rooftops. The financing initiative offers packages from as low as RM20,000 and up to RM1 million, in support of the government’s Net Energy Metering (NEM) scheme.

“SMEs need to first obtain the NEM approval from SEDA, to be eligible for CIMB’s Renewable Energy Financing. The financing initiative provides a practical solution to enable even the smaller and micro SMEs to purchase solar PV systems to save on their electricity bills, and contribute to planet earth’s well-being.”

According to CIMB Group’s group CEO Tengku Dato’ Sri Zafrul Aziz, with the CIMB Renewable Energy Financing, CIMB is able to incorporate environmentally friendly policies into its commitment to the SME sector.

“Our planet is at a tipping point, from an environmental, economic and social (EES) perspective, and we must take action now,” Tengku Zafrul said.

“To that end, members of the banking and finance industry can and must leverage on our resources and network to catalyse real lasting change across these fronts, and to begin pursuing profits with a purpose.”

In addition, just last week, CIMB Group, together with 29 other global business titans, pledged to collaborate over the next two years to fulfill the objectives of the Global Investors for Sustainable Development (GISD) Alliance. The GISD is a UN’s initiative to free up trillions of dollars from the private sector to finance the Sustainable Development Goals.

“We are pleased to join forces with 29 other global corporations to champion sustainable development worldwide. Being part of the GISD Alliance complements our commitment to UNEP-FI’s Principles for Responsible Banking, and our five-year plan on realizing CIMB’s SDG-related goals.

“It will also see us enhance efforts towards increasing investments in sustainable development, in line said.

On RE financing, Hong Leong Bank (HLB) has also committed RM 500 million in this segment for the next four years to support the government’s goal to increase the share of RE to 20 per cent of the country’s power mix by 2025.

Additionally, HLB has allocated part of this financing for SMEs looking to venture into RE, with solar, biogas and small hydropower identified as the key focus areas.

“At HLB, we’ve identified RE as a commercially viable industry with a significant growth potential taking into consideration that the government has also been actively developing the industry. Since we started sustainable financing in RE 15 months ago, we’ve seen tremendous traction in this space.

“As of August 2019, the Bank has approved close to RM300 million in financing in which we are confident will exceed the RM 500 million target by the end of this financial year, two years ahead of schedule,” Business Corporate Banking (BCB) managing director Yow Kuan Tuck said.

According to the press statement, the bank has approved RM300 million in financing spans across 20 RE projects of both large corporates and SMEs that generate energy from biogas and solar PV, and will soon start financing small hydropower projects as well. The current sustainable financing ranges at an average of RM10-15 million per project for non-solar projects.

A greener F&B sector?

For the food and beverage sector, Nestle Malaysia announced last month a breakthrough in the War on Plastic Waste, with a packaging innovation for its MILO UHT 125ml drink packs which will avoid 40 million plastic straws per year.

According to the statement, the new packs, which will be rolled out throughout the fourth quarter of 2019 and will make Nestle the first Food and Beverage Company in Malaysia to introduce paper straws for packaged drinks.

“Reducing plastic waste and mitigating climate change effects through advanced technology and product design, as well as consumer education, are a priority for us.

“This is the latest of our contributions to Nestle’s pledge to make our packaging 100 per cent recyclable or reusable by 2025,” Nestle Malaysia CEO Juan Aranols said.

Following this pilot initiative, Nestle Malaysia plans to roll out this packaging solution to its other MILO UHT variants in phases progressively with the ultimate objective of eliminating over 200 million plastic straws a year, the statement also revealed.

In doing its part to encourage sustainability, Nestle Malaysia with the support of Federal Land Development Authority (FELDA), Kedah State Department of Agriculture (KSDA), Kedah Economic Development Authority (KEDA), Pertubuhan Kami Anak FELDA (KAF) and Malaysian Agricultural Research and Development Institute (MARDI) launched in October its NESCAFE Grown Respectfully Programme, a sustainable coffee farming initiative, to help revive the Malaysian coffee farming sector.

“Malaysian farmers are an important part of Nestle’s value chain. For close to 30 years, we have been actively engaging local farmers in Kedah and Kelantan through our Nestle Paddy Club and Chilli Club programmes, to maximise yields without compromising quality.

“This is in line with our commitment to improve farmer livelihoods and enhance rural development in our local communities,” Aranols said of the initiative.

Meanwhile, McDonald’s Malaysia announced earlier this month that it targets to open 200 green restaurants by 2025, as part of its commitment towards long-term sustainability efforts.

As per its press release, the quick-service restaurant chain will be investing up to RM60 million in the next five years by procuring Energy Efficient (EE) and Renewable Energy (RE) equipment for the 200 restaurants, which includes new and remodelled outlets.

“As a company and brand with an extensive global footprint, we have a responsibility to do our part for people and the environment. We aim to use our Scale for Good strategy to achieve this objective while helping the nation meet its commitment to reduce the country’s greenhouse gas (GHG) emissions.

“In view of this, we are working towards ensuring that 100 percent of our restaurants are fitted accordingly with EE and RE equipment,” McDonald’s Malaysia managing director and local operating partner Azmir Jaafar said.

Notably, the company has also introduced 100 per cent sustainable fibre packaging in all its restaurants.

“Since 2015, the company ensured that carryout bags used at all McDonald’s restaurants were made of 100 per cent recycled materials. Additionally, all restaurants nationwide have also significantly reduced the usage of plastics bags and plastic lids since 2015,” the press release revealed.

“One of the more recent implementations that took place early this month include replacing plastic McFlurry cups and lids with alternative materials. This, together with other efforts to combat the use of single-use plastics, have resulted in the reduction of 276 tonnes of plastics per year for McDonald’s restaurants nationwide.

“Through the company’s ‘Say No To Straw’ campaign, McDonald’s Malaysia had also successfully reduced 55 million pieces of straws nationwide. Apart from that, the company has also stopped the use of foam packaging by making the switch to paper since 2017.”