Joint Financial Sector Committee to strengthen the response to climate risk

KUALA LUMPUR (Bern) – The Joint Committee on Climate Change (JC3) aims to advance initiatives aimed at strengthening the capacity of the financial sector to manage climate-related risks.

Yesterday at its fifth meeting, the JC3 stated that following the publication of the Principle Based Taxonomy and Climate Change (CCPT) in April 2021, a CCPT Implementation Group will be established to support its consistent and credible implementation by financial institutions.

Members of JC3 are senior officials from Bursa Malaysia and 19 financial sector actors, as well as relevant experts.

Twelve JC3 members pledged to adopt the CCPT quickly, ahead of expectations of financial institutions regulated by Bank Negara Malaysia (BNM) to classify and report their lending and investing activities in accordance with the CCPT from July 2022.

“The CCPT provides a common framework for the classification of climate-related exposures of financial institutions to support risk assessments and encourage financial flows towards greening the economy,” said BNM and Securities Commission (SC) in a joint statement today.

JC3 members also reviewed the progress of work undertaken to develop reference guides on climate risk management and scenario analysis, as well as climate-related disclosures.

The joint committee expects to publish the reference guides in the fourth quarter of this year.

At the same time, work will be undertaken by JC3 to produce localized reference climate scenarios relevant to Malaysia in order to improve understanding of the physical and transient impact of climate change under different climate trajectories.

“This, in turn, will support risk assessments, better alignment of business strategies with climate goals and climate-related disclosures by financial institutions,” the statement said.

The JC3 also said that its members discussed in more detail plans for mandatory disclosure of climate-related financial information by financial institutions and that further details on these plans will be released by the end of the year.

They also noted that a work plan for the new data gap subcommittee had been approved at the meeting.

JC3 members supported the prioritization of initial use cases by the subcommittee, which includes data to support investment and lending decisions, macroeconomic modeling, stress testing, scenario analysis and product development.

For use cases, the sub-committee will work with key public and private sector partners to identify critical data needs and map them to relevant data sources and create a climate data catalog that the financial sector can access, the statement added.