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Sunday, December 10, 2023

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Malaysia launches ESG framework for manufacturing sector

The Malaysian Ministry of Investment, Trade & Industry (MITI) launched the National Industry Environmental, Social and Governance (i-ESG) Framework on the 2nd October 2023. The framework is envisioned as a launchpad for Malaysia’s manufacturing sector to tap global ESG-focused opportunities.

“The i-ESG Framework represents a pivotal step in our commitment to help industries embrace ESG considerations in their operations.

“This will help them manage risks and build resilience, while also ensuring their continued access to ESG-sensitive customers and markets,” Tengku Zafrul Aziz, the minister of MITI, remarked.

With an emphasis on MSMEs, the framework consists four pillars — standards, financing, capacity-building and market mechanism — with 50 deliverables and two phases.  

The first phase, dubbed the ‘Just Transition’ phase, is a two-year plan starting from 2024. The second leg is a three-year ‘Accelerate ESG Practices’ phase ending in 2030.

While the minister acknowledges that the Malaysian manufacturing sector is playing catch-up with developed markets, he is confident that it will reach its sustainability goals in seven years or less.

Phase 1 of the framework will introduce financing options and start companies’ sustainability journey through self-readiness assessments, outreach and training programs.

The financial incentives will enable companies to undertake ESG projects through providing access to a pool of sustainable funding.

MITI will collaborate with Bank Negara Malaysia, Bursa Malaysia and financial institutions to promote ESG-related financing and funding and attract investment for sustainable projects.

Prior to the launch of the framework, Tengku Zafrul told ISFI that given the size of the Islamic finance industry in Malaysia, it should play a major role in financing sustainable projects in the manufacturing sector.

In addition to promoting the participation of manufacturers in Malaysia’s voluntary carbon market, the Bursa Carbon Exchange, the framework also calls for the design for carbon-pricing instruments.

MITI is currently working with the Ministry of Finance (MOF), the Ministry of Energy and National Resources and the World Bank to design a carbon-pricing index to gauge the impact of carbon-pricing mechanisms and the cost implications of reducing carbon emissions across various sectors.

ISFI previously reported that the feasibility study for carbon-pricing instruments, a joint effort between the MOF, the World Bank and Bursa Malaysia, is currently underway and will culminate in a policy decision on carbon tax in Malaysia.

“This study will take about two years … at the end of the two years, the Malaysian government will make a decision on how the carbon compliance market would look like,” Dr Chen Wei-nee, the head of the carbon market at Bursa Malaysia, told ISFI in a prior podcast interview.

In addition to driving ESG adoption in the manufacturing sector, the i-ESG Framework will also act as a guide to the National SDG Centre in planning its roles and operations.

  • Companies in the Article
  • MITI

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