The Ministry of Investment, Trade and Industry (MITI) has announced an updated timeline for the launch of the National Industry ESG Framework for the manufacturing sector. The framework, set to be launched before the end of the year, will include the element of financial incentives to drive ESG adoption in the sector.
In conjunction with the announcement, MITI Minister Tengku Zafrul Aziz called for financial institutions to allocate a higher portion of resources toward SMEs, manufacturers and exporters.
“I think that Islamic finance has a natural advantage in this area and the principles behind it [give it] a first-mover advantage. What we need to ensure is that given the size of Islamic finance, they can also play a major role,” Tengku Zafrul told ISFI.
In the view of the minister, while Islamic finance has embraced ESG principles earlier than its conventional counterpart, the goal is to have all financial institutions contribute to the sustainability agenda.
Tengku Zafrul also highlighted the specific importance of channeling funding toward Malaysian companies particularly those involved in sectoral decarbonization, electric mobility, hydrogen energy and carbon capture, utilization and storage.
With the need for local companies to stay competitive in a landscape where ESG expectations are increasing, Tengku Zafrul remarked that Malaysian SMEs must be ready to meet the ESG standards set by other markets.
With hopes to secure buy-in from financial institutions and formalize its joint efforts, MITI is arranging a series of engagement sessions with financial institutions.
According to the MITI minister, the outcome from the sessions, the first of which was held last week, will be a framework to outline how banks can finance ESG practices for manufacturers.
“We are also collaborating and engaging with Bursa [Malaysia] and the voluntary carbon market. We are also now waiting for the relevant ministry in the government to finalize our policy on this,” Tengku Zafrul revealed.
According to the MITI minister, the soon-to-be-tabled policies being developed by the Ministry of Natural Resources, Environment and Climate Change, including the Climate Change Act, will form the basis of the framework enabling Malaysian companies, agencies and ministries to contribute to addressing climate change.