One of the most anticipated sustainability events in Malaysia, the second Climate Finance Summit took place on August 1, 2024. Sustainability and climate change financiers, regulators, professionals, experts, businesses and enthusiasts gather for a common mission: to explore innovative solutions for funding a sustainable and inclusive future.
In this article, I will share my key takeaways and the learnings from attending this summit.
Table of Contents
The Big Picture
This theme of this year’s summit is “Mobilizing Capital for a Just Transition,” with the purpose and objective of providing a platform for the regulators, financiers, and businesses to inform, engage, and discuss issues pertaining to climate financing, including but not limited to adaptation financing and climate justice. The summit created a safe space and set an open-minded tone for businesses and professionals to express recommendations and opinions to leaders in the space.
Besides that, with the rising numbers of young faces we could see at recent sustainability events, it was a good sign that sustainability and climate change are no longer an exclusive topic discussed in the boardroom only but also a common topic discussed among the general public, especially among the youths such as Gen Z and Gen Alpha because they are the ones that are going to be impacted by climate change the most.
Why Is This Summit More Important Than Ever Before
Comparing to the financial reporting standards, which are mature, we can say that sustainability is still at the infancy stage. Hence, a lot of new regulations and policies are introduced globally and locally to stabilise the sustainability scene to reach a balanced state where the economy, environment, and society could thrive harmonically. Some of the recent developments include the EU Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), EU Deforestation Regulation (EUDR), and Carbon Border Adjustment Mechanism (CBAM).
Although most of the regulations and policies are introduced to the large companies first and later only affecting the small and medium enterprises (SMEs) within and outside of the region, this change in the compliance needs still brings fear and anxiety to the majority of the businesses around the globe. What if other regions and their home countries follow the steps? The resources needed to meet the requirements are enormous and even worse if the stand-alone regulations are not in sync with each other.
The Climate Finance Summit 2024 came at the right time to bring in perspectives from different stakeholders on how we can move forward together to tackle climate change and provide the support needed by businesses to empower them to take actions. Financing, fair treatment of communities, and climate policy are among the highly discussed matters today.
What Are the Key Takeaways and Learnings
The Climate Finance Summit 2024 was an informational event with thought-provoking questions for you to ponder on. Based on my personal experience, I summarised the key takeaways and learnings, which I think are worth sharing with my readers.
Insight Forum 1: Financing for Transition
In accordance with the National Energy Transition Roadmap, which aims for 70% renewable energy by 2050, the minister has encouraged the private sector to adopt long-term decarbonisation strategies. Although the government has introduced green incentives such as Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) to promote the adoption of green technologies among the private sectors, the existing “carrots” are still far from assisting companies to respond to the call from the government.
This is where financiers such as banks come into play. Bank Negara Malaysia (BNM) expects 50% of new financing by banks to support climate transition activities by 2026, as part of the Financial Sector Blueprint 2022-2026. Although many banks are offering BNM’s Funds for SMEs—Low Carbon Transition Facility (LCTF) to encourage and support SMES to adopt sustainable practices for business reliance. But still, it is a loan, which means that businesses will only get into more debts than before.
What businesses truly need at these tough economic times is grants like the MIDA DIAF-ESG Adoption, which helps to defray the costs associated with implementing environmental, social and governance (ESG) practices. Or perhaps, banks can offer performance-based interest rebate to companies which show exceptional good results in improving ESG performance. I believe that these “carrots” will work well and companies will be more willing to contribute to the nation’s ambition.
Insight Forum 2: Bridging Gaps for Climate Justice
This forum revealed the truth of what’s happening on the ground when the elites were discussing climate change in luxurious venues. The voices of the community, the often-forgotten key component of climate change mitigation projects, were heard here.
Climate change mitigation initiatives such as restoring forests via carbon credit projects and construction of hydroelectric power stations aim to reduce emissions and enhance sinks in the hope that climate change can be slowed down or stopped. Usually, such megaprojects take place in the rural area and affect the local communities, who see forests as their home. Is Free, Prior and Informed Consent obtained from the affected communities before the commencement of such projects? Where can the general public access the documentation and records? Is the project proponent transparent about the process and open to questioning?
Looking back at the historical data, the earth’s climate has never stopped changing. I believe that the more important thing to do now is adapt to climate change and reduce its impacts on humanity as low as possible through climate change adaptation initiatives such as the SMART Tunnel in Kuala Lumpur.
According to the Department of Irrigation and Drainage, the coastal zone of Malaysia has special socioeconomic significance as it supports about 70% of the population and is also the centre of economic activities encompassing urbanisation, agriculture, fisheries, etc. The physical impact of climate change—sea level rises is really going to hit us hard.
As current policies and financing are steered heavily towards climate change mitigation, what can we do better to minimise the loss and damage?
Informative Debate: The Carbon Border Adjustment Mechanism (CBAM): An Equitable Solution or a Disproportionate Burden?
Another highlight of the day is the debate between H.E. Michalis Rokas, Ambassador and Head of the European Union Delegation to Malaysia, and Yin Shao Loong, Deputy Director of Research, Khazanah Research Institute (KRI), around the CBAM, a carbon pricing tool introduced by the EU to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.
The CBAM was launched with the image of promoting global sustainability, ensuring fair competition, and incentivising innovation. However, the rest of the world sees it as something else: a trade-restrictive policy that could disproportionately burden developing countries and impose complex verification processes.
The introduction of the CBAM is a good thing. It is a process that we have to go through to reach maturity in sustainability. Always listen to both sides of the story and find a balance. Obviously, this “stick” is deemed too thick for the trading countries because of the short preparation time, high compliance cost, and complex and different methodological approaches compared to existing practices such as product carbon footprint, which holds the same purpose: to measure the global warming potential of a product.
The rest of the world has voiced their opinion. Can the EU take the criticism with an open mind and adapt to it?
How Can Business Leaders Move Forward From This Summit
The Climate Finance Summit 2024 laid out the most pressing issues faced by businesses and communities when the whole world is transitioning towards a low-carbon future. During this stage, rapid development in the sustainability landscape is unavoidable because everyone has to go through trial and error to reach a balance state.
Change is the only constant. Learn to embrace it and enjoy the process.
Every day, we experience different types of change, including our schedule and the weather. Every facet of our lives is subject to change, which is an inherent component of being human. The only thing that makes the difference is how we react to it.
Some of us embrace change with open arms and eagerly seek new opportunities, whereas others may feel reluctant to change and prefer comfort and familiarity. Well, it all comes down to mindset. The choice is in your hands to create the energy you want to sail across this stormy sea and be resilient until the sky is clear again.
Is your business affected by the recent developments in sustainability, or are you looking to ride on the wave and seek new business opportunities by incorporating climate change and sustainability management into your business strategy?
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