Malaysia Issues TCFD Adoption Guide for Financial Institutions

All local and foreign financial institutions expected to adopt the basic recommendations within 24 months.

Malaysia’s JC3 (Joint Committee on Climate Change) has released new guidance outlining recommendations for financial institutions on the implementation of climate-related disclosures that are aligned with the recommendations of the Task Force on Climate-related Financial Disclosures.

The JC3 consulted on a draft version of the application guide earlier this year, a part of its efforts to ensure that Malaysian financial institutions collectively manage all material risks and opportunities stemming from climate change in a comprehensive manner.

The TCFD Application Guide draws reference from a selection of good practices adopted by financial institutions that are regarded as global leaders in this space.

The Guide was developed by the Malaysian financial industry within the context of the Malaysian economy and financial system, to support financial institutions that are stepping up efforts to implement the TCFD Recommendations in phases beginning 2022.

It outlines key recommendations supplemented by the relevant descriptions, guidance notes, considerations and examples that could be utilised as practical resources to help financial institutions improve their disclosures.

All local and foreign financial institutions – banks, insurers, takaful operators, asset managers, and institutional investors – are expected to adopt the basic recommendations set out in the application guide, within a recommended implementation timeframe of 24 months.

Financial institutions will also be encouraged to adopt so-called ‘Stretch’ recommendations, which are linked to more sophisticated underlying practices but their adoption should depend on a financial institution’s overall climate risk exposure and complexity of operations.

Each financial institution should conduct an assessment to determine the extent to which they should adopt the Stretch Recommendations, and the corresponding timeframe for implementation.

“Supervised financial institutions are expected to integrate climate-related risks and considerations into their governance framework arrangement, organisational structure, business strategies, corporate planning and risk management practices,” the guide says.

As an extension of this initiative, disclosure guides for Malaysian businesses will be developed later in 2022.

The JC3 was set up in September 2019 as a platform to pursue collaborative actions for building climate resilience within the Malaysia financial sector. The task force is co-chaired by Malaysia’s securities commission and central bank, comprising Bursa Malaysia and 19 other financial industry players.

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