Bank Negara Malaysia (BNM) is strengthening its commitment to regional sustainability by aligning with Malaysia’s Asean chairmanship theme of “Inclusivity and Sustainability”. The central bank will prioritise two key areas: financing energy transition initiatives across Asean and supporting the low-carbon transformation of small and medium enterprises (SMEs).
These focal points were underscored during the recent Asean Finance Ministers’ and Central Bank Governors’ Meeting, held in Kuala Lumpur earlier this month.
As part of its efforts to catalyse the region’s energy transition, BNM will play a facilitative role in mobilising funding mechanisms for the Asean Power Grid (APG). Assistant Governor Madelena Mohamed, who leads the central bank’s new strategy and sustainability division, noted that enabling the APG is essential to boosting cross-border electricity trade, particularly for renewable sources.
Launched in 2018, the APG aims to establish a connected regional power grid to drive energy security and sustainability. However, realising this vision requires substantial investment in infrastructure upgrades. The Asean Investors Roundtable—held during the same week—served as a platform to convene project champions, investors, and philanthropic capital providers to deliberate on financing modalities, practical challenges, and policy enablers.
“This marks an important step towards realising this long-term, highly complex and economically significant infrastructure project,” said Madelena in a written response to ESG.
In tandem, BNM is scaling up its Greening Value Chain (GVC) programme, originally launched in Malaysia in 2023, to the broader Asean region. The initiative equips SMEs with tools and financing support to measure and disclose their greenhouse gas emissions. A playbook, Building Supply Chain Resilience: Insights into Greening Value Chains for Asean, was released during the meeting week, drawing on insights from the programme’s rollout in Malaysia.
According to Madelena, “We envisage GVC to be rolled out in at least one other Asean country this year, and for the playbook to serve as a key reference by businesses and financiers.”
Navigating a Complex Sustainability Mandate
Appointed assistant governor in January, Madelena brings 32 years of experience at BNM, most recently serving in its sustainability unit. Acknowledging the growing complexity of climate-related challenges, she emphasised that public and stakeholder trust in the central bank’s stewardship must be matched with decisive and inclusive action.
“The stakes are high. Our operating environment is becoming more challenging. The public and other stakeholders trust and expect us to discharge our mandates well, and this should not be taken lightly,” she said.
The financial sector remains instrumental in Malaysia’s path towards net zero emissions by 2050. Madelena highlighted that the foundations are already in place, with Islamic financial institutions having taken the lead in sustainable finance.
“This provided us valuable lessons that shaped our approach to climate finance and risk management,” she said.
BNM’s Joint Committee on Climate Change, launched in 2019 alongside other stakeholders, has evolved into a platform for collaborative innovation in climate risk and finance.
“With the foundation in place, we are shifting the gear towards impactful implementation. Realising this ambition requires Bank Negara to work collaboratively with our stakeholders, particularly peer regulators, government ministries and agencies, and industry players.”
The bank’s close engagement with regional central banks is evident through its work with the Asean Taxonomy Board. In December 2024, the board released Version 3 of the Asean Taxonomy for Sustainable Finance, the world’s first regional transition taxonomy. Its distinctive “traffic light” system acknowledges firms at various stages of decarbonisation.
BNM’s own Climate Change and Principle-based Taxonomy—mandatory for financial institutions—aligns with this regional framework.
Internally, the central bank is advancing its own climate transition plan and has implemented a structured capacity development programme to support its objectives.
The Asean Investors Roundtable also explored the role of Islamic finance in funding large-scale climate projects. Madelena revealed that RM11.9 billion in Sustainable and Responsible Investment (SRI) sukuk were issued in 2024, a threefold increase from 2021. Under the Values-Based Intermediation (VBI) framework, Islamic financial institutions have channelled over RM26 billion into green and decarbonisation-focused activities.
-The Edge Malaysia
