Climate Change reporting and stress testing for Financial Institutions gain momentum

As with practically all other business sectors, there are growing concerns as to the impact of climate change on financial institutions and their business. In this regard, two notable publications were released last week.
First, the Task Force on Climate-Related Financial Disclosures (‘TCFD’) Application Guide for Malaysian Financial Institutions (‘TCFD Application Guide’) was released by the Joint Committee on Climate Change (JC3) on 29 June 2022. The TCFD Application Guide seeks to support the progressive implementation of climate-related disclosures by financial institutions that are aligned with TCFD recommendations1. The guide was developed by the Malaysian financial industry within the context of the Malaysian economy and financial system and is designed for the following financial institutions: (a) commercial banks, (b) Islamic banks; (c) investment banks; (d) development financial institutions; (e) insurance and reinsurance companies; (f) takaful and retakaful operators; (g) fund management companies; and (h) institutional investors. The TCFD Application Guide can be accessed here.
Second, the Discussion Paper on the 2024 Climate Risk Stress Testing (‘CRST’) Exercise (‘Discussion Paper’) was issued Bank Negara Malaysia on 30 June 2022 to seek feedback on the proposed design of the industry-wide CRST exercise to be conducted in 2024. Bank Negara Malaysia has proposed in the Discussion Paper that the following financial institution participate in the 2024 CRST exercise: (a) licensed banks, licensed investment banks and licensed insurers, including licensed professional reinsurers under the Financial Services Act 2013; (b) licensed Islamic banks and licensed takaful operators, including licensed professional retakaful operators under the Islamic Financial Services Act 2013; and (c) prescribed development financial institutions under the Development Financial Institutions Act 2002. The Discussion Paper can be accessed here.
The deadline for providing feedback to Bank Negara Malaysia on the Discussion Paper is 30 September 2022.
Alert by Kok Chee Kheong (Partner) of the Corporate Practice of Skrine.

1 The Final Report on the Recommendations of the Task Force on Climate-related Financial Disclosures can be accessed here.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact