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Maybank pioneers green banking in Malaysia via first SPF

© Shutterstock / PeachShutterStockSustainable finance.

Maybank’s self-designed sustainable product framework (SPF) is designed to mobilise RM50 billion in sustainable finance to its retail and corporate client base. It could help extend sustainable finance beyond its conventional financial products and into Islamic finance, while also serving as a template for other banks in the country, and in the region.

Maybank is the first Malaysian bank to launch a sustainable finance framework.

The new framework enables the expansion of sustainable finance into the fast-growing Islamic finance market in the region.

SPF could provide a template for other banks in the region.

While Maybank’s self-designed framework is the first by a Malaysian bank, it does reference best practices adopted by global peers, laying the groundwork for its global acceptance. Setting up a sustainability framework is an important prerequisite to issuing sustainability and sustainability-linked financing. It is also useful in obtaining a second party opinion, which is seen as the de facto standard to green issuance.

The Securities Commission Malaysia first set up a green finance framework in 2017, titled its Sustainable and Responsible Investment (SRI) Sukuk framework. Sukuk is synonymous with ‘sharia compliant’ bonds, as defined by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

The bond market is particularly contentious in terms of sharia law, which is effectively the Islamic legal system. Sharia is opposed to usury, as are many different religions, on the grounds of encouraging negative social impacts. In fact, under sharia law the collection of riba, or interest, is forbidden. That means that bond investments under Sharia-compliant structures represent partial ownership rather than a debt obligation.

Maybank sees framework driving new product development

Maybank’s SPF will be implemented across its conventional and Islamic product offerings, with a commitment to mobilise RM50 billion by 2025. The framework is intended to guide the development of these products, using Maybank’s own sustainable standards and use of proceeds as additional filters.

The SPF has been framed to comply with standards set by the International Capital Markets Association’s (ICMA) Climate Transition Finance Handbook and the decarbonisation pathway set by the Transition Pathway Initiative (TPI). Alignment with globally accepted principles for green financing could help attract global investors.

The bank’s products will be offered across its customer base to retail, non-retail and corporate clients, based on their readiness and needs. The framework will also inform its own decisions in offering sustainable, sustainability-linked, or transit-finance solutions.

An important inclusion in the SPF is the qualification of transition factors for hard-to-abate sectors.

The SPF is applicable to all financial products and services that integrate ESG criteria into business or investment decisions to bring about sustainable development outcomes or contribute positively to the achievement of the Paris Agreement goals and United Nations-Sustainable Development Goals (UN-SDG). 

Strong commitments backing sustainable finance goals

Maybank has made four sustainability commitments, two of which will drive its sustainable finance goals. In addition to mobilising RM50 billion of sustainable finance by 2025, it is also committed to improving the lives of 1 million households across ASEAN.

Through various community programs that include measures to improve financial inclusion among lower income groups, Maybank claims to have exceeded its 2022 goal of 150,000 households in 2022. 

Further, the Bank is nearly half-way to meeting its 2025 sustainable finance goals, having financed RM23.9 billion in financing at the end of 1H 2022, largely in Malaysia and Singapore. The bulk of the financing has been focused across the property, infrastructure and renewable energy sectors. 

Maybank ahead of schedule on its sustainability targets

Maybank has targeted a net zero carbon equivalent position by 2050, with a carbon neutral position in its own Scope 1 and 2 emissions by 2030 an interim goal.

Thus far it claims to have  41.1% of its Scope 1 and 2 emissions against its 2019 baseline, exceeding its 2022 target of 40% reduction, via the rollout of various energy efficiency programs, and the use of Malaysia Renewable Energy Certificates. 

Its final commitment to sustainability appears to be more philanthropic, targeting one million hours per year in employee volunteering, with initiatives targeting diversity and inclusivity, and transparency. The intention is to deliver on one thousand significant SDG-related outcomes by 2025. 

Thus far, Maybank claims it has exceeded 2022 targets for three of its four sustainability commitments at the end of the first half.

Championing green via Islamic finance may be tough ask

Proponents of Islamic finance have pointed to similarities between religious tenets and the UN Sustainable Development Goals (SDGs), making it an ideal market for green and sustainable financing. A focus on social impact and the exclusion of ‘sin’ industries like alcohol and gambling support these claims.

Yet the economies of many of the countries where it is popular and prevalent are dominated by high polluting and environmentally unfriendly industries.

Malaysia is a prime example of this – together with Indonesia, it accounts for 84% of global palm oil production. Malaysia is also the second-largest oil producer in Southeast Asia, and the third largest exporter of liquefied natural gas (LNG).

Malaysia is the largest issuer of conventional and green sukuk in the ASEAN region, accounting for $3.9 billion, or 56% of the total in 2021, according to E&Y. Islamic finance assets are expected to grow at a compounded annual growth of around 9% to 2025, based on Refinitiv data, which will help Malaysian banks strengthen their position in the category among ASEAN nations.

Maybank’s SPF is an important first step in bringing global standards to green and sustainable finance issuance among Malaysian and ASEAN banks, amid the transition challenges faced by economies in the region.

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