The Securities Commission Malaysia (SC) said Monday it is eyeing mobilizing capital for sustainability related projects, and building a robust sustainable finance ecosystem.
The regulator said in its Capital Market Masterplan 2026–2030 (CMP4) that it will facilitate sustainable financing including via the application of blended finance instruments (e.g., guarantees, first-loss tranches, sustainability-linked sukuk, impact bonds, catastrophe bonds etc.) as a means of systematically de-risking investments and enhancing return profiles for projects with low commercial viability (e.g., coastal resilience, micro, small and medium enterprises [MSME] decarbonization, coal plant retirement, just transition etc.).
In this regard, blending commercial capital from banks and institutional investors with concessional capital from government and philanthropic sources will help better match risk-return preferences across a broader investor base.
In parallel, the SC will explore expanding the issuer base by facilitating state and municipal entities to raise capital for sustainability-related projects, while providing support for federal government initiatives.
Recognizing that many sustainability projects remain marginally bankable or wholly unbankable, SC said greater efforts will be made to unlock new pools of concessional and commercial capital, including through Islamic social finance.
The SC will be seeking guidance from the State Islamic Religious Councils (SIRCs) to integrate waqf and zakat into blended finance models via regulatory and operational frameworks.
Greater efforts will also be made to identify and meet the participation criteria for international funds.
To broaden access and market participation, the SC will facilitate the establishment of regulated fundraising platforms such as the Social Exchange to enable retail investors to participate in small-scale, high-impact projects.
The Social Exchange, which will be developed in phases, will connect non-governmental organizations (NGOs), social enterprises, donors and investors, through the broadening of capital market access and instruments that support social impact projects.
NGOs and Social Enterprises will be able to raise funds from a wider pool of donors and investors, through the Social Exchange, for social impact projects that benefit communities.
By enhancing transparency, credibility and accountability within the social finance ecosystem, this initiative will complement government efforts to strengthen community resilience and social welfare through market-driven solutions, said SC.
To further catalyze innovation and crowd-in private capital, the SC will support the mobilization of capital through climate finance innovation platforms (e.g. the Climate Finance Innovation Lab) and the establishment of special-purpose funds or vehicles for adaptation projects.
These initiatives will complement existing funding channels, create proof-of-concept opportunities for emerging sustainability solutions and scale up investments in frontier sectors.
“Collectively, these measures will form a robust foundation for scaling investable opportunities, improving capital allocation efficiency and channeling funds to projects with the highest measurable impact,
“They also seek to align domestic financing with Malaysia’s broader sustainability goals, advance climate transition, enhance adaptation and resilience, and promote social equity,” said SC.
The SC believes that a well-articulated and managed framework may also attract international funds that seek to do good.
“Overall, these measures will unlock commercial investment for environmental and social projects, facilitate cross-border capital flows into sustainability-focused products and reinforce the capital market’s role in driving Malaysia’s shift towards a sustainable and inclusive economy,” it highlighted.
Meanwhile, the SC intends to accelerate the development of the sustainable finance ecosystem, partly in pursuit of its goals to develop sustainable finance as a niche.
There are many aspects to consider in building the ecosystem. Firstly, the ecosystem will be supported by clear taxonomies, robust measurement standards and transparent sustainability disclosures.
The SC will collaborate with Bank Negara Malaysia (BNM) to develop a national sustainability taxonomy, aligned with the ASEAN Taxonomy and mitigation co-benefits and Adaptation for Resilience (mARs) Guide.
This will provide consistent definitions and improve market clarity as well as investor confidence.
Secondly, the SC will develop impact investment guidance, beginning with social impact indicators aligned with international frameworks to standardize impact measurement and disclosure requirements.
This will improve the credibility of disclosures, comparability of impact outcomes and support informed decision-making with a view to building investor confidence that their capital is being channeled into projects delivering genuine environmental and social outcomes.
Overall, this will facilitate greater capital mobilization for projects with meaningful community benefits.
Thirdly, enhanced transparency standards will be reinforced by strong safeguards and oversight to mitigate risks such as greenwashing, fraud and market misconduct.
Market discipline will be anchored in robust self-governance
mechanisms, strengthened professional standards and industry-led accountability.
These will be complemented by proportionate regulatory supervision to identify, address and deter misconduct across the ecosystem.
Fourthly, as listed and large non-listed companies progressively adopt the ISSB Standards, the Advisory Committee on Sustainability Reporting (ACSR), chaired by the SC, will focus on improving the quality of data sets and explore how the disclosed information can demonstrate to both domestic and international investors the resilience of our business community in navigating future uncertainties.
Fifthly, the SC will work with key stakeholders to strengthen assurance mechanisms, standards and price discovery frameworks, while facilitating the development of Malaysia’s carbon market.
Potential linkages with regional carbon markets will be explored to enhance interoperability, deepen liquidity and support credible regional price formation, thereby unlocking larger flows of sustainable and transition capital.
Sixthly, the SC will prioritize building local capability and attracting global expertise across the sustainable finance value chain.
This includes enabling service providers such as impact investment managers, environmental, social, and governance (ESG) rating agencies, verification bodies, auditors and technology vendors to play a greater role in origination, structuring and assurance.
According to SC, collaboration with international firms and development partners will help transfer knowledge, raise professional standards and build the technical depth of
domestic players.
In tandem, efforts will be made to localize expertise and strengthen professional capacity across the ecosystem.
This includes the establishment of an association of sustainability professionals. The deepening of market expertise is critical to success in financing climate transition,
environmental resilience and inclusive socio-economic development.
“Overall, these measures will contribute to higher levels of transparency, comparability and accountability that will convince investors to increase their allocations to sustainable finance products while encouraging boards to embed sustainability into corporate strategies as a driver of long-term value,” it added.
SC to develop appropriate regulatory frameworks for alternative assets