KUALA LUMPUR, Nov 1 — The financial sector must continue to play an important role in facilitating the funding and investment required towards reducing the intensity of greenhouse gas emissions of the gross domestic product by 45 per cent by 2030.

Deputy Finance Minister II Steven Sim said the collective funding required to support the development of projects and initiatives as planned in the National Energy Transition Roadmap (NETR) in the next few decades is big.

Hence, he said, Malaysia cannot rely entirely on public sector funding owing to fiscal constraints.

"In this context, it is important to stress that there is a close alignment between Islamic financing and sustainable and responsible investment.

"The basic principles of Islam to promote justice, environmental sustainability and business ethics are also in tandem with the concept of sustainable investment, and the government is emphasising these in its Madani Economy framework,” he said at the Dewan Rakyat today.

He was replying to a question from Datuk Seri Hasni Mohammad (BN-Simpang Renggam) who wanted to know the government’s latest initiative to mobilise Islamic green finance to fulfil part of the funding for the country’s carbon-neutral agenda 2050 and NETR.

In 2021, he said the government issued the global sukuk, amounting to US$1.3 billion (US$1=RM4.76) and received very encouraging response from investors.

Of that amount, US$800 million was the first US dollar-denominated sovereign sustainability sukuk in the world.

Based on the successful issuance, the government has also issued the Malaysian Government Investment Issue (MGII) Lestari, which is a federal government domestic debt instrument, amounting to RM4.5 billion in 2022 and RM5.5 billion in 2023, making the accumulated amount of the debt papers at RM10 billion, thus achieving the target as announced in Budget 2022.

"In Budget 2024, the federal government will pioneer the issuance of biodiversity sukuk totalling up to RM1 billion involving the planned replanting of degraded forests. This replanting initiative will be undertaken in collaboration with the state government,” he said.

Meanwhile, he said via the Malaysian capital market, various initiatives have been implemented to take advantage of the synergy between the Islamic capital market and sustainable and responsible investment (SRI) initiative.

As the first initiative that integrates shariah and SRI principles, the SRI sukuk framework enables green, social and sustainable project owners to issue SRI sukuk to finance the project, he said.

Until December 2022, a total of RM18.92 billion SRI sukuk were issued since 2015, including the issuance of the world’s first green sukuk in 2017.

Furthermore, he said that to encourage local companies and entrepreneurs to participate in projects based on green technology, the Green Technology Financing Scheme (GTFS) was introduced by the government in 2010.

"Until 2022, RM7.5 billion funding was provided for this purpose, including shariah-compliant funding,” he said, adding that via Budget 2023, GTFS 4.0 would offer funding of up to RM1 billion and is open for applications until 2025.

Meanwhile, the financial sector has committed a funding amount of over RM200 billion until 2025 for environmental, social and governance (ESG) funding purposes.

Islamic banking institutions had allocated almost RM16 billion for green projects from 2017 until September 2021, he added. — Bernama