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Building financial resilience to climate-related risks
The rising challenges of global climate change pose wide ramifications for the resilience and stability of economies and organizations worldwide. Consequently, financial institutions (FIs) are accelerating their focus on developing a comprehensive and robust framework for climate risk management. This framework factors and integrates all relevant climate change risks, including their linkages with other risk categories such as market risk, operational risk, credit risk and country risks.
In Malaysia, effective 30 June 2025, FIs will need to identify the potential impact of climate risk on their loan portfolios to ensure organizational sustainability and resilience. Bank Negara Malaysia has set the Climate Risk Stress-Testing (CRST) modelling assessment methodology for Malaysian financial institutions (FIs). This requires reporting the impact of climate risk with quantitative and qualitative modelling to gauge the susceptibility of Malaysia’s financial system to climate-related hazards.
Mitigating the impact of climate change risks, and associated financial risks are much driven by Government policymakers and businesses actions or inactions.