KUCHING: Malaysia’s sustainable finance push is accelerating but smaller firms are still being left behind.
Universiti Malaya Department of Finance Associate Professor Dr Rozaimah Zainudin and Monash University (Malaysia) School of Business Associate Professor Dr Karren Lee-Hwei Khaw said smaller firms still face uneven access.
They added that regulators are tightening the framework to steer lending towards climate-aligned activity.
“This shift is driven by Bank Negara Malaysia and the Securities Commission Malaysia through the Joint Committee on Climate Change (JC3), a platform for regulators and industry to advance climate resilience and financial system greening.”
They noted that a key milestone came in December 2025, when JC3 issued new guidance for banks on assessing borrowers.
“In December 2025, JC3 launched the Sustainable and Transition Finance Guidance, outlining principles for banks to assess borrowers at both asset and entity levels.”
They said that lenders are rolling out more green, transition and sustainability-linked facilities, with SME Bank setting a financing target through 2030.
“SME Bank Malaysia, under its Sustainability Roadmap 2.0, targets RM10 billion in sustainable financing by 2030.”
They said many SMEs still do not fully understand what sustainable finance is tied to.
“Some SMEs still view it as long-term or stable financing rather than borrowing tied to measurable sustainability outcomes and performance indicators.”
They noted that operational capacity remains a bottleneck, including the ability to produce basic ESG data that lenders can rely on.
“Sustainable finance applications require measurable indicators, defined targets and structured documentation, yet operational metrics such as energy use, emissions intensity, resource consumption or workforce indicators, are frequently tracked informally.”
They said banks may not require full sustainability reports, but still need evidence to test climate alignment and transition risk.
“Although banks do not expect comprehensive sustainability reports from SMEs, they do require sufficient evidence to assess climate alignment and transition risk.”
They stressed that uncertainty around how sustainability criteria are applied across lenders can discourage applications.
“SMEs may therefore struggle not because they lack initiatives but because they lack clarity on evaluation standards.
“Sustainability credentials do not override credit fundamentals, leaving younger and asset-light firms facing approval hurdles.
“For lenders, sustainability without financial strength is insufficient.”
