Malaysia’s central bank and capital market regulator have unveiled a draft outline of the country’s first unified, national taxonomy for sustainable finance, inviting industry feedback.
Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) said that the proposed Malaysia Taxonomy for Sustainable Finance aims to reflect the “evolving needs” of the financial community, while also safeguarding against greenwashing.
“As market participants advance in their climate journey, there is growing demand for more detailed, science-based screening criteria,” the regulators said in a statement on 2 March.
“Ensuring alignment with other sustainable finance taxonomies is also important to ensure interoperability, reduce compliance burdens and facilitate cross-border capital flows,” they added.
A sustainable finance taxonomy classifies which economic activities are ‘green’ or envrionmentally sustainable, helping to prevent greenwashing.
The new Malaysia taxonomy builds on both regulators’ existing frameworks, namely BNM’s Climate Change and Principle-based Taxonomy (CCPT) and the SC’s Principles-Based Sustainable and Responsible Investments Taxonomy (SRI Taxonomy).
The CCPT had been published in 2021 and was aimed at raising awareness on climate change and its impacts. The SRI Taxonomy, published the following year, provided guidance on environmental components in capital market instruments, like funds and bonds.
“The aim [of the Malaysia Taxonomy] is twofold – create a unified taxonomy at the national level and align the structure of the national taxonomy with the Asean Taxonomy,” BNM and SC said.
The Asean Taxonomy for Sustainable Finance, which saw its fourth version published last November, introduced stricter thresholds and screening criteria for projects in the electricity, transport, construction, agriculture, manufacturing, and waste management sectors.
The region’s finance leaders recently said that there needs to be better understanding and acceptance of transition activities, classified as “amber” in the taxonomy.
Similar to the Asean Taxonomy, BNM and SC are considering the development of a transition finance guide to supplement the Malaysia Taxonomy.
“It would complement the taxonomy by building on the amber tiers and providing credible and practical decarbonisation pathways to the green tier,” said the regulators’ call for feedback document.
Among the other developments proposed in the Malaysia Taxonomy compared to the CCPT and SRI ones is the introduction of guiding principles for biodiversity protection and ecosystem health.
“The Malaysia Taxonomy [will] give prominence to broader environmental considerations and resource efficiency,” the document stated. “Generally, activities must promote or enable restoration, conservation, facilitate protection mechanisms of the ecosystem and biodiversity, and promote the sustainable use as well as protection of water and marine resources.”
The taxonomy will also promote the transition to a circular economy, as well as incorporate social considerations.
BNM and SC have invited feedback on the proposed structure and design of the Malaysia Taxonomy by 14 April 2026.
“Financial institutions, asset managers, government agencies, industry associations, and other relevant stakeholders are strongly encouraged to contribute to this consultation,” they said.
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