KUALA LUMPUR (March 9): The Securities Commission Malaysia (SC) aims to mobilise RM90 billion to RM100 billion in cumulative sustainability financing by 2030 for projects delivering measurable environmental and social impact.
“Over the next five years, the initial focus will be on facilitating pilot financing for identified projects [which will serve as] learning opportunities to build up the sustainability financing ecosystem,” the regulator said in the fourth Capital Market Masterplan (CMP4), which spans 2026-2030, launched on Monday.
Noting that Malaysia is “well-positioned to unlock the potential for market-based sustainability finance”, the SC said it will tap the expertise of global institutions, environmental, social and governance (ESG) firms and specialists, as well as non-governmental organisations (NGOs), to adopt best practices and avoid common pitfalls.
The SC will also forge partnerships with counterparts in Asean and the Middle East, where there are shared interests in sustainability and Islamic finance.
Mobilising capital with blended structures
The report said the urgency of mobilising sustainable financing is reinforced by climate risks. The Intergovernmental Panel on Climate Change projects global warming could exceed two degrees Celsius by 2100, highlighting the need for significant investment in sustainability-related projects such as renewable energy and resilient infrastructure.
“The challenge for the Malaysian capital market is to mobilise substantial private capital in tandem with government funding to finance the nation’s goal in meeting its transition, mitigation, adaptation, resilience and social commitments,” the SC said.
One approach is to develop effective de-risking mechanisms to make climate and high-impact social projects more attractive to investors and private funds.
“Innovative blended finance structures will play a catalytic role in improving the commercial viability of high-impact projects,” the regulator said, referring to funds arranged in layers or a “capital stack” where each group of investors takes on a different level of risk and return.
The junior layer or the concessional grant, usually from donors, development finance institutions or climate funds that place high value on ESG benefits, is usually more willing to absorb the riskiest part of the project, creating a safety net for other investors.
On its role, the SC said it will facilitate sustainable financing through instruments such as guarantees, first-loss tranches, sustainability-linked sukuk, impact bonds and catastrophe bonds to de-risk investments and enhance returns for projects with lower commercial viability, including coastal resilience initiatives, micro, small and medium enterprise decarbonisation, and coal plant retirement.
Combining commercial capital from banks and institutional investors with concessional funding from governments and philanthropic sources can also help align risk-return expectations across a broader investor base.
“In parallel, the SC will explore expanding the issuer base by enabling state and municipal entities to raise capital for sustainability-related projects, while supporting federal government initiatives,” it said.
Recognising that many sustainability projects remain marginally bankable or unbankable, the regulator said efforts will be stepped up to unlock new pools of concessional and commercial capital, including through Islamic social finance.
In addition, the SC will seek guidance from State Islamic Religious Councils to integrate waqf and zakat into blended finance structures through appropriate regulatory and operational frameworks, while exploring ways to attract international funding.
Social Exchange, building trust in social impact finance
To broaden access and market participation in social impact financing, the SC plans to facilitate the establishment of regulated fundraising platforms such as a Social Exchange, enabling retail investors to support small-scale, high-impact projects. The platform will connect NGOs, social enterprises, donors and investors, allowing social initiatives to tap a wider pool of funding.
Enhancing transparency, credibility and accountability within the social finance ecosystem will complement government efforts to strengthen community resilience and social welfare. It will also support capital mobilisation through climate finance innovation platforms, such as the Climate Finance Innovation Lab, and the establishment of special-purpose funds for adaptation projects to crowd in private investment and scale emerging sustainability solutions.
“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,” the SC said.
A key initiative under CMP4, the Social Exchange Platform will provide a structured and transparent avenue for non-profit organisations to raise donations for eligible social projects while enabling donors to have greater visibility over fund utilisation and the impact of the projects.
In January 2025, the SC rolled out Malaysia’s first Social Exchange Pilot Programme towards establishing Malaysia’s first Social Exchange, as announced by Prime Minister Datuk Seri Anwar Ibrahim at the Global Forum on Islamic Economics and Finance in May 2024.
On Feb 12 this year, the SC announced the appointment of LC Wakaful Digital Sdn Bhd as the first Social Exchange Platform in Malaysia.
Click here for all you need to know about the Capital Market Masterplan 2026-2030.