KUALA LUMPUR, Dec 27 — Bank Negara Malaysia (BNM) has issued an Exposure Draft on Climate Risk Management and Scenario Analysis, which sets out the proposed requirements and guidance on climate risk management and scenario analysis.

It said the proposed specific requirements and expectations are to ensure that financial institutions strengthen the management of financial risks stemming from climate change to enhance the resilience of the financial sector against climate-related risks and to facilitate an orderly transition to a low-carbon economy.

"This exposure draft complements the Climate Change and Principle-based Taxonomy (CCPT), Value-based Intermediation Financing and Investment Impact Assessment Framework (VBIAF), as well as the VBIAF Sectoral Guides,” the central bank said on its website today.

BNM also said that with respect to scenario analysis and stress testing, it will be providing additional guidance to the financial institutions in a forthcoming discussion paper on Climate Change Stress Test, set to be released in the first quarter of 2022.

The discussion paper is intended to solicit feedback to gauge industry readiness and to identify potential challenges in areas such as design of climate scenarios, coverage of financial exposures, methodology, level of granularity, and data gaps.

The central bank invites written feedback on the proposed requirements, including suggestions on areas to be clarified and alternative proposals that the Bank should consider.

Responses must be submitted to BNM at climatechange@bnm.gov.my by March 31, 2022.

The exposure draft can be accessed at  https://www.bnm.gov.my/documents/20124/938039/ED_Climate_Risk.pdf — Bernama