Malaysia risk losing US$65 bln in revenue if local suppliers miss out on green transition — Expert
24 Aug 2022
Malaysia stands to lose up to US$65 billion (US$1=RM4.485) in revenue if local suppliers do not undertake a green transition alongside their multinational company (MNCs) partners, said Sustainable Finance Institute Asia Ltd chief executive officer Eugene Wong Weng Soon.
He said that while the green sector in Southeast Asia would pose an additional US$1 trillion worth of economic opportunities by 2030, the micro, small and medium-sized enterprises (MSMEs) and SMEs should grasp the opportunity and embrace the net zero carbon transition.
Albeit noting that the transition process would involve higher costs, which in turn might hinder some pandemic-battered small businesses from embarking on the journey, Wong said they could do it by riding on the supply chain.
“One way they can do this is to ride on the supply chain, we have to be very clear that as part of the supply chain, many of the customers have already embarked on the net zero targets (journey).
“If they do not align with this, they will be left out from the supply chain, and a study from Standard Chartered revealed that up to 80 per cent of MNCs plan to remove suppliers who fail to meet their carbon transition target by 2025,” he said at the Maybank Invest ASEAN 2022 virtual environmental, social, and governance (ESG) conversations, here, today.
Wong said as MSMEs and SMEs are the backbone of the economy (which account for more than 97 per cent of overall businesses in Malaysia), they are a big part of the economy and need to be a big part of the solution as well.
He foresees that sustainability is a must-have business strategy and smaller businesses have to find ways to adopt it in order to stay competitive in the future.
However, unlike larger corporates which have easier financial access such as capital market, loan financing, or instruments like sustainability-linked bonds (SLB) and loans (SLL) to pursue their green transition journey, Wong said different forms of financing are needed for smaller companies, with loans remaining the easiest sustainable financial instrument for them.
“While it is heartening to see many banks in Southeast Asia starting to reconfigure their lending policies to support the sustainability agenda for MSMEs, we also need to see how banks can intermediate,” he said.
Other than that, Wong said smaller businesses could also tap into peer-to-peer (P2P) crowdfunding platforms for green transition funds.
“We have already seen some success (cases) in that and more are expected to come,” he said.
While acknowledging that the green transition is an expensive and high-cost journey for MSMEs and SMEs, Asian Development Bank principal financial sector specialist Mohd Sani Mohd Ismail opined that governments could help by linking the recovery support subsidy, or financing under the stimulus packages, to green initiatives.
“This is an important opportunity to help MSMEs to make the transition, as they are the backbone of the economy, governments need to play their role to help them make the transition,” he said.
The Sustainable Finance Institute Asia Ltd is an independent institute established to catalyse ideas on sustainable finance at the policy level in Asia, particularly in ASEAN.