On Wednesday 29th June 2022 United Nations Environment Programme Finance Initiative (UNEP FI), in partnership with Global Ethical Finance Initiative (GEFI), published a “Guide for Malaysian Banks supporting SMEs in the Sustainable Recovery from Covid”.

The Guide, launched at the inaugural Ethical Finance ASEAN 2022 summit, aims to assist Malaysian banks in helping Small to Medium-sized Enterprises (SMEs) to embed sustainability / ESG practices as business-as-usual and suggests practical steps and examples.

The findings presented in the Guide, as well as the development of a new Framework for banks, are based on the findings of a desk-based review and interviews with 13 Malaysian and international banks that took place earlier this year.

SMEs play a vital role in the Malaysian economy and, as has been the case across the globe, the research found that Malaysian SMEs have been negatively impacted by the COVID-19 (covid) pandemic. As Governments commit to ‘building back better’ the recovery from covid provides an opportunity to align spending and initiatives towards creating a more sustainable future and taking action to combat pressing issues such as climate change.

The Guide found that SMEs in Malaysia are at an early stage of embedding sustainability as, for many, the focus has been on survival during the covid pandemic. While many corporates have made headway on sustainability initiatives, especially around net zero commitments, there is a risk that SMEs are left behind.

Banks are uniquely positioned to support SMEs in taking action on sustainability, both through finance related activities (such as developing sustainability products) and broader activities (such as capacity building). The research found that during the covid pandemic, Malaysian banks primarily supported SMEs through the disbursement of Government funding and ensuring continuity of business through digitalisation. There has been some wider activity to date but, as we recover from the covid pandemic, momentum is building amongst Malaysian banks to further support SMEs on their sustainability journey and further develop areas such as product development, capacity building, offering a one-stop-shop for sustainability initiatives and accelerator programmes.

The Guide provides a Framework for action that Malaysian banks can take in supporting SMEs in the sustainable recovery from the covid pandemic in three key areas:

  • Bank Wide Approach;
  • Supporting SMEs; and
  • Product Development.

The Framework – which is intended to supplement existing sustainability tools, frameworks and initiatives rather than replace them – identifies 19 key suggestions for bank wide approach, supporting SMEs and provides a step-by-step guide for product development. Each of these areas is supported by several practical steps augmented with of work already being undertaken by Malaysian and international banks.

Banks can play a significant role in supporting SMEs on their sustainability journey and the Guide highlights the appetite amongst Malaysian banks to further assist SMEs in progressing their sustainability journey. Further support could be through assisting SMEs in measuring greenhouse gas (GHG) emissions, educating internal staff, capacity building for SMEs, further development of sustainability products and a greater consideration of the social and governance aspects of sustainability.

The Guide concludes that responsibility for assisting SMEs on sustainability should not lie with banks alone and support is also required from Government and other industry players to incentivise action.

Click Here to visit the UNEP FI page to access the Guide.