The report explores the country’s growing vulnerability to climate-related shocks and the urgent need to rethink how adaptation and resilience (A&R) are financed. Malaysia is already facing escalating physical risks ranging from floods and droughts to coastal degradation, with recent disasters resulting in significant economic and social losses. An estimated MYR1.6 trillion is required for overall climate investments, of which approximately MYR400 billion is needed specifically for adaptation and resilience initiatives.

Despite progress in green and sustainable finance, funding remains heavily skewed towards mitigation. Adaptation efforts continue to be underfunded, fragmented, and largely reactive, reflecting structural barriers such as weak coordination, limited project bankability, mispricing of climate risk, and gaps in technical and institutional capacity. The public-good nature of many adaptation projects further constrains their commercial attractiveness, reinforcing a persistent market failure.

This report proposes an integrated, market-driven framework to close the A&R financing gap. It outlines a two-part strategy: foundational and financial de-risking by the public sector, followed by strategic market-building through capital markets. A five-pillar approach is presented, encompassing institutional reform and governance coordination, blended finance mechanisms through an Adaptation Catalytic Facility, the creation of innovative financial instruments, transparent and technology-enabled monitoring systems, and regional scaling through ASEAN cooperation.

By repositioning adaptation as an investable asset class rather than a fiscal burden, the report underscores Malaysia’s opportunity to catalyse private capital, strengthen national resilience, and assume a leadership role in shaping a climate-resilient economy across the region.

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