Over the past decade, sustainability has become a major focus globally, with significant momentum driven by the ratification of the Paris Agreement and the introduction of the 17 Sustainable Development Goals (SDGs) in 2015. Countries have since implemented national targets, including Nationally Determined Contributions (NDCs) to align with these global objectives. Sustainable finance has evolved to support these efforts, with regulatory frameworks and taxonomies guiding market behavior. Today, the focus has shifted towards mainstreaming sustainability across the economy, requiring a whole-of-economy approach to achieve climate and sustainability goals, as well as addressing the concept of a just transition.

However, several challenges persist in advancing sustainable finance. These include the lack of integration between sustainability and broader financial policies, uneven capital allocation favoring traditional activities over sustainable ones, and insufficient private sector investment in emerging markets. The reliance on public sector funding, especially in regions like East Asia and the Pacific, limits the scope and impact of sustainable financing. Furthermore, concerns over greenwashing and inconsistent sustainability definitions create credibility issues, highlighting the need for better data, disclosures, and interoperability across standards​.

For Malaysia to achieve its sustainability goals, there is a need to scale up national efforts. This requires taking a whole-of-nation and whole-of-economy approach such as the use of transition and adaptation financing as well as enhancing both human and technological capacity across sectors, and promoting sustainable finance as a mainstream initiative rather than a standalone pillar. Additionally, leveraging on the ASEAN platform and the country’s strengths in Islamic finance and focusing on emerging sectors can position Malaysia as a leader in the global transition towards a greener economy.

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