Malaysia’s funding gap for green investment is expected to widen by up to 16 times by 2030 after the current RM3.5 billion soft loan funding Green Technology Financing Scheme is finally exhausted and the scheme expires by the end of 2015.
Hence, the Ministry of Energy, Green Technology and Water Malaysia (KeTTHA) and Malaysian Green Technology Corporation (Greentech Malaysia) will have to hasten its effort to develop sustainable funding mechanisms for 2016 and beyond to ensure that the steady, growing demand for country’s green investments are met.
According to study by Protégé Associates commissioned by Greentech Malaysia, projections based on a business as usual (BAU) scenario, cumulative demand of funds for green investments is expected to spike to RM76.2 billion by 2030 while cumulative supply by the end same period is expected to reach only RM22.2 billion.
This is with an increase rate of RM3.4 billion in 2013, compared to RM54 billion in 2030, representing a cumulative average growth rate (CAGR) of 17.7 per cent during the same period.
“Thus, in efforts to bridge the gap, Greentech Malaysia has to establish a specialised innovative financial mechanism leveraging and mobilising on private financing through a “crowd-in” approach,” said Greentech Malaysia VP for Smart Partnership Group Syed Ahmad Syed Mustafa.
The figures were disclosed to The Malaysian Reserve during the five-day Green Financing Study Mission in London led by KeTTHA and Greentech Malaysia officials.
The two organisations have since returned to the drawing board already to carve out the details of the proposed Green Investment Corporation (GIC) to be mooted for tabling under the 11th Malaysia Plan.
The proposal, currently being reviewed by Greentech Malaysia CEO Ahmad Hadri Haris, will be presented to the National Green Technology & Climate Change Council (MTHPI) chaired by Prime Minister Datuk Seri Mohd Najib Razak at its next meeting, touted to take place sometime between this month and the next (December 2014).
Though no details of the proposed GIC have been finalised yet, it is believed that it may not be a commercial bank, but rather modelled after a development bank, said Green Malaysia VP Syed Ahmad Syed Mustafa.
The proposed GIC will take into account its long-term sustainability, loan structures and mechanisms as well as key sectors or type of projects that qualify for funding.
The Green Financing Study Mission was organised by KeTTHA and Greentech Malaysia and headed by KeTTHA Green Technology deputy secretary general Datuk Harjeet Singh. Also on the mission were Syed Ahmad, Credit Guarantee Corporation Malaysia Bhd EVP Kristine Ng Wei Miem and European Union-Malaysia Chamber of Commerce and Industry committee member Ai Li Koch. EUMCCI coordinated the mission that was also participated by The Malaysian Reserve.
The aim of the mission was to provide stakeholders with insight on the global examples and best practices in green investment formulation and green financing programmes.
The seven-member mission met, amongst others leaders and representatives from the Science, Innovation and Climate Department under Britain’s Foreign and Commonwealth Office, The Carbon Trust, Green Investment Bank, European Bank for Reconstruction and Development, Transport for London, London Energy Efficiency Fund and Bloomberg New Energy Finance.
Earlier this year, GreenTech Malaysia told The Malaysian Reserve they were studying a proposal to set up a special bank to finance clean and low-carbon projects. Though initially the bank was proposed under Budget 2015, GreenTech Malaysia CEO Ahmad Hadri Haris said the proposed bank will now be tabled under the 11th Malaysia Plan, which will be roll out from 2016 onwards, soon after GTFS expires by the end of 2015.
The Malaysian government had set aside RM1.5 billion and RM2 billion in 2010 and 2013 for GTFS in its annual budget.
As of October 2014, 150 green projects have been fuinded under GTFS by 23 banks, valued at about RM1.95 billion, with green investments amounting to RM3.8 billion, offering 2,216 green jobs in the market and resulting in greenhouse gas emissions reduction of 2.29 million tonnes CO2 equivalent.
