Bank Negara explores possibility for banks to take higher risks in RE financing

KUALA LUMPUR: Malaysia's central bank, Bank Negara Malaysia, is considering allowing financial institutions to take on greater risks in supporting the country's energy transition, according to Governor Datuk Seri Abdul Rasheed Ghaffour. Speaking at the JC3 Journey to Zero Conference 2026, Rasheed said the central bank is exploring regulatory and supervisory changes to enable this.

However, he emphasized that any higher risks must be carefully assessed and managed within acceptable risk appetites. Rasheed noted that the main challenge is ensuring capital is directed towards credible and investable green energy projects at a sufficient scale and pace, rather than a lack of available capital itself. The Collaborative Finance for Impact Lab has received 45 projects seeking over RM5 billion in financing, but the true measure of success will be how many of these projects can be scaled up to deliver tangible environmental impact.

Rasheed stressed that financial institutions should engage with projects early, help shape them, identify funding gaps and structure risk-sharing solutions, rather than waiting for fully developed proposals. Malaysia's energy transition is progressing, with renewable energy making up 31% of installed capacity in 2025, up from 25% in 2023.

With data centers projected to consume nearly one-third of electricity by 2035, Rasheed highlighted the need for Malaysia to ensure its digital economy growth is supported by reliable, affordable and increasingly cleaner energy sources.