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PETALING JAYA, 14 October 2021 — Malaysia was ranked 21st among 32 countries in KPMG’s inaugural Net Zero Readiness Index (NZRI), which compares the progress of selected countries in reducing greenhouse gas emissions that cause climate change. The index also assesses the country’s preparedness and ability to achieve Net Zero by 2050.

KPMG selected the 32 countries to capture insights from across developed and emerging economies and current energy exporters. They include members of the G20 intergovernmental forum, as well as G20 invitees which are emerging or large economies; members of the Organization of the Petroleum Exporting Countries; and countries which had a Net Zero target in place at the time of framing the methodology.

Malaysia is one of 10 countries in the Index, collectively accounting for 43 percent of global emissions, that have set Net Zero targets in policy documents or political pledges but have not implemented any legal mechanisms that require their governments to achieve them. Such targets are therefore better considered as intentions rather than commitments.

In September 2021, following the release of the 12th Malaysia Plan (12MP), the prime minister had announced a national ambition to be carbon-neutral by 2050 and that a comprehensive National Energy Policy will soon be introduced to provide a “long-term strategic direction” as part of the carbon neutral commitment. Carbon pricing and carbon tax will be introduced to support this vision alongside other carbon reduction measures after the strategic long-term review of the low-carbon development strategies is finalized by the end of 2022.

Kasturi Nathan, Head of Governance & Sustainability at KPMG in Malaysia, said Malaysia’s targeted ambition is a positive stride forward, adding, “Our study reveals that countries with a net zero target, legally binding or in policy, demonstrate stronger delivery capability across the sectors. The challenge now is to go beyond the talk, ensuring that everyone plays their part. The private and public sectors are the engine of low-carbon growth and they are seeking for clarity and certainty in government Net Zero policies.

“Hence, if Malaysia is to achieve its Net Zero ambition by 2050, it’s critical for the government to set clear policies that enable the green movement. This includes spurring investment in research and development, providing support mechanisms for early stage innovation by small and medium-sized enterprises and creating markets for low-carbon products and services, among other initiatives.”

Using 103 key drivers to achieve Net Zero, the top 25 performing countries and seven ‘countries to watch’ were identified for the Index. The indicators are split between national preparedness (a country’s national commitment to decarbonize, its past decarbonization performance, country-specific drivers of emissions such as population growth, and the national enabling environment for decarbonization) and sector readiness which covers the five highest emitting sectors: electricity and heat; transport; buildings; industry; and agriculture, land use, land use change and forestry.

KPMG’s report recognizes that Malaysia has some strong initiatives already in place. One of the government strengths is introduction of the Green Technology Financing Scheme (GTFS), which is to subsidize work in sectors including renewable energy, buildings, transport and manufacturing. Malaysia has also established the Energy Audit Conditional Grant, an energy efficiency program under the 12MP, for implementation between 2021-25. It is supported by grants for organizations in the commercial and industrial sectors to help them collaborate with local energy service companies registered with the Energy Commission to conduct energy audits in their buildings.

According to Phang Oy Cheng, Executive Director of Sustainability Advisory at KPMG in Malaysia, Malaysia’s transition to net carbon zero will require not just political will, but also significant structural and legislative reforms on a national scale.

“Businesses require clear plans, policies and support mechanisms from the government in order to

stimulate delivery capability at the sector level. Based on our observations, corporate transparency on emissions, climate-related financial risk and readiness for Net Zero transition is also essential to spur private sector innovation and harness the power of the financial sector. Making such disclosures mandatory, such as the UK and New Zealand have done with the Taskforce on Climate related

Financial Disclosures (TCFD) recommendations, accelerates the availability of the data investors and

lenders rely on to make greener investment and lending decisions,” said Phang.

The 2021 Net Zero Readiness Index was produced by KPMG IMPACT, established last year to support and empower the global organization and KPMG firms’ clients in delivering on the UN’s Sustainable Development Goals – from ESG & Sustainability to Economic & Social Development, Sustainable Finance, Climate Change and Decarbonization and Measurement, Assurance & Reporting.