Malaysia’s central bank is urging financial institutions to incorporate nature-related risks and opportunities into their lending and investment decisions, warning that biodiversity loss and ecosystem degradation could increasingly threaten financial stability while creating new opportunities for sustainable finance.
Speaking at the launch of a Bank Negara Malaysia (BNM) report on nature-related financial risks, Assistant Governor Madelena Mohamed said nature has long been treated as an externality in economic and financial decision-making despite underpinning virtually all economic activity.
“Nature underpins all economic activities,” Mohamed said. “Yet today, nature remains largely invisible in our economic and financial decision-making, treated as if it is limitless, external and optional.”
The remarks come as regulators globally broaden their focus beyond climate change to include biodiversity and ecosystem risks, amid growing concerns that environmental degradation could disrupt supply chains, reduce asset values and increase financial losses.
BNM cited estimates that nature-positive business opportunities across the Asia-Pacific region could generate as much as $4.3 trillion in annual economic value and create 232 million jobs by 2030.
The central bank highlighted opportunities in sustainable agriculture, eco-tourism and nature-based solutions such as mangrove restoration and reforestation, which can improve climate resilience while reducing long-term infrastructure and insurance costs.
At the same time, BNM warned that businesses dependent on natural ecosystems face growing physical and transition risks.
Water shortages could disrupt manufacturing and construction, while flooding and declining fish stocks could hurt businesses and communities.
New environmental regulations and changing market expectations could also raise compliance costs for companies with significant impacts on nature.
BNM’s research found that 54% of Malaysian commercial bank loans were extended to sectors with high or very high dependence on ecosystem services, while 36% of lending went to sectors with significant impacts on nature.
For banks and investors, these exposures could translate into higher credit, liquidity and reputational risks, Mohamed said.
To help address these challenges, BNM launched the report “A LEAP for Nature: Advancing Nature-related Financial Risk and Opportunity Assessment in Malaysia,” building on an earlier 2022 study.
The central bank said it would work with financial institutions to improve data quality, develop risk assessment tools and strengthen capacity to integrate nature considerations into financial decision-making.
The speech signals that nature finance is emerging as the next frontier in sustainable finance regulation.
For fintech platforms, crowdfunding operators and impact investors, the development could create demand for new financing products tied to biodiversity conservation, sustainable agriculture and ecosystem restoration.
At the same time, lenders and investment platforms may increasingly be expected to assess not only climate risks but also how portfolio companies depend on and affect natural ecosystems.