Malaysia

Yes.

ESG disclosure requirements are primarily aimed at listed companies and financial institutions:

1. The Task Force on Climate-Related Financial Disclosures Application Guide for Malaysian Financial Institutions (TCFD Application Guide) issued by the Joint Committee on Climate Change (JC3)^[1] sets out Basic and Stretch recommendations for financial institutions (e.g., banks, insurers / takaful operators, asset managers and asset owners) in respect of disclosures on governance, strategy, risk management, metrics and targets.   
2. The Main Market Listing Requirements, ACE Market Listing Requirements and Sustainability Reporting Guide (collectively, Sustainability Reporting Framework) issued by Bursa Malaysia Securities Berhad (Bursa Malaysia) set out the sustainability reporting requirements applicable to listed companies. Under the Sustainability Reporting Framework, listed companies are required to include in their annual reports a narrative statement on their management of sustainability-related risks and opportunities (Sustainability Statement) in accordance with IFRS S1 and IFRS S2.
3. The National Sustainability Reporting Framework (NSRF) issued by the Ministry of Finance of Malaysia addresses the use of the ISSB Standards, specifically IFRS S1 and IFRS S2, as the baseline sustainability disclosure standard for listed companies and non-listed companies with a consolidated group revenue of RM2 billion and above for two consecutive financial years (Large NLCos).

1. The Central Bank of Malaysia (BNM)’s Policy Document on Climate Risk Management and Scenario Analysis (CRMSA) (last updated in March 2025) requires financial institutions to produce TCFD-aligned climate disclosures in line with the TCFD Application Guide, which must be published together with annual financial reports. Disclosures on Basic and Stretch recommendations are mandatory for financial institutions in line with their overall climate risk exposure and/or complexity of operations.
2. The Sustainability Reporting Framework contains mandatory sustainability-related disclosure requirements for listed companies - the requirements and timeline for compliance are in alignment with the NSRF.
3. Adopting a climate-first approach, the NSRF applies on a phased basis as follows:

(i) for Main Market listed issuers with market capitalisation of RM2 billion and above (MMLCos above RM2 billion) – mandatory climate-related disclosures in annual reports for annual reporting periods beginning on or after 1 January 2025 and mandatory disclosures in line with the full adoption of IFRS S1 and IFRS S2 in annual reports for annual reporting periods beginning on or after 1 January 2027;

(ii) for Main Market listed issuers with market capitalisation below RM2 billion (MMLCos below RM2 billion) - mandatory climate-related disclosures in annual reports for annual reporting periods beginning on or after 1 January 2026 and mandatory disclosures in line with the full adoption of IFRS S1 and IFRS S2 in annual reports for annual reporting periods beginning on or after 1 January 2028; and

(iii) for ACE Market listed issuers and Large NLCos - mandatory climate-related disclosures in annual reports for annual reporting periods beginning on or after 1 January 2027 and mandatory disclosures in line with the full adoption of IFRS S1 and IFRS S2 in annual reports for annual reporting periods beginning on or after 1 January 2030.

Consequential amendments to the relevant legislation, rules and guidelines to adopt the NSRF have been and are in the process of being undertaken, including amendments to, among others, the Companies Act 2016, the Capital Markets and Services Act 2007 and the Listing Requirements.

In March 2025, Bursa Malaysia launched the Centralised Sustainability Intelligence Platform, which is intended to complement its existing ESG Reporting Platform by, among others, streamlining standardised climate reporting.

The TCFD Application Guide focuses on climate-related matters.

The Sustainability Reporting Framework and the NSRF focus on sustainability-related risks and opportunities, beginning with climate reporting, and will expand to sustainability reporting under the phased approach outlined in section A.3(c) above.

The climate-related disclosure requirements for financial institutions under the TCFD Application Guide are aligned with the TCFD Recommendations developed by the Financial Stability Board.

The Sustainability Reporting Framework is not based on any specific international standards, but listed companies are encouraged to report in alignment with or with adherence to the NSRF prior to its phased implementation.

The NSRF addresses the use of the ISSB Standards as the baseline sustainability disclosure standard and is closely aligned with both IFRS S1 and IFRS S2 subject to certain transitional reliefs as outlined in sections A.3(c) and A.7.

The climate-related disclosures required under the TCFD Application Guide adopt a single materiality approach which is consistent with the TCFD Recommendations.

The Sustainability Reporting Framework and the NSRF adopt a single materiality approach in line with the ISSB Standards.

The TCFD Application Guide sets out mandatory disclosures, in the form of Basic and Stretch Recommendations, for financial institutions. Scope 1, Scope 2 and limited Scope 3 emissions (i.e., business travel and employee commuting) disclosures are required pursuant to the Basic Recommendations under the TCFD Application Guide, while Stretch Recommendations include disclosures for all Scope 3 emissions which should be reported based on the financial institution’s overall climate risk exposure and/or complexity of operations.

There are no requirements under the TCFD Application Guide on the measurement methodology. However, disclosures of methodologies used to calculate emissions are required.

Under the Sustainability Reporting Framework and the NSRF, MMLCos above RM2 billion are required to make mandatory disclosures on Scope 1, Scope 2 and limited Scope 3 emissions in their annual reports for annual reporting periods beginning on or after 1 January 2025, and all Scope 3 GHG emissions for annual reporting periods beginning on or after 1 January 2027. MMLCos below RM2 billion are required to make mandatory disclosures on Scope 1, Scope 2 and limited Scope 3 emissions for annual reporting periods beginning on or after 1 January 2026, and all Scope 3 GHG emissions for annual reporting periods beginning on or after 1 January 2028.

ACE Market listed companies and Large NLCos are required to make disclosures on Scope 1, Scope 2 and limited Scope 3 emissions for annual reporting periods beginning on or after 1 January 2027, and all Scope 3 GHG emissions for annual reporting periods beginning on or after 1 January 2030.

In line with the ISSB Standards, the NSRF requires the use of GHG Protocol as the default measurement methodology. However, the use of the GHG Protocol is subject to transition relief for: (a) the first two reporting periods for MMLCos; and (b) the first three reporting periods for ACE Market listed companies and Large NLCos.

There are no requirements under the TCFD Application Guide for climate-related disclosures of financial institutions to be subject to an assurance process.

There are currently no requirements for the Sustainability Statements of listed companies to be subject to an assurance process, but such practice is encouraged pursuant to the Sustainability Reporting Guide and the NSRF. Currently, listed companies may disclose in their annual reports that their Sustainability Statements have been subject to an independent assurance performed in accordance with either the International Standard on Assurance Engagements (ISAE) 3000 or the International Organization for Standardization (ISO).

Under the NSRF, reasonable assurance on Scope 1 and Scope 2 GHG emissions is expected to be mandatory for: (a) MMLCos above RM2 billion from annual reporting periods beginning on or after 1 January 2027; (b) MMLCos below RM2 billion from annual reporting periods beginning on or after 1 January 2028; and (c) ACE Market Listed companies and Large NLCos from annual reporting periods beginning on or after 1 January 2029.

The Advisory Committee on Sustainability Reporting (ACSR) issued a public consultation paper on the proposed issuance of a Framework for Sustainability Assurance (Sustainability Assurance Framework Consultation Paper) on 25 June 2025. The Sustainability Assurance Framework Consultation Paper sought feedback on the use and application of the IFRS S1 and IFRS S2 and on a sustainability assurance framework for Malaysia. In particular, it sought feedback on the adoption of the International Standard on Sustainability Assurance 5000, General Requirements for Sustainability Assurance Engagements (ISSA 5000) as the recognised sustainability assurance standard in Malaysia and the adoption of the International Standard on Quality Management 1 (ISQM 1) as the only recognised quality management standard to be complied with by all firms providing sustainability assurance services in Malaysia. 

Given the difference in readiness and maturity of listed and non-listed companies, the Sustainability Assurance Framework Consultation Paper proposes mandatory external assurance for:

1. Scope 1 and Scope 2 GHG emissions; and
2. IFRS S1 core contents (governance, strategy, risk management, and metrics and targets) and Scope 3 GHG emissions, to be adopted by (i) MMLCos above RM2 billion for annual reporting periods beginning on or after 1 January 2027 (in respect of Scope 1 and Scope 2 GHG emissions) and 1 January 2030 (in respect of IFRS S1 core contents and Scope 3 GHG emissions) respectively; (ii) MMLCos below RM2 billion for annual reporting periods beginning on or after 1 January 2028 (in respect of Scope 1 and Scope 2 GHG emissions) and 1 January 2031 (in respect of IFRS S1 core contents and Scope 3 GHG emissions) respectively; and (iii) ACE Market listed companies and Large NLCos for annual reporting periods beginning on or after 1 January 2029 (in respect of Scope 1 and Scope 2 GHG emissions) and 1 January 2033 (in respect of IFRS S1 core contents and Scope 3 GHG emissions) respectively.

The ACSR, via the Sustainability Assurance Framework Consultation Paper, also sought feedback on the adoption of accountants to act as sustainability assurance engagement leaders and the expansion of the role of the Securities Commission’s Audit Oversight Board to regulate sustainability assurance providers of applicable entities, as well as to carry out enforcement actions in the event of significant non-compliance. Subject to further consultation, the ACSR intends to adopt a profession-agnostic approach in allowing both audit and non-audit assurance providers to provide sustainability assurance, subject to registration with the Audit Oversight Board, as the overseer of the implementation of mandatory external assurance.

A Sustainability Assurance Working Group has been established to work towards the issuance of the Sustainability Assurance Framework.

Based on our limited checks, some listed companies do reference international standards and frameworks, such as the GRI Standards, in their Sustainability Statements even though such alignment or adherence is not mandatory.

Entities operating in hard-to-abate sectors as well as those covered under Malaysia’s proposed CBAM sectors are highly encouraged to report in accordance with the NSRF.

Capital Markets Malaysia, in collaboration with the Department of Natural Resources, Environment and Climate Change, issued in October 2023 the Simplified ESG Disclosure Guide for SMEs in Supply Chains which provides practical guidance and baseline disclosures expected of SMEs in relation to ESG disclosure. The guide is currently voluntary.

The Climate Change and Principle-based Taxonomy (CCPT) issued by BNM on 30 April 2021 provides a principles-based taxonomy for the classification of economic activities against climate objectives and the reporting of CCPT-aligned lending and investment activities by financial institutions. Financial institutions are expected to submit reports to BNM on their application of the CCPT in their classification of economic activities against climate objectives and reporting of lending and investment activities. 

The Principles-Based Sustainable and Responsible Investment Taxonomy (SRI Taxonomy) issued by the Securities Commission Malaysia on 12 December 2022 provides universal guiding principles for the classification of economic activities by all capital market users. The SRI Taxonomy is currently not mandatory.

The ASEAN Taxonomy for Sustainable Finance (ASEAN Taxonomy) Version 4 issued by the ASEAN Taxonomy Board on 6 November 2025 provides alignment on underlying principles and helps harmonise the classification of sustainable activities and assets across ASEAN. It does not have mandatory application.^[1]

Malaysia is consulting on a sustainable finance taxonomy that builds on the above taxonomies. The Call for Feedback in relation to the Malaysia Taxonomy for Sustainable Finance (Malaysia Taxonomy) was issued by JC3 in February 2026. The proposed Malaysia Taxonomy aims to establish a coherent national approach, drawing on lessons from past implementation of existing taxonomies to, among others, ensure alignment with other sustainable finance taxonomies, ensure interoperability, reduce compliance burdens and safeguard against greenwashing practices.

The Malaysia Taxonomy Call for Feedback examines the salient components of ASEAN Taxonomy, CCPT and SRI Taxonomy and is seeking feedback on, among other things, the key elements of a sustainable finance taxonomy, the taxonomy assessment and classification approach as well as consolidation of taxonomy reporting at entity and portfolio level based on underlying exposures.

Other than the NSRF (which addresses the use of the ISSB Standards), there are currently no plans to adopt or incorporate any other international ESG reporting framework.  

The NSRF and the Sustainability Assurance Framework Consultation Paper are expected to shift the existing voluntary approach on external assurance for sustainability reporting to a mandatory one.

The NSRF PACE working group was established to assist companies in implementing the NSRF by providing tools, educational resources and capacity building programmes, including the introduction of a module on interoperability between the ISSB and GRI Standards.

Climate-related reporting requirements are expected to continue to evolve alongside Malaysia's broader decarbonisation initiatives, including the proposed ETS and the development of a national climate data repository. The forthcoming National Climate Change Bill is expected to establish Malaysia's overarching climate governance framework, although the extent to which it will provide the legislative basis for these initiatives will only become clear upon publication of the Bill.

Yes. Malaysia has reaffirmed its commitment to reduce carbon intensity by 45% by 2030 to achieve its goal of net zero carbon by 2050. To support this goal, the Malaysian government has launched the National Climate Change Policy (NCCP) 2.0 to consolidate key national initiatives such as the National Energy Transition Roadmap and the National Industrial Master Plan 2030. NCCP 2.0 aims to provide a comprehensive framework on climate governance and sets the foundation for the forthcoming National Climate Change Act.

The Ministry of Natural Resources and Environmental Sustainability (NRES) announced in May 2026 that Malaysia's climate change legislative framework will comprise the National Climate Change Bill (RUUPIN) and the National Climate Change Authority Bill (RUUIKLIM). Collectively, the Bills are intended to establish the legal and institutional framework for the implementation of Malaysia's national climate change policies and decarbonisation strategies and are expected to provide statutory support for the formulation, coordination and governance of national climate objectives, including Malaysia's emissions reduction commitments. Both Bills are currently in the final stages of drafting and are expected to be tabled in Parliament later in 2026.

(a) Carbon levies in Sarawak State

Under the Environment (Reduction of Greenhouse Gases Emission) Ordinance 2023, which came into effect on 1 March 2024, certain persons or business entities undertaking activities in the oil and gas sector, energy sector and other economic sectors in Sarawak, as may be determined by the Sarawak State Executive Council (Majlis Mesyuarat Kerajaan Negeri Sarawak), are required to submit a carbon emission report to the Controller of Environmental Quality. Based on the carbon emission report, a carbon levy will be imposed on relevant entities exceeding the emission thresholds set by the Sarawak State Executive Council.

To promote sustainable forest management practices, the State of Sarawak has also recently imposed the following taxes through the Forests (Forest Carbon Activity) (Amendment) Rules, 2025: a Forest Ecosystem Fee of around 5% to 7% of the value of traded carbon, and an annual land use tax for carbon trading based on the size of the licensed area of such land.

(b) Proposed National Carbon Tax

The Malaysian government announced in the 2026 National Budget, the introduction of a national carbon tax aimed at the iron, steel and energy industries, to be implemented by 2026 in response to the EU’s CBAM. In alignment with the EU’s objectives, the proposed carbon tax would impose a levy on carbon-intensive industries as a means of incentivising emissions reductions across the Malaysian economy. Among the sectors that could fall under the purview of the carbon tax are those currently within the scope of EU’s CBAM, including but not limited to the iron and steel, aluminium, cement, fertiliser and energy industries.

However, in light of prevailing geopolitical tensions arising in the Middle East, the government announced that the implementation timeline for the carbon tax would be deferred to avoid imposing additional cost pressures on industries and consumers. Although no revised implementation date has been announced, the government confirmed in June 2026 that the carbon tax policy is in its final phase of formulation and will be implemented in due course.

(c) Proposed National Carbon Market

The National Carbon Market Policy (NCMP) was approved by the Cabinet in April 2026 and sets out the government’s policy framework and strategic direction for the development of a domestic carbon market in Malaysia. Although the NCMP does not itself impose legally binding obligations, it provides the policy foundation for the future implementation of carbon pricing instruments, including a domestic mandatory emissions trading scheme. The NCMP is also intended to complement the proposed National Climate Change Bill (RUUPIN) and the National Climate Change Authority Bill (RUUIKLIM).

In this regard, the NCMP sets out the Government's roadmap for establishing the institutional, governance and regulatory framework necessary to support the development and operation of a domestic carbon market. Broadly, the NCMP seeks to:

1.  promote the development of domestic carbon credit generating projects;
2.  establish the infrastructure required for a credible carbon market, including a monitoring, reporting and verification (MRV) system, as well as the proposed creation of a National Carbon Registry; and
3. facilitate the cross-border trading of Malaysian carbon credits, including by enabling domestically generated carbon credits to be traded in international carbon markets.

A voluntary carbon market, the Bursa Carbon Exchange (BCX), was established by Bursa Malaysia in December 2022 and is backed by the Malaysian government, under the purview of the Ministry of Finance and the Ministry of Natural Resources, Environment and Climate Change. This platform is the world's first Shariah-compliant voluntary carbon market, facilitating the trading of carbon credits from accredited nature-based and technology-based projects. The inaugural auction for the BCX was held on 16 March 2023.

The BCX has since expanded its offerings by introducing Renewable Energy Certificates (RECs). On 9 September 2024, the BCX launched continuous trading for RECs, enhancing its existing auction-based capabilities by enabling off-market REC transactions on the platform. The BCX has received accreditation from the International Tracking Standard Foundation for its REC trading platform, making it the first Malaysian trading platform operator to obtain such accreditation.

Under Malaysian law, there are currently no mandatory statutory requirements for companies in Malaysia to have in place and/or disclose climate-related transition plans.

However, under the NSRF, Main Market-listed issuers are required to prepare a Sustainability Statement in accordance with the applicable ISSB Standards, which require disclosure of details of any transition plan they may have adopted. ACE Market-listed issuers are still subject to Bursa Malaysia’s Sustainability Reporting Framework and are required to disclose a basic transition plan towards a low-carbon economy. ^[1] From 2027 onwards, ACE Market-listed issuers will be required by the NSRF to prepare their Sustainability Statements in accordance with the ISSB Standards, subject to transitional reliefs.

There are no mandatory statutory requirements set by the Malaysian Government.

However, as mentioned above, Bursa Malaysia has imposed the requirement on Main Market listed issuers to include climate change-related disclosures that are aligned with the TCFD Recommendations in their Sustainability Statements, and for ACE Market-listed issuers to disclose a basic transition plan towards a low-carbon economy. The NSRF imposes ISSB-aligned requirements in a phased manner, which would require in-scope companies to disclose details of any climate-related targets they may have set or are required to meet.

Malaysia does not currently have a mandatory circular economy regime or comprehensive eco-design legislation comparable to those adopted in certain other jurisdictions. In particular, there are currently no generally applicable statutory obligations requiring businesses to comply with EPR schemes or mandatory eco-design standards across all sectors.

However, Malaysia is progressively developing its circular economy framework through a combination of national policy initiatives. These include the Circular Economy Policy Framework for the Manufacturing Sector launched by the Ministry of Investment, Trade and Industry in September 2024, the Malaysia Plastics Sustainability Roadmap 2021-2030, and the Circular Economy Blueprint for Solid Waste in Malaysia (2025-2035). While these policies do not impose legally binding obligations, they establish the Government's strategic direction for transitioning towards a circular economy and contemplate the phased introduction of regulatory measures, including mandatory EPR schemes, eco-design requirements and resource efficiency initiatives.

Circular Economy Policy for the Manufacturing Sector

The policy was introduced to reform fossil-fuel-based industrial models and promote green growth practices across the manufacturing value chain. The policy outlines plans for key initiatives aimed at ensuring local producers take responsibility for the entire life cycle of their products, including:

1. mandating specific products (e.g. packaging and consumer goods) to contain minimum recycled or circular materials;
2. introducing mandatory EPR for manufacturers over a three to five-year timeframe in sectors such as electronics and packaging; and
3. developing a taxonomy on circular economy activities.

Malaysia Plastics Sustainability Roadmap 2021-2030

The roadmap sets out the Government's strategy to improve plastics sustainability and reduce plastic pollution. It contemplates the phased implementation of an EPR framework for plastic packaging, together with measures relating to eco-design, recycled content, recyclability, product stewardship and waste collection systems. The packaging and plastics industries are expected to be the primary sectors affected, with enforcement to be implemented through future legislation and subsidiary legislation.

Circular Economy Blueprint for Solid Waste in Malaysia (2025-2035)

This blueprint establishes the Government's long-term strategy to transition from a linear waste management model to a circular economy. It identifies a range of proposed regulatory and market-based mechanisms, including EPR schemes for priority waste streams, landfill diversion measures, resource recovery initiatives, material traceability and enhanced recycling infrastructure. It also contemplates a phased implementation beginning with packaging before extending to other sectors, such as electrical and electronic equipment, construction and demolition waste, and other priority waste streams, with implementation to be supported through future legislative and institutional reforms.

Malaysia does not currently impose economy-wide mandatory corporate sustainability due diligence obligations. In particular, there is presently no legislation requiring companies generally to identify, prevent, mitigate and account for actual or potential adverse environmental or human rights impacts across their operations and value chains.

The Environmental Quality Act 1974 and its subsidiary legislation regulate environmental pollution and prescribe licensing, compliance and enforcement requirements for specified activities. However, it does not impose a general duty on companies to undertake environmental or human rights due diligence across their operations or value chains.

In March 2026, BNM and the Securities Commission Malaysia issued a draft Malaysia Taxonomy for Sustainable Finance for public consultation. The proposed taxonomy is intended to establish a common framework for classifying sustainable economic activities and providing greater consistency in how financial institutions and businesses assess sustainability-related investments and financing activities.

The proposed taxonomy builds on existing frameworks, including BNM’s CCPT and the Securities Commission’s SRI Taxonomy, by introducing more detailed and science-based criteria for assessing whether activities contribute to environmental objectives. It is also intended to improve alignment with regional frameworks, including the ASEAN Taxonomy for Sustainable Finance, to facilitate sustainable finance flows.

In Malaysia’s Budget 2026,^[1] the Malaysian government reiterated its commitment to integrating sustainability considerations into its financial planning and supporting the country’s climate transition. Key initiatives include:

1. continued support for the aspirations of the National Energy Transition Roadmap; and
2. the continuation of the widely successful Green Technology Financing Scheme^[2] under the Green Technology Financing Scheme 5.0 (GTFS 5.0) until 31 December 2026 (or until the RM 1 billion financing allocation is fully utilised, whichever is earlier). GTFS 5.0 continues to target six priority sectors: Energy, Manufacturing, Transport, Building, Waste and Water, offering a government guarantee of 80% on the green component cost financed by participating financial institutions for projects in the waste sector and 60% for projects in the remaining eligible sectors. However, unlike previous iterations of the scheme, GTFS 5.0 no longer provides a rebate on the annual interest or profit rate, with financing rates instead being determined by the participating financial institutions.

[1] “Belanjawan 2026 Malaysia Madani: Budget 2026 Speech” issued by the Ministry of Finance Malaysia.

[2] The GTFS is a scheme started over a decade ago by the Malaysian government aimed at advancing a green economy by providing essential funding for companies investing in green technologies.

Yes. In December 2025, environmental watchdog RimbaWatch filed what it described as the country's first climate litigation of its kind by commencing two judicial review applications before the High Court against the Ministry of Domestic Trade and Cost of Living and the Ministry of Natural Resources and Environmental Sustainability. The applications followed the ministries' refusal to investigate complaints alleging that Shell Malaysia had made misleading "carbon neutral" claims. RimbaWatch seeks, among other things, orders compelling the government to investigate the alleged greenwashing and quashing the previous decisions refusing to do so. As at the time of writing, the applications remain at the leave stage.

No. However, there is guidance relevant to mitigating greenwashing risks (e.g., the SRI Taxonomy and the Guidance Note on Managing ESG Risks for Fund Management Companies issued by the Securities Commission and the CCPT issued by BNM) applicable to capital markets players and financial institutions.

The Lodge and Launch Framework issued by the Securities Commission sets out clear requirements pertaining to the issuance of Sustainable and Responsible Investment (SRI) sukuk, ASEAN Green/Social/Sustainability bonds and sukuk, SRI-linked sukuk and ASEAN Sustainability-linked bonds and sukuk. Risks of greenwashing are therefore mitigated as the issuance of such bonds and sukuk is regulated. The Guidelines on SRI Funds also provide guidance on the disclosure and reporting requirements for SRI funds.  

BNM’s Policy Document on CRMSA requires financial institutions to use established standards and taxonomies, as well as leverage certifications and third-party assurances, to verify that the disclosures made by customers comply with relevant standards, metrics and methodologies in order to mitigate the risks associated with greenwashing their portfolios. Financial institutions must also establish a board-approved policy on climate-related disclosures that promotes credible as well as high-quality disclosures to mitigate the risks of greenwashing.

The likely grounds include:

1. liability for false or misleading disclosures pursuant to securities laws and regulations (e.g., sustainability reporting requirements applicable to listed issuers);
2. misrepresentation claims; and
3. breaches of consumer protection, trade descriptions and advertising laws.

It is still too early to speculate on the impact that RimbaWatch's judicial review applications against the two ministries may have in this area should they be successful. In any event, if leave is granted, it is likely to be several years before the court reaches a decision on the merits.