Protecting nature, protecting jobs, protecting portfolios: A practical guide for Malaysia’s financial sector

Malaysia's economy is built on nature. As one of the world's 17 megadiverse countries, it draws on some of the richest ecosystems on earth — for agricultural productivity, water supply, soil stability, and the raw materials that power its remarkable economic development. Yet the financial system that funds these activities has only just begun to grapple with what happens when those ecosystems degrade.

The scale of exposure is significant. Over half of Malaysia's GDP has a high or very high dependency on at least one ecosystem service. For the banking sector, 54 percent of commercial lending flows to sectors highly dependent on ecosystem services — from water provision and soil stability to pollination and rainfall regulation — while 36 percent of loans finance activities that put those same ecosystems under significant pressure (Figure 1). The palm oil and construction sectors sit at the center of this dual exposure: deeply reliant on nature, and among its largest sources of stress.
 

Figure 1. Share of loans to sectors with high or very high dependency on ecosystem services (left) or pressures on ecosystems (right) (% of total lending)

^{Source: World Bank, UNDP BIOFIN, and Bank Negara Malaysia (BNM) (2026).}

The human stakes are equally significant. Construction alone supports 1.3 million jobs — 14 percent of total private-sector employment. Agriculture, including the palm oil sector, accounts for another 502,000. That is nearly 1.8 million workers in just these two sectors. When ecosystems degrade — when water sources are depleted, soils erode, or biodiversity declines — firms face rising costs, supply disruptions, and regulatory penalties. As policies like the EU Deforestation Regulation affect global market access, firms that cannot demonstrate sustainable practices risk exclusion from value chains, taking jobs with them. For the banks that finance these sectors, ecosystem degradation translates directly into credit risk.

Practical and proportionate — not bureaucratic

A legitimate concern among firms and financial institutions is that nature-risk assessment means yet another compliance layer. A new report by Bank Negara Malaysia, UNDP BIOFIN, and the World Bank — A LEAP for Nature: Advancing Nature-related Financial Risk and Opportunity Assessment in Malaysia — addresses this directly. Drawing on surveys of 83 financial institutions and 45 publicly listed companies, and five pilot LEAP assessments, its central finding is that most organizations already collect nature-relevant data — through Environmental Impact Assessments, sustainability certifications like MSPO and RSPO, and environmental compliance reporting. The real challenge is not generating new information, but connecting what already exists across sustainability, operations, and finance teams.

The report recommends a proportionate, iterative approach: start with the largest exposures, build on existing climate-risk frameworks, and deepen assessments over time. This matters because, while awareness is growing — nearly 80 percent of surveyed financial institutions are already identifying or intend to identify nature-related risks — about 60 percent still report only a limited understanding of the issues, and only 22 percent of surveyed firms have conducted a formal nature-related risk assessment (Figure 2).
 

Figure 2, Summary of financial institutions’ and firms’ understanding, assessment, and disclosure practices regarding nature-related Dependencies, Impacts, Risks and Opportunities. 

^{Source: World Bank, UNDP BIOFIN, and Bank Negara Malaysia (BNM) (2026). Survey of 83 financial institutions and 45 corporates (UNDP BIOFIN, 2025).}

The five pilot LEAP assessments show that this gap can be closed through action rather than deliberation. Starting with imperfect data proved far more productive than waiting for perfect methodologies. CIMB, one of Malaysia’s largest banks, has already published a Nature and Biodiversity Report aligned with the TNFD framework. Gamuda, a leading Malaysian construction and property firm and TNFD adopter, has revised its site-development strategies based on nature assessments. Another pilot financial institution has begun integrating nature-risk screening into its credit risk acceptance criteria. The lesson is clear: learning by doing works.
 

From risk to opportunity

Nature-risk management is not only about avoiding losses. Sustainable palm oil, green construction, nature-based solutions for flood management, and ecosystem restoration all represent growing markets. These are investment opportunities that can sustain and create quality employment — provided the financial system is equipped to identify and finance them. The report encourages financial institutions to actively seek areas where ecological benefits and financial returns intersect, from the circular economy to sustainable land use and payments for ecosystem services.
 

The way forward

The report offers targeted recommendations for three groups. Financial institutions can begin integrating nature considerations into existing risk frameworks, starting with their most exposed portfolios and engaging clients in high-risk sectors for better data. Firms can leverage data they already collect, bridge internal silos through cross-departmental collaboration, and build on existing climate disclosures. Public sector authorities can accelerate progress by centralizing nature data on an accessible platform, embedding nature into Malaysia's sustainable finance taxonomy, and establishing a clear pathway toward proportionate mandatory disclosure.

Malaysia's financial sector has already built substantial capacity on climate-related risks. Nature-risk assessment builds directly on that foundation. The tools are available, and the approach is designed to be proportionate. The stakes — for nature, for the financial system, and for the millions of workers whose livelihoods depend on healthy ecosystems — are too high to wait.

Employment figures are from the Department of Statistics Malaysia, Employment Statistics, Fourth Quarter 2025. The agriculture figure (502,000 jobs) covers the full agricultural sector. See full report.