RM 420 mil of BNM’S fund for Low Carbon Transition Facility (LCTF) utilized by SMEs so far
The Low Carbon Transition Facility (LCTF) and the Business Recapitalisation Facility (BRF) were first announced by the Minister of Finance during the 2022 Malaysian Budget Speech. The LCTF is a financing facility to encourage and support SMEs in adopting sustainable practices for business resilience and is in line with the Government’s target for Malaysia to be a net-zero emission economy by 2050.
On 21 January 2022, Bank Negara Malaysia, the Central Bank of Malaysia (BNM) introduced two new facilities under BNM’s Fund for SMEs, namely the Business Recapitalisation Facility (BRF) and the Low Carbon Transition Facility (LCTF) with a facility amount of RM1.0 billion each.
A total of RM420 million or 21% of the total value of the RM2 billion low carbon transition facility (LCTF) fund has been utilised by small and medium enterprises (SMEs) so far, said Deputy Economy Minister Datuk Hanifah Hajar Taib.
“Efforts are being intensified to increase the adoption of ESG among SMEs, considering the level of awareness among SMEs is at 42%, based on a public survey report by SME Corporation Malaysia in 2023,” she said in a question-and-answer session in Parliament on Thursday (March 16), answering a question from Datuk Dr. Ku Abd Rahman Ku Ismali (PN-Kubang Pasu) regarding the government’s initiative to empower environmental, social and governance (ESG) sustainability in Malaysia.
Hanifah Hajar said the government also issued sukuk and a bond grant scheme under the sukuk framework for sustainable and responsible investment (SRI) by the Securities Commission Malaysia, to encourage more companies to finance green, social and sustainable projects.
“Currently, all public listed companies (PLCs) on Bursa Malaysia are encouraged to report on business practices that comply with ESG principles.
“This business reporting is expected to be enforced by Bursa Malaysia to all PLCs in 2024,” she said.
Hanifah said the government’s green procurement (GGP) policy, led by the Finance Ministry, has also been implemented to encourage and cultivate the purchase of green products and services in the public sector.
The LCTF can be used to finance capital expenditure or working capital to initiate or facilitate the transition to low carbon and sustainable operations. These include, but are not limited to, the following activities:
- obtaining sustainability certification;
- increasing the use of sustainable materials for production;
- improving energy efficiency of buildings and appliances; and
- installing on-site generation equipment of renewable energy.
According to BNM, the full list of projects/activities eligible to be financed is available from the PFIs. The LCTF cannot be used to refinance existing credit/financing facilities.
Read more about the LCTF fund here