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Joining hands towards a sustainable Asean capital market
Dec 18, 2025
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Datuk Mohammad Faiz Azmi is the executive chairman of the Securities Commission Malaysia
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ASEAN stands at a defining moment; with economic dynamism meeting the global quest for sustainability. As the Securities Commission Malaysia (SC) chairman and Asean Capital Markets Forum (ACMF) 2025 chairman, I have seen first-hand the collective resolve of the region’s 11 member states to build capital markets that are resilient, future-proof, and firmly grounded in sustainable principles.
This shared ambition is embodied in the ACMF Action Plan 2026–2030, a roadmap to strengthen regional market integration while addressing individual developmental realities.
Why a just transition matters for Asean
While Asean contributes a modest share of global emissions, our economies are deeply exposed to external shocks and climate-related disruptions. Recent typhoons in the Philippines and major floods in Indonesia, Malaysia, Thailand and Vietnam are no longer isolated climate events, but signal risks with direct consequences for livelihoods and economic growth.
For Asean, the question is not whether to transition, but how? A just and orderly transition requires credible decarbonisation at a pace that reflects different national starting points.
For developing and frontier markets, an abrupt shift to purely “green” mandates could stall growth and strand entire industries. But remaining dependent on fossil fuels – even at “low emission levels” is not sustainable. Asean’s approach is more deliberate and nuanced. One that enables progress while providing clear pathways to cut emissions, reduce fossil-fuel dependency and steer capital towards cleaner technologies.
This philosophy underpins one of Asean's most significant achievements: the Asean Taxonomy for Sustainable Finance, now in its fourth iteration. It serves as the common language to classify sustainable activities regionally to attract much-needed capital.
Designed to be inclusive and credible, it is the first regional taxonomy in the world to incorporate a “transition” category - an innovation now being examined and adapted by other markets. Domestically, a national taxonomy aligned with the Asean Taxonomy is in development, ensuring congruence between regional frameworks and domestic implementation.
Having an Asean-centric taxonomy reduces the need to adopt an international framework less suited to our diversity and unique characteristics.
Its multi-tiered system serves two important purposes. The “green” standards are closely aligned with global benchmarks, such as the EU Taxonomy, ensuring interoperability and credibility.
Meanwhile, the “transition” category provides industries and countries with a structured, time-bound pathway toward greener operations, supporting near-term emission reductions even where “green” solutions are not yet viable and removing long-term fossil fuel dependency.
The Asean Taxonomy is already being used by regional corporates, including Tenaga Nasional Berhad (Malaysia), PT Bank Mandiri (Indonesia) and Bangkok Expressway and Metro PLC (Thailand).
Turning principles into practice
Our focus, however, is not limited to frameworks. Climate financing solutions with risk-sharing mechanisms such as blended finance and public-private partnerships are essential to unlock capital without overburdening public budgets.
We are developing practical tools that ensure sustainability is achievable across markets and sectors. The Asean Transition Finance Guidance offers companies practical steps to secure capital for decarbonisation pathways.
Similarly, the ACMF Voluntary Carbon Market (VCM) Development Plan and Asean VCM Guidance assesses the current carbon market landscape in Asean and provides best practices to promote high-integrity and interoperable regional carbon markets. It also recognises the role of securities regulators in promoting the financial integrity and orderly functioning of VCMs, while acknowledging interdependence with environmental actors.
With this regional endorsement, the impetus is clear at home: the SC will play a stronger role in the oversight and development of VCM. Strengthening governance, transparency and investor protection are key to the credibility and integrity of the Malaysian carbon market ecosystem. Ultimately this will provide better value for those seeking funds from offsets and carbon credit programmes.
Beyond decarbonisation, Asean and Malaysia must also strengthen its focus on climate adaptation and mitigation.
A key thrust of the ACMF is the development of the mitigation co-benefit and Adaptation for Resilience (mARs) Guide, which provides a framework for identifying adaptation projects and financing options in the region, particularly those that are not commercial or bankable. It supports the Asean Taxonomy with the aim of channelling funding towards adaptation and mitigation projects.
Empowering resilience in businesses across all levels
Climate change is a whole-of-society issue. Several Asean countries are pressing forward with implementation of the IFRS® Sustainability Disclosure Standards, starting with larger corporates. In Malaysia, the Standards have been adopted via the National Sustainability Reporting Framework (NSRF). Implementation is supported by PACE (Policy, Assumptions, Calculators, Education) initiatives including the publication of Illustrative Sustainability Reports for specific sectors on how to apply these Standards.
However, sustainability must also extend to the core of our economies: SMEs that anchor corporate supply chains and drive innovation. They face the steepest challenges in fulfilling ESG expectations. In this regard, the ACMF’s Asean Simplified ESG Disclosure Guide for SMEs in Supply Chains (Asean SEDG) provides a tiered, practical guide, translating complex reporting frameworks into accessible steps.
Further, our recent work with the Malaysian batik industry, where we developed the Sustainable Batik Disclosure Guide, shows how traditional sectors can turn ESG adaptation into a unique brand differentiator.
These efforts signal to global investors that businesses across Asean are integrating ESG considerations for operational resilience.
Charting the path to regional integration
Yet, deeper regional market integration remains challenging. Asean’s diversity is its greatest strength, but it demands patient consensus-building. Data gaps also persist, while funding limitations continue to constrain innovation.
This is why international partnerships play a vital role. Collaborations with the Asian Development Bank, the Economic Research Institute for Asean and East Asia (ERIA), and UNEP FI have provided technical capacity, expertise and financial support to advance our work.
Looking ahead, Asean’s next chapter will be defined by deeper connectivity and global positioning. The ACMF Action Plan 2026–2030 underscores the need for greater market integration, supported by initiatives such as the development of a unified “Asean Asset Class”, strengthening corporate governance scorecards, and the introduction of region-wide Shariah screening criteria.
In parallel, we are enhancing market linkages by expanding cross-border depositary receipt arrangements. Enhancements to the Asean Collective Investment Schemes (CIS) Framework further support greater mobility of funds across the region.
As our markets become more digital and interconnected, threats such as cross-border scams and cyber-related risks demand coordinated enforcement and supervision. Strengthening intelligence-sharing, coordinating enforcement actions, and enhancing supervisory cooperation will be essential to preserving investor confidence.
A collective horizon
Asean’s journey toward sustainability and integration is still unfolding. But the resolve demonstrated during our chairmanship shows that our region is more aligned than ever moving forward.
By championing a just transition, empowering entrepreneurship, enhancing market connectivity, and reinforcing market integrity, Asean is shaping not only a cohesive capital market, but a sustainable, inclusive future for its people.
The horizon is green and together, Asean is ready to step confidently towards it. -ENDS-
This shared ambition is embodied in the ACMF Action Plan 2026–2030, a roadmap to strengthen regional market integration while addressing individual developmental realities.
Why a just transition matters for Asean
While Asean contributes a modest share of global emissions, our economies are deeply exposed to external shocks and climate-related disruptions. Recent typhoons in the Philippines and major floods in Indonesia, Malaysia, Thailand and Vietnam are no longer isolated climate events, but signal risks with direct consequences for livelihoods and economic growth.
For Asean, the question is not whether to transition, but how? A just and orderly transition requires credible decarbonisation at a pace that reflects different national starting points.
For developing and frontier markets, an abrupt shift to purely “green” mandates could stall growth and strand entire industries. But remaining dependent on fossil fuels – even at “low emission levels” is not sustainable. Asean’s approach is more deliberate and nuanced. One that enables progress while providing clear pathways to cut emissions, reduce fossil-fuel dependency and steer capital towards cleaner technologies.
This philosophy underpins one of Asean's most significant achievements: the Asean Taxonomy for Sustainable Finance, now in its fourth iteration. It serves as the common language to classify sustainable activities regionally to attract much-needed capital.
Designed to be inclusive and credible, it is the first regional taxonomy in the world to incorporate a “transition” category - an innovation now being examined and adapted by other markets. Domestically, a national taxonomy aligned with the Asean Taxonomy is in development, ensuring congruence between regional frameworks and domestic implementation.
Having an Asean-centric taxonomy reduces the need to adopt an international framework less suited to our diversity and unique characteristics.
Its multi-tiered system serves two important purposes. The “green” standards are closely aligned with global benchmarks, such as the EU Taxonomy, ensuring interoperability and credibility.
Meanwhile, the “transition” category provides industries and countries with a structured, time-bound pathway toward greener operations, supporting near-term emission reductions even where “green” solutions are not yet viable and removing long-term fossil fuel dependency.
The Asean Taxonomy is already being used by regional corporates, including Tenaga Nasional Berhad (Malaysia), PT Bank Mandiri (Indonesia) and Bangkok Expressway and Metro PLC (Thailand).
Turning principles into practice
Our focus, however, is not limited to frameworks. Climate financing solutions with risk-sharing mechanisms such as blended finance and public-private partnerships are essential to unlock capital without overburdening public budgets.
We are developing practical tools that ensure sustainability is achievable across markets and sectors. The Asean Transition Finance Guidance offers companies practical steps to secure capital for decarbonisation pathways.
Similarly, the ACMF Voluntary Carbon Market (VCM) Development Plan and Asean VCM Guidance assesses the current carbon market landscape in Asean and provides best practices to promote high-integrity and interoperable regional carbon markets. It also recognises the role of securities regulators in promoting the financial integrity and orderly functioning of VCMs, while acknowledging interdependence with environmental actors.
With this regional endorsement, the impetus is clear at home: the SC will play a stronger role in the oversight and development of VCM. Strengthening governance, transparency and investor protection are key to the credibility and integrity of the Malaysian carbon market ecosystem. Ultimately this will provide better value for those seeking funds from offsets and carbon credit programmes.
Beyond decarbonisation, Asean and Malaysia must also strengthen its focus on climate adaptation and mitigation.
A key thrust of the ACMF is the development of the mitigation co-benefit and Adaptation for Resilience (mARs) Guide, which provides a framework for identifying adaptation projects and financing options in the region, particularly those that are not commercial or bankable. It supports the Asean Taxonomy with the aim of channelling funding towards adaptation and mitigation projects.
Empowering resilience in businesses across all levels
Climate change is a whole-of-society issue. Several Asean countries are pressing forward with implementation of the IFRS® Sustainability Disclosure Standards, starting with larger corporates. In Malaysia, the Standards have been adopted via the National Sustainability Reporting Framework (NSRF). Implementation is supported by PACE (Policy, Assumptions, Calculators, Education) initiatives including the publication of Illustrative Sustainability Reports for specific sectors on how to apply these Standards.
However, sustainability must also extend to the core of our economies: SMEs that anchor corporate supply chains and drive innovation. They face the steepest challenges in fulfilling ESG expectations. In this regard, the ACMF’s Asean Simplified ESG Disclosure Guide for SMEs in Supply Chains (Asean SEDG) provides a tiered, practical guide, translating complex reporting frameworks into accessible steps.
Further, our recent work with the Malaysian batik industry, where we developed the Sustainable Batik Disclosure Guide, shows how traditional sectors can turn ESG adaptation into a unique brand differentiator.
These efforts signal to global investors that businesses across Asean are integrating ESG considerations for operational resilience.
Charting the path to regional integration
Yet, deeper regional market integration remains challenging. Asean’s diversity is its greatest strength, but it demands patient consensus-building. Data gaps also persist, while funding limitations continue to constrain innovation.
This is why international partnerships play a vital role. Collaborations with the Asian Development Bank, the Economic Research Institute for Asean and East Asia (ERIA), and UNEP FI have provided technical capacity, expertise and financial support to advance our work.
Looking ahead, Asean’s next chapter will be defined by deeper connectivity and global positioning. The ACMF Action Plan 2026–2030 underscores the need for greater market integration, supported by initiatives such as the development of a unified “Asean Asset Class”, strengthening corporate governance scorecards, and the introduction of region-wide Shariah screening criteria.
In parallel, we are enhancing market linkages by expanding cross-border depositary receipt arrangements. Enhancements to the Asean Collective Investment Schemes (CIS) Framework further support greater mobility of funds across the region.
As our markets become more digital and interconnected, threats such as cross-border scams and cyber-related risks demand coordinated enforcement and supervision. Strengthening intelligence-sharing, coordinating enforcement actions, and enhancing supervisory cooperation will be essential to preserving investor confidence.
A collective horizon
Asean’s journey toward sustainability and integration is still unfolding. But the resolve demonstrated during our chairmanship shows that our region is more aligned than ever moving forward.
By championing a just transition, empowering entrepreneurship, enhancing market connectivity, and reinforcing market integrity, Asean is shaping not only a cohesive capital market, but a sustainable, inclusive future for its people.
The horizon is green and together, Asean is ready to step confidently towards it. -ENDS-
Source: Joining hands towards a sustainable Asean capital market (Thursday, 18 Dec 2025). The Star. Retrieved from https://www.thestar.com.my/esg/2025/12/18/joining-hands-towards-a-sustainable-asean-capital-market
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