Sustainable finance: A study on Malaysia's regulatory frameworks on sustainable banking and their implementation by selected Islamic banks in Malaysia in support of sustainable development goals.

In 2018, Bank Negara Malaysia (BNM), the central bank of Malaysia, issued a Strategy Paper on Value-based Intermediation (VBI). VBI aims to deliver the intended outcomes of Shariah through Islamic Financial Institutions (IFIs) practices, conduct, and offerings that generate positive and sustainable impacts on the economy, community, and environment. To assist IFIs in translating VBI into actual banking practices and offerings, BNM issued guidance documents, one of which is the Value-based Intermediation Financing and Investment Impact Assessment Framework (VBIAF). BNM also issued the Climate Change and Principle-based Taxonomy (CCPT), specifically addressing climate change. This article examines the VBI, VBIAF, and CCPT and investigates their adoption by three Islamic banks (IBs) in Malaysia. It aims to provide insight into the regulatory frameworks and how their adoption has influenced the banks' offerings, practices, and operations toward the Triple Bottom Line (TBL) approach in support of Sustainable Development Goals (SDGs). The findings reveal that the IBs have started implementing an impact-based risk assessment and management consistent with the VBIAF and climate risk assessment based on the CCPT. However, these are still in the preliminary stages for the IBs. Nonetheless, what is encouraging is that all three IBs have implemented various VBI-related initiatives in line with the underpinning thrusts of VBI. This paper illustrates how these various VBI-related initiatives by the IBs have assisted the banks in supporting sustainable development. [ABSTRACT FROM AUTHOR]

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