KUALA LUMPUR – SMEs and MSMEs who do not undertake green transitions could cause Malaysia to lose US$65 billion in revenue, said Sustainable Finance Institute Asia Ltd CEO Eugene Wong.
During the Maybank Invest Asean 2022 virtual environmental, social, and governance (ESG) conversations event, Wong stated that by the year 2030, the green sector in Southeast Asia is expected to provide over US$1 trillion in terms of economic opportunities and this is why SMEs and MSMEs should take the chance and embrace the net-zero carbon transition.
He noted that undertaking green transition will incur higher costs that may cause the SMEs and MSMEs to be discouraged, especially those that are still recovering from the effects of COVID-19. However, he still encourages local suppliers to try embarking on the journey by riding on the supply chain.
“One way they can achieve it is to ride the supply chain; we must be very clear that as part of the chain, a lot of customers have already started on their net zero target (journey),” he said.
He explained that SMEs and MSMEs who do not align with the transition will be left out of the supply chain.
He said that a recent study by Standard Chartered showed that over 80% of multinational companies (MNCs) intend to remove the suppliers that do not meet their green transition target by the year of 2025.
Wong stated that with SMEs and MSMEs being the backbone of Malaysia’s economy by accounting for over 97% of the overall businesses, they are a significant part of the economy and must also be a significant part of the solution as well.
To remain competitive in the future, he sees sustainability as a must-have business strategy, and smaller companies will need to find methods to implement it.
He noted that unlike the larger companies which have easier access to capital markets and other tools like loan financing, sustainability-linked bonds (SLB) and also loans (SLL) which would help them on their green transition journey, SMEs and MSMEs require different financing methods as well, with loans remaining the most accessible sustainable financial instrument for them.
Wong said that while it is encouraging that Southeast Asian banks are beginning to reconfigure their policies to offer the support needed for SMEs and MSMEs to do a green transition, banks must also decide how to be intermediaries.
Furthermore, he said that smaller enterprises could consider tapping into peer-to-peer (P2P) crowdfunding platforms for the green transition funds while adding that there already has been some successful cases with an expectation of more to come.
Meanwhile, Asian Development Bank’s principal financial sector specialist, Mohd Sani Mohd Ismail, stated that while the green transition journey is expensive for SMEs and MSMEs, governments could offer their support through connecting green initiatives to the recovery support subsidy or financing under the stimulus packages.
He said that it would be a crucial opportunity to assist SMEs and MSMEs in their transition and given their contribution to the economy, governments should play their role to help make the transition happen.
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