KPMG: Legal frameworks is a must to achieve net-zero GHG emissions

by PRIYA VASU / pic by TMR FILE 

MALAYSIA is one of 10 countries in the Net Zero Readiness Index (NZRI) that have set net-zero targets in policy documents or political pledges but have not implemented any legal mechanisms that require their governments to achieve them. 

KPMG, in a statement yesterday, said that Malaysia, which is one of 10 countries in NZRI, accounting for 43% of global emissions, noted that despite setting such targets, it is better considered as intentions rather than commitments without a legal binding framework. 

Malaysia was ranked 21st among 32 countries in KPMG’s NZRI which compares the progress of selected countries in reducing greenhouse gas (GHG) emissions that cause climate change. The index also assesses the country’s preparedness and ability to achieve net-zero by 2050. 

The audit firm said it selected the 32 countries to capture insights from across developed and emerging economies and current energy exporters. 

They include members of the G20 intergovernmental forum, as well as the G20 invitees which are emerging or large economies, members of the OPEC and countries which had a net-zero target in place at the time of framing the methodology. 

In September 2021, following the release of the 12th Malaysia Plan, the prime minister had announced a national ambition to be carbon-neutral by 2050 and that a comprehensive National Energy Policy will soon be introduced to provide a “long-term strategic direction” as part of the carbon-neutral commitment. 

Carbon pricing and carbon tax will be introduced to support this vision alongside other carbon reduction measures after the strategic long-term review of the low-carbon development strategies is finalised by the end of 2022. 

Kasturi Nathan, head of governance and sustainability at KPMG in Malaysia, said Malaysia’s targeted ambition is a positive stride forward. 

“Our study reveals that countries with a net-zero target, legally binding or in policy, demonstrate stronger delivery capability across the sectors. 

“The challenge now is to go beyond the talk, ensuring that everyone plays their part. The private and public sectors are the engine of low-carbon growth and organisations are seeking for clarity and certainty in government’s net-zero policies. 

“Hence, if Malaysia is to achieve its net-zero ambition by 2050, it’s critical for the government to set clear policies that enable the green movement. This includes spurring investment in research and development, providing support mechanisms for early-stage innovation by small and medium enterprises, and creating markets for low-carbon products and services, among other initiatives,” she added.

Using 103 key drivers to achieve net-zero, the top 25 performing countries and seven countries to watch were identified for NZRI.

The indicators are split between national preparedness and sector readiness which covers the five highest emitting sectors: electricity and heat; transport; buildings; industry; and agriculture, land use, land-use change and forestry. 

According to Phang Oy Cheng, ED of sustainability advisory at KPMG in Malaysia, Malaysia’s transition to net carbon zero will require not just political will, but also significant structural and legislative reforms on a national scale. 

“Businesses require clear plans, policies and support mechanisms from the government to stimulate delivery capability at the sector level. Based on our observations, corporate transparency on emissions, climate-related financial risk and readiness for net-zero transition is also essential to spur private sector innovation and harness the power of the financial sector,” Phang said. 

She added that making such disclosures is mandatory, as the UK and New Zealand have done with the Task Force on Climate-related Financial Disclosures recommendations, accelerates the availability of the data investors and lenders rely on to make greener investment and lending decisions.