Kuala Lumpur:Bank Negara Malaysia is considering allowing financial institutions to undertake higher risks responsibly to aid the energy transition, as announced by Governor Datuk Seri Abdul Rasheed Ghaffour.

According to BERNAMA News Agency, the central bank is assessing how to adjust regulations to better support the energy transition. This includes providing financial institutions with more flexibility to assume higher risks within a manageable risk appetite.

Governor Abdul Rasheed emphasized the importance of this approach during his remarks at the JC3 Journey to Zero Conference 2026. He highlighted BNM's commitment to facilitating green energy projects and exploring regulatory adjustments to support them.

He pointed out that while there is available capital, the main challenge lies in financial intermediation and directing funds into viable green projects. Early-stage, high-impact projects often face financing hurdles due to perceived commercial risks, despite their technical feasibility.

Using small-scale renewable energy initiatives as an example, Abdul Rasheed noted that while individual projects may seem marginal, they can become viable when scaled up. This highlights the need for early engagement, better structuring, and effective risk-sharing mechanisms.

Regarding Malaysia's broader energy transition, Abdul Rasheed mentioned that progress is evident, with renewable energy expected to account for 31% of installed capacity by 2025, compared to 25% in 2023. However, he warned of challenges posed by rising electricity demand from artificial intelligence and expanding data centers, which could consume nearly one-third of electricity by 2035.

To address these challenges, he underscored the necessity for Malaysia to ensure its digital economy's growth is underpinned by reliable, affordable, and clean energy. Abdul Rasheed also advocated for a shift from post-disaster recovery financing to proactive investment in climate resilience.