Kuala lumpur: Malaysia must expand green finance, strengthen local tech capacity, as well as broaden participation across sectors and regions to fully leverage the global shift towards sustainability and turn climate risk into a competitive edge in green value chains.
According to BERNAMA News Agency, in its recently published Country Climate and Development Report, the World Bank highlighted significant barriers such as low research and development investment, workforce skills gaps, and weak industry-academia collaboration that risk limiting innovation as Malaysia accelerates its national green transition.
While Malaysia has introduced green policies and fiscal tools, the World Bank noted that domestic private sector investment remains cautious, and innovation ecosystems are still developing. To drive this transformation further, Malaysia should also invest in sustainability-linked services and knowledge-based sectors, the bank said in the report.
The World Bank emphasized that global demand for activities backed by strong environmental, social, and governance (ESG) standards is rising. Green finance, climate risk analytics, sustainable certification, and environmental auditing are emerging as growth areas. Malaysia, with its mature financial sector, digital infrastructure, and multilingual workforce, has a competitive edge in ESG.
Building capabilities in these high-value services will diversify exports and embed sustainability across supply chains, the World Bank added, suggesting that states like Penang and Selangor could become green industrial clusters, attracting sustainable investment and talent. The bank also stressed the importance of enabling rural and smaller states to benefit from low-carbon growth, through green agro-processing, circular economy ventures, or eco-tourism.
Supporting small and medium enterprises, investing in regional innovation hubs, and empowering local governance would ensure Malaysia's green transition is inclusive, resilient, and a foundation for shared prosperity.
The World Bank warned that climate change is expected to cost Malaysia up to 8.3 per cent of its gross domestic product (GDP) by 2050 under the most pessimistic scenario, with larger losses possible. It noted that half of the predicted costs of climate change have already been realised in lower GDP figures, with crop losses, flooding, and heat-related productivity declines being major drivers of projected economic losses.
The agriculture sector alone could see up to 18 per cent of its production value eroded by mid-century, with cascading impacts across society, affecting business continuity, employment, health outcomes, and the broader stability of the economy. If a one-in-20-year flood were to hit following an extended heatwave, GDP losses could exceed 20 per cent in a single year, making climate resilience an economic imperative, said the World Bank.
Adaptation measures could offset up to half of Malaysia's projected climate-related economic losses, with tackling heat stress identified as a key strategy. The World Bank suggested that raising air-conditioning coverage in workplaces from 42 to 75 per cent by 2050 could significantly preserve labour productivity at a modest annual cost of US$40 million.
Broader actions such as climate-resilient land use plans could reduce flood and landslide risks, while climate-smart agriculture and integrated water resource management would help to sustain food and water security, it added.