As part of the Twelfth Malaysia Plan (2021-2025), Malaysia has committed to achieving net-zero greenhouse gas emissions by 2050. This goal is reinforced by several government policies, including the New Industrial Master Plan (NIMP) 2030, the National Renewable Energy Roadmap (NETR), and the National Energy Policy for 2022-2040.
As of 2022, Malaysia’s installed renewable energy capacity was at 25%, with 9,856 megawatts in place. The government projects potential investments of RM1.2 trillion to RM1.3 trillion by 2050, contributing approximately RM220 billion to the GDP and creating around 310,000 green jobs[1]. The targets set by the NETR, along with insights from MIDA on green investment trends, position Malaysia to attract new economic opportunities.
*Our previous article on Part 1 of the NETR is accessible here.
Sectoral Policies
Additionally, Malaysia has introduced several sectoral policies, as follows:
(a) Green Technology Financing Scheme (GTFS) 4.0: This scheme will support six key sectors, namely Energy, Manufacturing, Transport, Building, Waste, and Water. GTFS 4.0 offers a 60% to 80% government guarantee on green technology costs financed by Participating Financial Institutions (PFIs) and a 1.5% annual rebate on interest/profit rates. New enhancements include financing for Housing Developers and Low Carbon Mobility Infrastructure, with caps of RM100 million and RM50 million, respectively. The scheme continues to support Producers, Users, and ESCOs, aiming to boost the green technology industry and advance climate change policies[2].
Under the GTFS, different categories have specific features[3]:
- Producers of Green Technology: Maximum financing of RM100 million, up to 15 years tenure, for producing green products (excluding large-scale solar projects). The rebate is 1.5% per annum for up to 7 years. Eligibility requires at least 60% Malaysian shareholding, and applications must be certified by Malaysian Green Technology and Climate Change Corporation (MGTC).
- Users of Green Technology: Maximum financing of RM50 million, up to 10 years tenure, for energy-efficient projects (excluding Net Energy Metering and Self-Consumption projects). Similar eligibility and rebate conditions apply.
- ESCOs: Maximum financing of RM25 million, up to 10 years tenure, for energy efficiency and performance contracting. The same eligibility criteria with the need to register with Energy Commission as ESCO, and rebate conditions apply.
- Housing Developers: Maximum financing of RM100 million, up to 5 years tenure, for green residential buildings with a selling cost up to RM350,000. Similar eligibility and rebate conditions apply.
- Low Carbon Mobility Infrastructure: Maximum financing of RM50 million, up to 5 years tenure, for electric vehicle charge points. Similar eligibility and rebate conditions apply.
The scheme provides a government guarantee of up to 60% for most sectors and 80% for waste. Applications must be submitted to MGTC for certification before seeking financing from Participating Financial Institutions (PFIs). The scheme is open until 31 December 2025, or until the RM1 billion allocation is exhausted. Processing fees apply, and certain projects, like refinancing or completed projects, are not eligible.
(b) Sustainable Development Goals (SDGs)[4]: Malaysia has integrated the United Nations’ SDGs into its national policies, ensuring that investment in sustainable practices aligns with global standards. The Economic Planning Unit (EPU) coordinates the implementation of the SDGs, guided by a multi-stakeholder governance structure led by the National SDG Council. The country has aligned its national development plans, including the Eleventh and Twelfth Malaysia Plans, with the SDGs to ensure effective resource mobilization and integration.
(c) Green SRI Sukuk[5]: The introduction of the Sustainable and Responsible Investment (SRI) Sukuk Framework by the Securities Commission Malaysia (SC) in 2014 marked a significant step in promoting socially responsible investment. This framework facilitates the issuance of green, sustainable, and social sukuk, with significant milestones including Malaysia’s issuance of the world’s first green SRI sukuk in 2017, which funded solar power projects.
The eligibility criteria for various sukuk and bond issuances under the SC’s SRI Sukuk Framework and ASEAN standards are as follows:
- Green SRI Sukuk: Issuances under the SC’s SRI Sukuk Framework from July 2017 onwards.
- Social, Sustainability, or Other SRI Sukuk: Issuances made under the SC’s SRI Sukuk Framework from 25 August 2020 onwards.
- ASEAN Green, Social, or Sustainability Bonds: Bond issuances made under the ASEAN Green Bond Standards, ASEAN Social Bond Standards, or ASEAN Sustainability Bond Standards from 29 October 2020 onwards.
- ASEAN Sustainability-Linked Bonds: Bonds issued under the ASEAN Sustainability-Linked Bonds Standards from 28 October 2022 onwards.
- SRI-Linked Sukuk: Issuances made under the SC’s SRI-Linked Sukuk Framework from 8 August 2022.
The tax incentives available include deductions on issuance expenses and income tax exemptions for grant recipients from 2021 to 2025. The SRI Sukuk and Bond Grant Scheme, established in 2018 and expanded in 2022, covers up to 90% of external review costs, subject to a maximum of RM300,000 per issuance for sustainable sukuk and bonds. These measures support the growth of sustainable finance in Malaysia and offer investors significant benefits, including tax incentives and grants, reinforcing the country’s commitment to sustainability and responsible investing.
(d) ESG Reporting[6]: The introduction of mandatory ESG reporting requirements for listed companies has improved transparency and accountability. Companies are now required to disclose their environmental impact, social practices, and governance standards. A summary of the enhanced requirements and their respective implementations dates are as follows:
| No. | Enhanced Sustainability Reporting Requirements | Effective Dates for Main Market | Effective Dates for ACE Market |
| 1. | Prescribed sustainability information, i.e. narrative statement of the listed issuer’s management of material economic, environmental and social risks and opportunities which must include the – sustainability governance, scope of the Sustainability Statement and basis for the scope, materiality assessment and management of material sustainability matters | Existing Requirement | Applicable for Sustainability Statements in annual reports issued for FYE on or after 31 December 2024 |
| 2. | The following common sustainability matters & indicators: (i) Anti-corruption (ii) Community/Society (iii) Diversity (iv) Energy Management (v) Health and Safety (vi) Labour Practices and Standards (vii) Supply Chain Management (viii) Data Privacy and Security (ix) Water | Applicable for Sustainability Statements in annual reports issued for FYE on or after 31 December 2023 | Applicable for Sustainability Statements in annual reports issued for FYE on or after 31 December 2025 |
| 3. | 3 financial years’ data for each reported indicator & corresponding performance targets (if any) | ||
| 4. | Summary of data & targets in a prescribed format | ||
| 5. | Statement of assurance | ||
| 6. | Remaining common sustainability matters & indicators: (i) Waste Management (ii) Emissions | Applicable for Sustainability Statements in annual reports issued for FYE on or after 31 December 2024 | Applicable for Sustainability Statements in annual reports issued for FYE on or after 31 December 2026 |
| 7. | TCFD-aligned disclosures | Applicable for Sustainability Statements in annual reports issued for FYE on or after 31 December 2025 | Not applicable |
| 8. | Basic transition plan | Not applicable | Applicable for Sustainability Statements in annual reports issued for FYE on or after 31 December 2026 |
Incentives Available to Green Players
The Green Technology Tax Incentive[7] offers tax allowances for companies investing in green technologies and sustainable practices. There are three (3) groups of activities under the Green Technology Tax Incentive. Applicants must verify eligibility and qualifying activities; some details are as follows:
| Type of Tax Incentives | Details |
| Green Investment Tax Allowance (GITA) Assets for Own Consumption Eligibility criteria: Applies to new and existing companies incorporated under the Companies Act, 2016. Eligible companies must incur qualifying capital expenditure on green technology assets between January 1, 2024, and December 31, 2026. The assets must minimize environmental impact, promote health, and conserve resources, and be approved by the Ministry of Finance (MOF) and listed in the MyHIJAU Directory. Group companies must keep projects, assets, and employees separate from their parent or related companies, and projects must not decrease the parent company’s investment. For green buildings, verification by a government-approved Green Building Certification Body is required. | – Company must submit the application for verification to the Malaysian Green Technology and Climate Change Corporation (MGTC) within 24 months (36 months for Green Building) from the date of qualifying capital expenditure incurred. Any application received after 24 months (36 months for Green Building) will not be considered for the incentive. – Company which has been granted GITA Asset for Own Consumption, is allowed to claim for the tax incentive with the following incentives in the same basis period for a year of assessment: (i) Pioneer Status under the Promotion of Investments Act 1986 subject to GITA incentive to be absorbed after the expiry of Pioneer Status period. (ii) Investment Tax Allowance under the Promotion of Investment Act 1986 subject to different asset under each incentive. (iii) Reinvestment Allowance under Schedule 7A or Investment Allowance for service sector under Schedule 7B, the Income Tax Act 1967 subject to different asset under each incentive. (iv) Exemption of income under the P.U.(A) 112/2006, Income Tax Act 1967 subject to GITA Incentive to be absorbed after the expiry of exemption of income period. (v) Investment Tax Allowance under P.U.(A) 113/2006, Income Tax Act 1967 subject to different asset under each incentive. – Unutilised allowances can be carried forward until they are fully absorbed. – The application of GITA Asset for Own Consumption should be submitted in one (1) set of MGTC GITA/A Form to MGTC from 1 January 2024 until 31 December 2026. |
| Green Investment Tax Allowance (GITA) Project for Business Purposes Eligibility criteria: A company must be new (not yet generating income) or an existing company engaging in qualifying green activities or new projects that generate separate income. Expenditures must occur after applying to MIDA. The company must minimize environmental degradation, reduce emissions, promote health, conserve resources, and use certified equipment recognized by MyHIJAU or MGTC. | – Green Investment Tax Allowance of 100% of qualifying capital expenditure incurred on green technology project for three (3) years from the date of first qualifying capital expenditure (CAPEX) incurred. – The date of first qualifying CAPEX shall not be earlier than the date of application received by MIDA. – The allowance can be offset against 70% of statutory income for each year of assessment. – Unutilised allowance can be carried forward until they are fully absorbed. – The application period for the GITA Project for business purposes has been extended until 31 December 2026[8]. – The application can be submitted to MIDA via Invest Malaysia portal at https://investmalaysia.mida.gov.my. |
| Green Income Tax Exemption (GITE) Solar Leasing (Subject to MOF’s decision) Eligibility criteria: A company must be listed under the Registered Solar PV Investor (RPVI) Directory by the Sustainable Energy Development Authority (SEDA), be at least 60% Malaysian-owned, and have a minimum installed solar PV capacity of 3MW under the Net Energy Metering (NEM) or Self-Consumption (SelCo) Programme with a Commercial Operation Date. The company must employ at least five full-time staff, including two green technology experts, and derive income from electricity sales or leasing. Assets must be listed on the RPVI balance sheet. Only one company per group can qualify for the incentive, and projects invoiced before the application to MIDA are ineligible. | – Income Tax Exemption of 70% on statutory income for solar leasing activity for a period up to 10 years of assessment. This incentive will be given based on tier as follows: (i) >3MW- ≤10MW – 5 years* (ii) >10MW- ≤30MW – 10 years* *Company possesses a minimum installed capacity of 3MW solar PV projects aggregated under the NEM programme or SelCo Programme which have achieved Commercial Operation Date as the pre-requisite to apply for the tax incentive The exemption will be given to company based on the addition once they have fulfilled the minimum 3MW pre-requisite. – The incentive period shall commence from the date of first invoice issued by RPVI to lessee as verified by SEDA and this date shall not be earlier than the application made to MIDA. – The application period for the GITE for Solar Leasing incentives has been extended until 31 December 2026[9]. – The application can be submitted to MIDA via InvestMalaysia portal at https://investmalaysia.mida.gov.my. |
Renewable Energy (RE)
NETR highlights key trends in Malaysia’s power mix as it moves toward its energy goals. By 2050, RE is projected to dominate installed capacity; however, its contribution to total generation will remain lower than that of fossil fuels, especially natural gas, due to solar’s lower capacity factor. Coal-fired generation is expected to decline significantly, with no new coal plants and a near-complete phase-out by 2045. Natural gas will serve as a transitional fuel, becoming the primary source for baseload power. The goal of achieving a 70% share of installed capacity from RE, mainly through solar PV, will require substantial growth, targeting 59 GW of solar capacity by 2050. The key initiatives include:
(a) Establish solar parks for accelerated deployment of utility-scale solar: The goal is to identify appropriate land for solar park development through collaboration among federal and state governments and utility companies, aiming to decarbonize hard-to-abate industries. Additionally, there’s a focus on enhancing the current large-scale solar (LSS) mechanism to bolster financial sustainability for developers;
(b) Promote floating solar and agrivoltaic technology: The plan includes removing regulatory barriers that hinder floating solar and agrivoltaic projects, such as amending existing hydropower power purchase agreements. It also calls for clear guidelines for these technologies and the adoption of distinct bidding categories in future LSS auctions to promote fair competition.
(c) Expand virtual aggregation model for rooftop solar: The proposal aims to expand the virtual aggregation mechanism, like the NOVA program, to include government and residential buildings for leasing rooftop space and selling it to offtakers. Additionally, it seeks to scale up the corporate and industrial solar rooftop program.
(d) Develop plan for accelerated investments of transmission and distribution: The initiative involves determining the amount, timing, and method of funding for grid infrastructure investments to alleviate grid constraints while addressing the energy trilemma. It also includes providing incentives for renewable energy development and power storage facilities to enhance system flexibility and manage renewable energy intermittency.
(e) Develop TPA framework for sourcing of RE: The plan includes developing a Transparent Power Agreement (TPA) framework with a clear mechanism for calculating wheeling fees to address the demand-supply gap for green electricity. Additionally, it aims to enable solar developers participating in the Corporate Green Power Programme (CGPP) to sell excess power to the Single Buyer, creating new revenue streams and enhancing investor interest.
(f) Set up RE exchange hub to enable cross-border RE trading: The initiative involves establishing a physical enabler, such as a special purpose vehicle, to serve as a market aggregator. It also includes developing regulations for a renewable energy exchange hub and cross-border trading, establishing or upgrading interconnections with neighbouring countries, and monetizing excess power through bilateral or multilateral trading arrangements.
Enhanced Clean Energy Programme
The Ministry of Energy Transition and Public Utilities has rolled out a series of progressive and strategic measures, including the improvement of existing programmes and the allocation of quotas, designed to attract investments in the renewable energy sector and to reaffirm the country’s commitment to clean energy transition. These measures include:
(a) Large Scale Solar (LSS) Programme
- The Fifth Large Scale Solar (LSS5) program is set to reshape Malaysia’s RE sector by providing a substantial 2,000MW solar quota.
- LSS5 is divided into four packages that cater to various project scales, including small-scale plants designated for Malaysian companies with Bumiputera equity, as well as larger projects open to wider participation.
- The maximum aggregated capacity for each bidder will be increased from 50MW to 500MW.
- LSS5 will include a dedicated category for floating solar projects, with a quota of 500MW, aligning with the National Energy Transition Roadmap (NETR) that promotes floating solar technology. The NETR also indicates the introduction of guidelines for these projects, suggesting that LSS5 may have distinct requirements for both land-based and floating solar installations.
(b) Low Carbon Energy Generation Programme (LCEGP)
- LCEGP is open to power generation projects that harness low-carbon sources, including small hydro, biogas, biomass, and hydrogen.
- These projects must be registered under the New Enhanced Dispatch Arrangement (NEDA) mechanism.
- Applications[10] will be accepted on a first-come, first-served basis starting 5 February 2024.
(c) Net Energy Metering (NEM) Programme
- An additional quota of 400MW has been made available from 5 February 2024 until 31 December 2024, which includes 100MW for the NEM Rakyat initiative (households) and 300MW for NEM Nova (commercial and industrial).
- The NEM program allows solar energy producers to consume their generated power and export any excess to Tenaga Nasional Berhad.
Corporate Sustainability
Major corporations in Malaysia are setting ambitious green targets, such as achieving net-zero emissions, reducing waste, and investing in sustainable supply chains.
For instance, Petronas[11] aims to achieve net-zero emissions by 2050 through investments in renewable energy and carbon capture technologies. Sime Darby Plantation[12] is targeting zero waste to landfill by 2030 and focusing on sustainable palm oil production. Malaysian Airline System (MAS)[13] is offering carbon credits from Malaysia’s Kuamut Rainforest Project as part of its offset program, aiming to reduce 16 million tons of CO2e and support local conservation and community development. Similarly, CIMB Group[14] is expanding its green financing portfolio and has set specific 2030 targets to reduce emissions intensity in key sectors, with a broader commitment to achieving net-zero emissions by 2050. These commitments not only enhance the corporate image of these companies but also align their practices with global sustainability standards.
Conclusion
Malaysia’s green investment landscape is rapidly evolving, driven by a robust policy framework, innovative financial instruments, and a growing commitment to sustainability. As Malaysia continues to prioritize environmental responsibility, it is well-positioned to become a prominent destination for green investment, contributing to a more sustainable future. Investors, businesses, and policymakers must collaborate to overcome challenges and seize opportunities, ensuring an effective and inclusive transition to a green economy.
[1] https://www.ekonomi.gov.my/sites/default/files/202309/National%20Energy%20Transition%20Roadmap_0.pdf
[2] https://www.gtfs.my/faq/what-gtfs-40
[3] https://www.gtfs.my/page/features-gtfs-40
[4] https://www.dosm.gov.my/portal-main/article/sustainable-development-goals
[5] https://www.capitalmarketsmalaysia.com/public-sri-sukuk/
[6] http://bit.ly/3ZL3Rqq
[7] https://www.mgtc.gov.my/wp-content/uploads/2024/05/GREEN-TECHNOLOGY-TAX-INCENTIVE-GUIDELINES-GITA-Asset-23-April-2024.pdf and https://www.mida.gov.my/wp-content/uploads/2021/12/Guideline-Green-Technology-Incentive-as-at-02122021.pdf
[8] https://www.mida.gov.my/media-release/announcement-gita-project-for-own-consumption-is-merged-with-gita-asset/
[9] https://www.mida.gov.my/media-release/announcement-gita-project-for-own-consumption-is-merged-with-gita-asset/
[10] https://www.singlebuyer.com.my/lcegp.php
[11] https://www.petronas.com/sustainability/delivering-net-zero#JbopTabs2
[12] https://www.sdguthrie.com/wp-content/uploads/2024/05/Sime-Darby-Plantation-Sustainability-Report-2023.pdf
[13] https://www.malaysiaairlines.com/my/en/mh-media-centre/news-releases/2024/malaysia-airlines-carbon-credit-portfolio.html
[14] https://www.cimb.com/en/newsroom/2024/cimb-becomes-the-first-malaysian-bank-to-complete-2030-decarbonisation-targets-for-high-emitting-sectors-accelerating-its-sustainability-journey-towards-net-zero-by-2050.html
The information provided is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
