BNM's Climate Change and Principle-based Taxonomy (CCPT) explained

What is the CCPT?

BNM prepared the CCPT with the Risk Management sub-committee of the Joint Committee on Climate Change (JC3), after consulting on a discussion paper issued on 27 December 2019. The final document came into effect on 30 April 2021.

It aims to give financial institutions a common way to assess and categorise economic activities, and to support standardised classification and reporting of climate-related exposures. BNM chose a principle-based approach, rather than fixed thresholds, to reflect Malaysia's stage of development and to avoid disruptive exclusions, so that the economy can transition in an orderly way.

Who must apply the CCPT?

The CCPT is a guide for the financial institutions BNM supervises:

• Licensed banks, licensed investment banks, licensed Islamic banks and licensed international Islamic banks.
• Licensed insurers and reinsurers, and licensed takaful and retakaful operators.
• Prescribed development financial institutions.

How does CCPT reporting work?

Since July 2022, financial institutions have submitted half-yearly reports to BNM on their exposures, classified using the CCPT guiding principles and classification system.

BNM has noted that reported classifications vary considerably between institutions, partly because of data quality and differences in the criteria used to assess the guiding principles, and that improving consistency is a priority to reduce greenwashing risk. The document says other financial sector players, such as capital market intermediaries and rating agencies, may also use it.

What are the five CCPT guiding principles?

GP1 and GP2 are assessed at transaction level, for example when credit is granted or an investment is made. GP3, GP4 and GP5 need a more holistic look at the customer's overall business. The CCPT notes that a certification on its own is not enough to meet GP3.

• GP1, climate change mitigation: the activity makes a substantial contribution to avoiding or reducing greenhouse gas emissions, or enables others to do so.
• GP2, climate change adaptation: the activity increases its own resilience, or enables others to increase theirs, to the effects of climate change.
• GP3, no significant harm to the environment: the business controls pollution, protects ecosystems and biodiversity, and uses energy, water and other natural resources sustainably.
• GP4, remedial measures to transition: recognises remedial measures that address significant harm that has been identified.
• GP5, prohibited activities: the activity must not be illegal or contravene environmental laws.

What do the CCPT categories C1 to C5 mean?

Positive impact and remediation must be material, not negligible, to avoid greenwashing. For Watchlist customers, BNM expects institutions to engage them on concrete plans to address the harm. If a customer shows no serious commitment, institutions can consider stricter terms such as a shorter tenor, a lower limit or higher pricing, or reassess the relationship.

• C1 (Climate Supporting): meets GP1, GP2 or both, and causes no significant harm to the environment.
• C2 (Transitioning): meets GP1, GP2 or both, causes significant harm, but remedial measures are being taken.
• C3 (Transitioning): meets neither GP1 nor GP2, causes significant harm, but remedial measures are being taken.
• C4 (Watchlist): meets GP1, GP2 or both, causes significant harm, and no remedial measures are taken.
• C5 (Watchlist): meets neither GP1 nor GP2, causes significant harm, and no remedial measures are taken.

How does the CCPT link to BNM's climate risk policy?

BNM's policy document on Climate Risk Management and Scenario Analysis, announced on 2 December 2022 and revised on 17 March 2025, sets 14 principles covering governance, strategy, risk appetite, risk management, scenario analysis and disclosure. It applies to banks, investment banks, Islamic banks, prescribed development financial institutions, insurers, takaful operators and financial holding companies.

It names the CCPT as one starting point for bottom-up risk assessment, especially for customers in the Watchlist category. It also requires annual climate-related disclosures aligned with the TCFD recommendations for financial years beginning on or after 1 January 2024, followed by disclosures under the National Sustainability Reporting Framework from 1 January 2025, 2026 or 2027, depending on the institution's group.

What does the SC's SRI Taxonomy cover?

On the capital market side, the Securities Commission Malaysia (SC) unveiled its Principles-Based Sustainable and Responsible Investment Taxonomy on 12 December 2022. It gives guiding principles for classifying economic activities that qualify for sustainable investment, includes a social as well as an environmental component, and aims to help manage greenwashing risk. The SC is also a member of the JC3 Risk Management sub-committee that worked on the CCPT.

Why do bank teams need CCPT training?

BNM's climate risk policy requires financial institutions to build capability through capacity building and training plans for the board, senior management and all relevant staff, and expects the board to stay up to date on climate-related developments. Typical topics include:

• Applying the guiding principles in credit and investment due diligence.
• Judging whether remedial plans and certifications are credible.
• Working through the CCPT's own use cases, such as oil palm, green buildings and fossil fuel financing.
• Linking CCPT classifications to climate risk management, scenario analysis and disclosure.

Sustainable finance training from Ogos Learning

Ogos Learning runs sustainable finance training for bank teams, including on the CCPT and climate risk. Ogos Learning has trained teams at more than 10 of Malaysia's licensed commercial banks.