Over half of Malaysian bank loans exposed to nature risks

Financing opportunities abound for sustainable agriculture and water management.

Malaysian banks’ exposure to sectors tied to natural risks could hurt them in the long run, but it also creates finance opportunity, said UOB Kay Hian.

About 54% of $200.28b (MYR816b) of banks’ commercial loans have high dependency on ecosystem services, whilst 36% are tied to environmental pressure, according to data from the Bank Negara Malaysia (BNM), the World Bank, and the United Nations Development Programme.

Sectors exposed are those with high or very high dependency to at least one ecosystem service, which include water supply and purification, rainfall regulation, flood mitigation, and soil retention.

Where these effects weaken earnings, cash flow or asset values, borrowers’ repayment capacity may deteriorate, converting nature loss into conventional bank credit risk, said Philip Wong and Keith Wee, analysts for UOBKH.

“The financial implications should emerge progressively through borrower selection, loan pricing, portfolio composition and, potentially, asset quality rather than through an immediate earnings impact,” said Wong and Wee.

Current Malaysian nature-related assessment remains less developed than climate-risk management, according to Wong and Wee. Banks with established nature-risk data and credit processes would face a smaller implementation gap.

Amongst banks, CIMB is said to show the strongest disclosed readiness, whilst Public Bank is also “relatively advanced.” Remaining banks are at different stages of implementation.

Beyond managing risks, banks may find opportunities from financing sustainable agriculture, water management, ecosystem restoration, and other nature-positive activities, Wong and Wee said.

(US$1 = MYR 4.07, as of 25 September 2026)