Dubbed Dana Iklim+, the fund will focus on channelling institutional capital towards climate-focused investments to accelerate Malaysia’s transition towards net zero by 2050, with a targeted mitigation or reduction of up to one million metric tonnes of carbon dioxide and its equivalents (CO2e).
It will seek relevant technological and nature-based solutions acrosss sectors including infrastructure, private equity and real estate, KWAP said in a statement on Wednesday.
“Dana Iklim+ seeks to deliver both sustainable financial returns and measurable environmental outcomes, supporting the country’s transition to a low-carbon, climate-resilient economy,” said the firm.
The fund size and targeted level of emisssions reduction would effectively price carbon at US$473 per tonne, significantly higher than the current market rates and even a proposed rate of US$50 needed to decarbonise Malaysia’s steel sector, according to a local think tank, the Institute for Democracy and Economic Affairs (IDEAS).
Eco-Business has reached out to KWAP for comment on carbon prices under Dana Iklim+.
Speaking to reporters at the launch of the fund, acting minister of natural resources and environmental sustainability Johari Abdul Ghani highlighted that investments are needed in local decarbonisation projects, such as reforestation, that could generate returns through mechanisms such as carbon trading.
However, he noted that Malaysia currently suffers weak prices for its carbon credits, currently ranging from US$3 to US$10 per tonne of CO2e in voluntary carbon markets. This is despite the International Monetary Fund recommending that carbon is priced between US$50 and US$75 a tonne for advanced economies by 2025.
Investments into carbon projects by the likes of KWAP could boost the local carbon trading market, currently operated by stock exchange operator Bursa Malaysia, said Johari. Carbon trading is expected to pick up pace once Malaysia introduces a carbon tax in 2026, although the government will have to table and pass a recently-delayed climate change bill first.
Johari also said that Dana Iklim+ would be like a “revolving fund”, targeting climate solutions that can be monetised and sold at scale.
“Then when [those products] are successful, they pay back [to the fund],” said Johari, likening the mechanism to the issuance of green bonds.
KWAP said that the fund would be structured as a “multi-asset investment strategy”. It will be guided by the pension firm’s impact measurement framework, which measures impact across six dimensions including national alignment, climate resilience, and co-benefit indicators.
The fund is the third in KWAP’s series of catalytic investment programmes, with the first two, Dana Pemaju and Dana Perintis, focused on private equity and venture capital investments respectively.
KWAP is among Malaysia’s largest government-linked institutional investors, which includes the Employees’ Provident Fund and Permodalan Nasional Berhad. A year ago, it pledged to commit RM20 billion (US$4.73 billion) to “transition assets” that would drive meaningful change in Malaysia’s transition to a sustainable economy.
Dana Iklim+ is also aligned with Malaysia’s National Energy Transition Roadmap (NETR), which is focused on decarbonising the country’s energy sector, its largest source of emissions.
“The fund also supports Malaysia’s broader climate ambitions under the 13th Malaysia Plan,” said KWAP.
