Pledges without rules

Four years after governments agreed to align public and private financial flows with global biodiversity goals, a new report Regulating Finance for Biodiversity: An Assessment for the Global Biodiversity Framework, finds that major financial jurisdictions have yet to translate those commitments into binding rules capable of stopping finance for deforestation and ecosystem destruction.

Alongside Malaysia, the report examines financial regulation in 10 other jurisdictions that play a strategically important role in the financing of forest-risk industries: Brazil, Canada, the Central African Economic and Monetary Community, China, the EU, Indonesia, Japan, Singapore, the UK and the US.

The report finds significant differences among jurisdictions, but no clear leader.

Although Malaysia claims progress in fulfilling its commitments under the Kunming-Montreal Global Biodiversity Framework (GBF), adopted in December 2022, financial regulators have yet to meaningfully engage.

Target 14 calls on governments to progressively align public and private financial flows with GBF goals.

The new assessment by the Forests & Finance Coalition examines whether financial regulation is beginning to deliver on that commitment.

The report finds a significant gap between international biodiversity pledges and the regulations governing lending and investment.

While biodiversity is increasingly featured in financial disclosure frameworks, taxonomies and risk-management policies, binding requirements across entire financial portfolios remain rare.

The Malaysian government’s latest National Report to the Convention on Biological Diversity – based on the National Policy on Biological Diversity 2022-2030 – does not provide a credible account of how the financial sector is being realigned with GBF targets to 2030. Nor does it direct financial regulators to establish rules that restrict harmful flows to forest-risk sectors.

It is therefore unsurprising that Malaysia did not achieve the report’s highest green rating. Across jurisdictions, most ratings were red or dark red and only a few were yellow.

In fact, no jurisdiction comprehensively prohibits banks or investors from financing companies involved in deforestation or the conversion of natural ecosystems.

The findings are being released as governments meet in Yerevan for COP17 of the UN Convention on Biological Diversity. Among the report’s key findings:

The regulatory gap is particularly significant because of the scale of finance continuing to flow to industries linked to tropical forest destruction. Forests & Finance identified $894bn in forest risk-adjusted loans and underwriting between January 2016 and September 2026.

In Malaysia, top banks like CIMB and Maybank lead in sustainability policies based on the recently published Banking on Biodiversity Collapse Report. However, the status quo may be triggering a ‘race to the bottom’; only mandatory regulation will level the playing field.

The report argues that closing the regulatory gap will require governments to move beyond voluntary guidance and product-level sustainability labels toward binding rules governing entire lending and investment portfolios.

For Bank Negara and the Securities Commission, it would mean instituting requirements for banks and investors to disclose financial flows and their biodiversity impacts – beyond voluntary frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD); mandatory due diligence for financing and investment linked to deforestation and ecosystem conversion; biodiversity criteria in prudential regulation; time-bound portfolio alignment targets; mandatory free, prior and informed consent and project‑level safeguards with clear grievance channels; and, finally, effective sanctions when financial institutions fail to comply.

Meenakshi Raman is the president of Sahabat Alam Malaysia.

Regulating Finance for Biodiversity is available at:https://forestsandfinance.org/regulatingfinance2026

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