End Coal Finance: An Open Letter to Malaysia’s Regulators and Banks

To: 

  • Governor, Bank Negara Malaysia
  • Chairman, Securities Commission Malaysia
  • Chairman and members, Shariah Advisory Council of Bank Negara Malaysia
  • Chairman and members, Shariah Advisory Council of the Securities Commission Malaysia
  • Leaders of Malaysia’s financial institutions

Dear Governor, Chairman, members of the Shariah Advisory Councils, and leaders of Malaysia’s financial institutions,

We write to ask that Malaysia’s financial system stop financing coal, with clear rules, firm dates, and full transparency. Coal generates approximately 43% of our electricity, yet it can still pass the Shariah screen that tobacco fails. While pledges by banks to exit coal, leave existing financing untouched. This letter sets out why coal financing conflicts with the Maqasid al-Shariah, and public health and interest, where current commitments fall short, and the specific steps we ask of regulators and banks. Those steps are a Shariah ruling on coal, a binding exclusion, annual disclosure in ringgit, and a 2035 exit from all coal finance, whether lent, underwritten, syndicated or rolled over. We also ask for human rights due diligence on every financing, from before the deal is signed to the day it ends.

Capital flows are an ethical and public health decision

The decision on the allocation and flow of capital is both an ethical and a public health decision, with far-reaching implications on the lives of people not just in Malaysia, but those suffering in other continents. As global leaders in Islamic finance, Malaysia carries a duty under the Maqasid al-Shariah: to act as stewards (khalifah) of the earth (Al-Baqarah 2:30), to uphold the balance (mizan) (Ar-Rahman 55:7-9), and to not cause corruption on the earth after it has been set in order (Al-A’raf 7:56). Financing what harms life and the earth goes against that duty.

We have felt this with every breath this past month. On 4 September 2026, Serian in Sarawak hit an API of 521, triggering a haze emergency, and by 30 September Klang and Kuala Lumpur were still at 163 and 166. The haze comes mostly from fires, but it is measured in PM2.5, the same pollution coal plants release every single day.

Coal harms public health at every stage

Fossil fuels, more specifically coal, have clear and detrimental public health impacts. Coal made up 43.1% of Malaysia’s electricity generation in 2024, in comparison to a mere 6% in 2000. And the Global Carbon Budget 2025 states that coal is also the largest single source of carbon dioxide emissions, making up 42% of global fossil CO₂ in 2025 and 46% of all fossil CO₂ emitted since the beginning of the industrial era.

Coal harms public health at every stage of its life cycle – burning it for electricity releases more nitrogen oxides, sulfur dioxide, particulate matter and heavy metals per unit of energy than any other fuel. Fine particulate pollution from coal plants carries more than twice the mortality risk of PM2.5 from other sources, that’s the same PM2.5 we are tracking for our current Transboundary Haze crisis. These burdens fall hardest on low-income communities, and the evidence shows that stopping coal emissions saves lives.

The World is asking Finance to Move

At the UN Climate Summit on 23 September 2026, Secretary-General António Guterres called for the overall global climate finance to reach $1.3 trillion annually by 2035, and to “match the revolution in energy with a revolution in finance” – finance needed by countries in our region to deal with unavoidable climate and environmental impacts. This came with a call to protect the foundations of climate action: science and truth, international law and cooperation. The International Court of Justice’s 2025 advisory opinion has confirmed that states must protect the climate system, including by regulating private actors as a matter of due diligence.

Why Our Campaign Exists

We acknowledge progress made – no new coal fired power plants, a 2044 coal phase-out target, bank exits from new coal, taxonomies, the National Sustainability Reporting Framework, and maqasid-based guidance for Islamic Finance. However, being compliant is not the same as ending and preventing harm. The gaps that we have identified:

  • The coal phase-out is slow and not binding – It relies on contracts expiring naturally, with 2 more decades of coal pollution from today.
  • Coal is being replaced by gas, and not a just transition directly to renewable energy. This risks a gas lock-in for up to 2 decades of coal pollution from today, and is still under the “Amber” category in our taxonomies. 
  • Commitments cover new coal, not existing exposure and financing – Banks like Maybank have committed to stop new coal financing, but existing exposure and financing continues, and our taxonomies are kind on coal. The ASEAN Taxonomy only labels coal phase-out finance as green if plants retire by 2040, and our 2044 exit misses that mark. Without strict criteria, “transition” labels risk rewarding plants for simply running out their contracts.
  • BNM’s Value-based Intermediation (VBI) framework holds that preventing public harm takes precedence over benefit, that harms cannot be offset by positive impacts, and that banks should cut the share of fossil fuels in their financing by a set date. But it leaves coal off its exclusion list, lets banks apply it only to new deals, and remains voluntary.
  • A company earning just 5% of its income from tobacco fails the Securities Commission’s Shariah screen. A company earning all of its income from coal can pass it, despite coal’s well-documented harm to life.
  • Reporting is not the same as respecting human rights – the ISSB standards behind the NSRF are catered to investors and omit human rights, risking “accountability-washing”. 
  • Screening checks what a company does, not where its products, partners and supply chains lead. Finance can facilitate violations of international human rights, humanitarian and environmental law without any screen catching it.

These principles are rooted in Islamic finance, but they cannot stop there. Most Malaysian banking groups run both Islamic and conventional arms. An exclusion that binds only Islamic finance would simply move coal financing to the conventional arm of the same group, and the harm to public health is the same whichever arm finances it. Every demand below therefore applies to both, except the Shariah ruling itself, whose conventional counterpart is a binding exclusion.

Our Key Demands

Divesting from coal is not only an ethical and health imperative – it is the global financially smart move. Renewables are the cheapest forms of energy, and the precedent already exists – Islamic finance already screens tobacco and excludes it for its harms. 

To Bank Negara Malaysia, Securities Commission Malaysia, and Bursa Malaysia: 

  1. Exclude coal from the Malaysia Taxonomies with no green or transition labels for it. (Climate Change and Principal-based, Sustainable and Responsible Investment, and Sustainable Finance)
  2. Classify coal as Shariah non-compliant. The SACs for BNM and SC should add thermal coal mining and coal power to the non-compliant activities list, alongside tobacco. Exceptions only through a published necessity (darurah) test.
  3. Issue a binding VBI sectoral guide on coal mining and coal power that puts coal on the exclusion list, applies to existing as well as new financing, and drops the rule that banks can only exclude industries an international agreement has already rejected.
  4. Develop one standard for coal exposure disclosure, from FY2027 using Global Reporting Initiative criteria, with transparency by instrument, underwriting, arranging, syndication and Shariah advisory, and an optional split between conventional and Islamic arms. Financed emissions should be reported in parallel. 
  5. Mandate dated and publicly available coal run-off plans for all banks operating in Malaysia by 2027, with year-on-year reduction targets and annual progress reports.
  6. Add a minimum 150% risk weight on coal exposures, against standard 100% corporate exposures, and higher for new coal financing.
  7. Make full supply chain human rights due diligence mandatory under the UN Guiding Principles on Business and Human Rights, before and throughout financing, and with heightened due diligence covering international humanitarian law in conflict-affected and high-risk areas.

To banks, asset managers, takaful operators, investors: 

  1. Publish a dated exit from all coal finance by 2035. This covers lending (project finance, corporate finance, and refinancing), investments in coal companies’ bonds, sukuk and shares, and takaful or insurance cover. From 2027, take no new mandates to arrange, underwrite, join a syndicate for, or provide Shariah advisory on coal deals. The 2030 interim target is zero thermal coal mining exposure and a 50% cut in coal power exposure against a 2025 baseline.
  2. Pledge no new commitments or rollovers; and disclose existing and active coal deals, by sector, amount, and maturity.
  3. Rather than waiting for regulators, put coal on both conventional and Islamic finance exclusion lists and write in necessity conditions into financing governance policies.
  4. Report an energy financing ratio of renewables against coal financing, in absolute RM each year – with a target of at least 4:1 by 2030. Coal-to-gas conversions do not count as green nor a just transition. 
  5. Fund a rights-respecting energy transition – set and publish annual RM targets for green sukuk and blended finance for renewables, with published human rights due diligence across supply chains, including critical minerals.
  6. Protect workers and communities as conditions of financing – ensuring every coal exit has a plan covering retraining, livelihoods, affordable energy and continuity of essential services, with annual progress reporting. 
  7. Transparency and accountability – disclose explicitly coal exposure and progress every year. 
  8. Review existing holdings against UN findings on corporate complicity in grave violations of international law, and use shareholder influence to end those ties. 

Leading by Example

As the global leader in Islamic Finance, it is not enough to be merely compliant – we need to truly champion the values of the Maqasid al-Shariah, above all the hifz al-nafs, the protection of life.