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Funding Your Green Future: The Ultimate Guide to ESG Grants, Funds & Loans in Malaysia (2026)

Industry Trends
clock Feb 25,2026
Woman hand holding plant growing from coins bottle in the on blurred green natural background

If you are a business leader in Malaysia today, you know that ESG (Environmental, Social, and Governance) is no longer just a buzzword, it is a license to operate. Whether it’s pressure from your supply chain (Scope 3 emissions), regulatory mandates from Bursa Malaysia, or simply the desire to future-proof your business, the “why” is clear. This is ESG funding ultimate guide in Malaysia 2026

The “how,” however, often comes down to one thing: Funding. 

Fortunately, the Malaysian government and financial sector have rolled out a robust suite of financing options to support this transition. From low-interest loans for SMEs to massive green bond frameworks for PLCs, here is your comprehensive guide to ESG funding in Malaysia for 2026. 

Funding picture
1. For SMEs: Kickstarting Your Transition

For Small and Medium Enterprises, the focus is on accessibility and affordability. The goal is to lower the barrier to entry for green technology adoption.

A. Bank Negara Malaysia (BNM) Low Carbon Transition Facility (LCTF)

This is arguably the most accessible “green loan” for SMEs. BNM provides the funds to commercial banks, who then lend to you at a capped rate. It is designed specifically for SMEs that need capital to “green” their operations (e.g., solar panels, energy-efficient machinery, or sustainable raw materials). 

  • Financing Amount: Up to RM10 million per SME. 
  • Interest Rate: Capped at 5.00% p.a. (inclusive of guarantee fees). 
  • Tenure: Up to 10 years. 
  • Eligibility: SMEs in all sectors committed to adopting sustainable practices. 
  • How to Apply: Through participating commercial and Islamic banks (e.g., Maybank, CIMB, AmBank, Public Bank).

B. Green Technology Financing Scheme/-i5.0

Managed effectively to support the national green agenda, the newly updated GTFS 5.0 offers robust guarantee schemes for companies engaging in Green Tech. This scheme is particularly powerful because it broadens the scope of eligible players (including housing developers) and offers high guarantee coverage. 

Who is it for? 

  • Producers & Users of green technology. 
  • ESCOs (Energy Service Companies). 
  • Housing Developers and Low Carbon Mobility Infrastructure Operators. 

Eligibility: 

  • Must hold a valid GTFS 5.0 Green Project Certificate issued by MGTC. 
  • Must be locally incorporated/registered with at least 60% Malaysian shareholding. 
  • Open to Sole Proprietorships, Partnerships, LLPs, Private Ltd, and Public Companies. 

The Benefits: 

  • High Guarantee Coverage: The government (via CGC) guarantees 60% or 80% of the financing amount, depending on your sector. 
  • Massive Cap: Up to RM80 million guarantee amount (depending on category). 
  • Long Tenure: Up to 15 years. 
  • Flexible Funds: Can be used for Working Capital and/or Capital Expenditure (Term Financing, Cash Line, Trade Facilities, etc.). 

Costs: 

  • Guarantee Fee: 0.40% per annum (refunds available on a pro-rated basis upon early settlement/termination). 
  • Interest/Profit Rate: To be determined by the Participating Financial Institution (PFI). 
  • Deadline: Available until 31st December 2026 or upon approval of RM1 billion total financing.

C. SME-Specific Bank Programs

Many banks have their own internal ESG schemes that bundle financing with advisory services (helping you measure your carbon footprint before you borrow). 

D. MIDF Sustainable Green Biz Financing (SGBF)

Offered by Malaysian Industrial Development Finance (MIDF), this is arguably the most attractive financing package currently available for SMEs due to its exceptionally low fixed rate. 

The “Killer” Feature: 

  • SMEs: Fixed Interest Rate of 2.00% p.a. (on reducing balance). 
  • Non-SMEs: Fixed Interest Rate of 5.00% p.a. 
  • Financing Amount: From RM100,000 up to RM10 million. 

Margin: Up to 100% of the cost. 

Tenure (Very Flexible): 

  • Up to 25 years for Industrial/Commercial Land & Building. 
  • Up to 9 years for Machinery & Equipment. 
  • Up to 7 years for IT Hardware/Software or Working Capital. 

Eligibility: 

  • Companies registered with SSM (Manufacturing or Services sector). 
  • At least 51% Malaysian equity. 
  • Operational for at least 6 months. 

What it funds: Solar panels, energy-efficient machinery, green building construction, or even software for ESG data collection management such as Scout360. 

This is ESG funding ultimate guide in Malaysia 2026

Public Listed Companies - PETRONAS
2. For Public Listed Companies (PLCs) & Large Corporates

For larger firms, the funding mechanisms are more complex and often tied to performance. If you hit your sustainability KPIs, your cost of funds goes down.

A. Sustainability-Linked Loans (SLLs)

Unlike a “Green Loan” where the money must be used for a green project (like a solar farm), an SLL can be used for general working capital. The catch? The interest rate is tied to your ESG performance. 

  • How it works: You and the bank agree on Sustainability Performance Targets (SPTs); for example, reducing carbon intensity by 10% over 3 years. 
  • The Benefit: If you hit the target, your interest rate drops.  
  • Major Players: Maybank, CIMB, OCBC, and HSBC Malaysia are very active in this space for PLCs.

B. SRI Sukuk & Green Bonds

For PLCs looking to raise substantial capital (typically RM100m+), the capital market remains the primary route. Recent updates have made this path significantly more attractive by covering more costs and expanding eligible frameworks. 

The SRI Sukuk and Bond Grant Scheme  

Administered by the Securities Commission Malaysia (SC), this scheme has been revised to further reduce the financial burden on issuers. 

  • 100% External Review Grant: The grant allocation to cover external review expenses (independent verification costs) has been increased from 90% to 100%, still subject to a maximum cap of RM300,000 per issuance. 
  • Expanded Eligible Instruments: The scheme now includes sukuk and bonds that conform to the ASEAN Taxonomy for Sustainable Finance, alongside existing ASEAN Green, Social, and Sustainability Bond Standards. 
  • Income Tax Exemption Extension: The income tax exemption on grants received under this scheme has been extended for an additional three years. It now applies to applications received by the SC from 1 January 2026 to 31 December 2028. 
  • Comprehensive Frameworks: Eligible issuances continue to include: 
    • SRI Sukuk and SRI-Linked Sukuk under the SC’s SRI Sukuk Framework. 
    • Bonds conforming to ASEAN Sustainability-Linked Bond Standards.

C. Institutional Funds (The “Equity” Route)

Bursa Malaysia and major institutional investors (EPF, KWAP, Khazanah) have clear mandates to prioritize ESG-compliant firms. 

  • PLCs on the FTSE4Good Bursa Malaysia Index consistently see higher institutional ownership and liquidity. While this isn’t a direct “loan,” it is access to cheaper equity capital and better valuation multiples. 

This is ESG funding ultimate guide in Malaysia 2026

Tax Incentive
3. Tax Incentives

Don’t overlook tax breaks. They are effectively cash-back from the government.

A. ESG Reporting Tax Deduction (New!)

To help companies manage the rising cost of sustainability compliance, the government has gazetted specific rules for tax deductions on ESG-related expenses. 

  • Benefit: A tax deduction of up to RM50,000 for each Year of Assessment. 
  • Timeline: Effective from YA 2024 until YA 2027. 
  • Eligible Entities: Financial Institutions (licensed under FSA/IFSA) and Public Listed Companies (PLCs). 

Qualifying Expenses: The deduction applies to the following specific activities: 

  • Validation & Certification: Costs for the validation, verification, and certification of ESG practices, including the calculation and tracking of greenhouse gas (GHG) emissions and ESG exposure. 
  • Technology & Software: Subscriptions for technology or software systems such as Scout360 used for data collection, tracking ESG metrics, risk management, scenario analysis, and GHG emission calculations. 
  • Capacity Building: Expenses for training, education, and skills development initiatives for employees to enhance their ESG competency. 
  • Professional Services: Fees for hiring consultant experts or subject matter experts to perform any of the activities mentioned above. 

B. GITA & GITE 

  • Green Investment Tax Allowance (GITA): Malaysian resident companies can apply for this incentive before the December 31, 2026 deadline. They can leverage this by undertaking qualifying green technology projects across three tiers, which include green hydrogen, integrated waste management, electric vehicle charging stations , and renewable energy generation like solar, biomass, and wind. Depending on the specific project tier, eligible businesses receive a 100% investment tax allowance that can be used to set off 70% to 100% of their statutory income for an incentive period spanning 5 to 10 years. 
  • Green Income Tax Exemption (GITE) Solar Leasing: Companies holding at least 60% Malaysian equity can utilize this tax exemption if they submit their applications by December 31, 2026. To leverage this opportunity, businesses must be verified by the Sustainable Energy Development Authority (SEDA), listed in the Registered Solar PV Investor (RPVI) Directory, and derive their income from fixed monthly solar photovoltaic system lease payments or solar energy sales. Qualified companies will benefit from a 70% tax exemption on their statutory income for 5 years (for capacities >3MW to ≤10MW) or 10 years (for capacities >10MW to ≤30MW). 

This is ESG funding ultimate guide in Malaysia 2026

Human Capital
4. Human Capital: Upskilling for the Green Economy

Transitioning to ESG requires more than just hardware; it requires “Heartware”, your people. You can fund this transition using levies you have already paid. 

HRD Corp Claimable Courses (HRD Corp Levy) 

If your company contributes to the Human Resource Development Corporation (HRD Corp), you can utilize your levy balance to fund critical ESG training. This effectively makes the training “cost-neutral” to your current cash flow. 

What can be funded? 

  • Scope 3 Calculation Methods: Training supply chain managers on how to gather data from vendors and calculate indirect emissions. 
  • IFRS S1 & S2 Transition: Technical workshops for finance and sustainability teams to master the new International Sustainability Standards Board (ISSB) reporting frameworks. 
  • Carbon Accounting & Management: Certification courses for internal “Green Champions.” 

How it works: 

  • Identify an HRD Corp Accredited Training Provider that offers specific ESG modules such as Scout360. 
  • Select a training program (public or in-house facilitation). 
  • Apply for the grant via the e-TRiS system before the training starts. 

Financial Benefit: 

  • Course fees are 100% claimable (subject to your levy balance and allowable limit). 
Turning Funding into Action with Scout360 

Now that you know the capital is available, the final challenge is execution. This is where Scout360 bridges the gap between securing funds and delivering results. 

As your comprehensive ESG partner, our services are designed to fit perfectly into the funding mechanisms listed above, allowing you to minimize or even eliminate your out-of-pocket costs: 

  • Maximize Tax Relief: Our Scout360 ESG Accounting Software is a qualifying expense under the RM50,000 ESG Reporting Tax Deduction. By subscribing to our platform to automate your data collection, analytics and audit preparation, you are directly leveraging government incentives to subsidize your digitalization. 
  • Finance Your Tech at 2%: Eligible SMEs can utilize the MIDF Sustainable Green Biz Financing to fund the procurement and implementation of Scout360’s software, locking in the lowest financing rate in the market to digitalize your ESG disclosure. 
  • Upskill at Zero Cost: As an HRD Corp Accredited Training Provider, our specialized workshops on ESG topics such as Scope 3 Calculation Methods and IFRS S1 & S2 Transition are 100% claimable under your HRD Corp levy. You can build a world-class sustainability team without touching your cash reserves. 

The funding is there. You just need the right partner to help you deploy it. Contact Scout360 today and let us help you build your ESG roadmap using the funds you are already entitled to. 

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