Source: The Edge Malaysia
Malaysia’s nascent climate finance ecosystem has received a powerful shot in the arm recently, with the landmark announcement from its public service pension fund that it has launched Dana Iklim+, the country’s first dedicated climate investment fund that will deploy up to RM2 billion across various asset classes.
This fund by the Retirement Fund Inc, more commonly known as KWAP, is not just a financial milestone but a critical catalyst designed to accelerate Malaysia’s transition towards a low-carbon, climate-resilient economy, while demonstrating that competitive returns can be generated from such investments.
Designed to prove that credible, scalable climate investing can balance climate goals with the development needs of a growing economy, the fund plans to deploy capital into infrastructure, private equity, real estate and nature-based solutions.
KWAP has long championed the integration of environmental, social and governance (ESG) considerations in its investment approach. Back in 2018, KWAP became the first pension fund in Malaysia to be a signatory of the Principles for Responsible Investment (PRI).
“KWAP holds the principle that integrating ESG practices can generate sustainable risk-adjusted returns and enable KWAP to perform its investments in a responsible manner”
— KWAP Chief Executive Officer (CEO) Datuk Nik Amlizan Mohamed
But Dana Iklim+ takes its initiative further as it marks a deeper shift in how finance defines fiduciary duty at KWAP — not as the pursuit of short-term returns, but as the stewardship of long-term value in a rapidly warming world.
The launch comes at a pivotal moment as Malaysia strengthens its climate ambition under Nationally Determined Contributions (NDC) 3.0, which, for the first time introduces an absolute emissions reduction target. Malaysia now aims to reduce 15 to 30 million tonnes of carbon dioxide equivalent by 2035, a major shift from earlier intensity-based pledges.
To the public service pension fund that manages more than RM190 billion in assets, Dana Iklim+ is both an investment vehicle and an instrument of strategy, as it is designed to accelerate the fund’s, and consequently Malaysia’s, path to net zero by 2050 while delivering sustainable risk-adjusted returns.
It is a key lever within KWAP’s pledge to achieve a net zero portfolio by 2050, and aligns directly with the National Energy Transition Roadmap (NETR), Ekonomi Madani framework, and the Ministry of Finance’s GEAR-uP programme, whose primary goal is to mobilise the accumulated wealth and influence of government-linked investment companies (GLICs) to drive socioeconomic reforms and structural transformation in the Malaysian economy.
“This is not about charity. It’s about building resilience, competitiveness and positioning KWAP to capitalise on a fast-growing opportunity set,” says Hazman Hilmi Sallahuddin, KWAP’s Chief Investment Officer (CIO).
The fund’s goal is both pragmatic and profound: to achieve market returns while mitigating or avoiding up to one million tonnes of carbon dioxide equivalent.
To do so, the fund plans to invest in global champions at the forefront of climate solutions, and channel both expertise and capital back towards sectors critical to Malaysia’s climate transition. This strategy to crowd-in capital accelerates the Gear-uP initiative that will spur Malaysia’s economy and increase its economic complexity.
And Dana Iklim+’s architecture is not purely financial. Surrounding the fund are three enablers: climate stewardship, specialist talent development and climate research. Together, these pillars ensure that Dana Iklim+ moves beyond investing and towards a systems based approach building institutional capacity and market depth.
“Global capital is already flowing into climate-aligned opportunities. Malaysia cannot afford to sit on the sidelines. We must invest with discipline, backed by data and strong analysis,” Hazman explains.
The Core and Satellite
Within KWAP’s broader net zero strategy, Dana Iklim+ functions as the satellite, a catalytic vehicle designed to accelerate decarbonisation and resilience through deliberate, high-impact investments.
The core, by contrast, centres on stewardship and engagement, working systematically with investee companies to embed credible transition plans, adopt science-based targets and decarbonise portfolios in an orderly and responsible manner.
This dual-track architecture — the core and the satellite — reflects a pragmatic understanding of transition dynamics. Transformation cannot rely solely on exclusion or divestment. It must combine evolution within incumbent portfolios, with revolution through new capital formation. In this way, KWAP seeks to balance fiduciary prudence with environmental urgency, ensuring progress towards net zero without triggering destabilising divestment shocks.
The design of the fund acknowledges that the pathway to net zero is neither linear nor uniform, and that there is a hierarchy and sequence to transition the real economy, such that certain sectors must decarbonise first to enable others. Hence, Dana Iklim+’s strategic capital allocation includes infrastructure and energy system investments that will enable economy-wide electrification and consequently unlock downstream emissions reductions.
Ultimately, the satellite reinforces the core, serving as an accelerant that supports portfolio decarbonisation and advances KWAP’s broader net zero objectives.
The Four Frontiers of Dana Iklim+
At the heart of Dana Iklim+ are four investment priorities, where climate, economy and society intersect most powerfully:
- Planetary health — restoring Malaysia’s natural capital through forest regeneration, mangroves, and biodiversity corridors that anchor ecosystem resilience.
- Urban resilience — financing adaptive cities, water management, and green infrastructure capable of withstanding climate shocks.
- Decarbonisation — scaling clean energy, low-carbon mobility and industrial transition pathways that drive national emissions reduction.
- Climate solutions and enablers — investing in technologies, data systems and financing mechanisms that unlock and accelerate climate impact.
These priorities cut across asset classes, guided by a single principle: climate investing is not a sector but a system-wide transformation.
“Global capital is already flowing into climate-aligned opportunities. Malaysia cannot afford to sit on the sidelines. We must invest with discipline, backed by data and strong analysis.”
— KWAP CIO Hazman Hilmi Sallahuddin
Within each of these areas are what KWAP calls tipping points of transition, thresholds where a small surge of investment can produce exponential results. These are the moments when renewable energy becomes cheaper than coal, when nature restoration generates measurable returns, or when resilient cities prevent future economic loss through better planning.
“We invest where change and impact can accelerate.” Hazman adds.
The “+” in Dana Iklim+ thus carries a deeper meaning. It stands for exponential climate impact and its ability to spur social and economic co-benefits. It reflects a systems-wide belief that addressing climate is not merely about reducing emissions, but about transforming systems that underpin growth, resilience and prosperity.
In essence, Dana Iklim+ embodies the bridge between the imperative of growth and the necessity of emissions reduction, between what must endure and what must evolve. With a green investment gap of more than RM1.85 trillion under the NETR, its launch signals the intent that public institutions are ready to invest, lead and co-create the country’s next chapter of sustainable growth.
For KWAP, this fund is more than a financial instrument. It reflects a belief that climate risk is investment risk, and that capital, when directed with discipline and foresight, can turn vulnerability into opportunity. As Malaysia enters a new era of sustainable finance, Dana Iklim+ stands as both a catalyst and a compass, designed not only to deliver returns, but to accelerate a just and credible transition for generations to come.
