ESG & Green Financing for SMEs Malaysia 2026
Sustainability isn't just good for the planet - it can also get you better financing terms. Malaysian banks and government agencies offer preferential rates for businesses adopting Environmental, Social, and Governance (ESG) practices.
Quick Facts
Pro Tip
You don't need to be a "green business" to access green financing. Any SME investing in sustainability improvements - from solar panels to energy efficiency - can qualify.
What is ESG & Green Financing?
Green Financing specifically funds environmental projects:
- Solar panel installations
- Energy-efficient equipment
- Waste reduction systems
- Electric vehicles
- Pollution control
ESG-Linked Financing rewards overall sustainability performance:
- Environmental practices
- Social responsibility (employee welfare, community)
- Governance (transparency, ethics)
Benefits of Green/ESG Financing
| Benefit | Typical Savings |
|---|---|
| Interest rate discount | 0.5% - 2% below market rate |
| Government guarantee | Up to 60% (reduces collateral needs) |
| Tax incentives | Up to 100% investment tax allowance |
| Processing priority | Faster approval for green projects |
| PR/marketing value | "Green certified" business credentials |
Green Technology Financing Scheme (GTFS)
The flagship government program for green business investment:
GTFS Key Features
- Loan amount: RM10,000 to RM20 million
- Interest rate: 2% below market rate (subsidized)
- Guarantee: 60% government guarantee
- Tenure: Up to 15 years
- Eligible use: Purchase/install green technology
Eligible Green Technologies
GTFS Covers These Areas
- Solar photovoltaic (PV) systems
- Energy-efficient equipment and machinery
- Green building upgrades (insulation, LED, HVAC)
- Electric vehicles (EV) and charging infrastructure
- Waste management and recycling equipment
- Water treatment and conservation systems
- Biogas and biomass energy systems
- Green data centers and IT infrastructure
How GTFS Works
- Identify project: Determine green technology investment
- Get certification: Technology must be on MGTC approved list
- Apply through bank: 15 participating financial institutions
- MGTC verification: Technology and supplier verified
- Loan disbursement: Funds released to approved supplier
Participating Banks
| Bank | GTFS Contact | Min Amount |
|---|---|---|
| Maybank | Green Financing Unit | RM50,000 |
| CIMB | Sustainability Banking | RM50,000 |
| Public Bank | Green Solutions | RM30,000 |
| RHB | Sustainable Finance | RM50,000 |
| Alliance Bank | Green Financing | RM30,000 |
| OCBC | Sustainability Desk | RM100,000 |
Solar Financing for SMEs
Solar installations are the most popular green financing use case:
Why SMEs Go Solar
| Benefit | Typical Impact |
|---|---|
| Electricity savings | 20-40% reduction in bills |
| Payback period | 4-7 years |
| Asset lifespan | 25+ years for panels |
| Property value | Increases commercial property value |
| Carbon reduction | Sustainability credentials |
Solar Financing Options
Option 1: GTFS Solar Loan
- Best for: Businesses that want to own the system
- Interest: 2% below market (typically 4-5% effective)
- Guarantee: 60% government guarantee
- Tenure: Up to 15 years
Option 2: Power Purchase Agreement (PPA)
- Best for: Businesses avoiding upfront costs
- How it works: Solar company installs free, you buy power at fixed rate
- Typical savings: 10-20% below TNB rates
- Contract: Usually 15-25 years
Option 3: Lease-to-Own
- Monthly payments like a loan
- System ownership transfers after lease period
- Often combined with GTFS benefits
Solar System Sizing for SMEs
| Business Type | Typical Size | Est. Cost | Monthly Savings |
|---|---|---|---|
| Small office | 10-20 kW | RM40-80K | RM800-1,500 |
| Small factory | 50-100 kW | RM150-300K | RM3,000-6,000 |
| Warehouse | 100-300 kW | RM300-900K | RM6,000-15,000 |
| Manufacturing | 500+ kW | RM1.5M+ | RM30,000+ |
Considering solar for your business? We can connect you with approved suppliers and financing.
ESG-Linked Loans
Unlike green loans (for specific projects), ESG-linked loans reward overall sustainability performance:
How ESG-Linked Loans Work
- Bank assesses your current ESG baseline
- Agree on ESG improvement targets (KPIs)
- Receive loan at standard rate
- Achieve KPIs = interest rate reduction
- Miss KPIs = rate stays same (or increases slightly)
Common ESG KPIs
Environmental
- Carbon emission reduction (% decrease)
- Energy efficiency improvement
- Waste reduction targets
- Water consumption reduction
- Renewable energy adoption
Social
- Employee safety metrics
- Training hours per employee
- Diversity and inclusion targets
- Community investment
- Supply chain standards
Governance
- Board diversity
- Anti-corruption policies
- Audit and transparency standards
- Data protection compliance
Banks Offering ESG-Linked Loans
| Bank | Program Name | Rate Benefit |
|---|---|---|
| Maybank | ESG-Linked Financing | Up to 0.5% discount |
| CIMB | Sustainability-Linked Loan | Up to 0.75% discount |
| Public Bank | Green Performance Loan | Up to 0.5% discount |
| OCBC | Sustainable Finance | Up to 1% discount |
Industry-Specific Green Financing
Manufacturing
- Energy-efficient machinery upgrades
- Pollution control equipment
- Waste treatment systems
- Green manufacturing certification (ISO 14001)
Food & Beverage
- Cold chain efficiency upgrades
- Solar for cold storage
- Waste-to-energy systems
- Sustainable packaging equipment
Logistics & Transport
- Electric vehicle fleet financing
- EV charging infrastructure
- Route optimization systems
- Fuel-efficient vehicles
Retail & Commercial
- Building energy efficiency
- Solar rooftop installations
- LED lighting retrofits
- Smart building systems
Tax Incentives for Green Investment
Green financing often stacks with tax benefits:
Green Investment Tax Allowance (GITA)
- Benefit: 100% investment tax allowance
- Qualifying assets: Green technology listed by MGTC
- Claim period: Within 3 years of first capital expenditure
- Offset: Against 70% of statutory income
Green Income Tax Exemption (GITE)
- Benefit: 70% income tax exemption for 10 years
- For: Green technology service providers
- Qualifying activities: Solar installation, energy audits, green consultancy
Pro Tip
Combine GTFS financing (2% rate subsidy) with GITA (100% tax allowance) for maximum benefit. The same solar installation can qualify for both.
How to Qualify for Green Financing
Green Financing Checklist
- Identify green investment (solar, efficiency, EV, etc.)
- Check if technology is on MGTC approved list
- Get quotations from certified suppliers
- Prepare standard loan documents (SSM, financials, bank statements)
- Obtain green technology verification letter
- Apply through participating bank
Required Documentation
| Document | Purpose |
|---|---|
| Technology quotation | Verify green technology specs |
| Supplier certification | Confirm approved supplier |
| Site assessment report | For solar/building projects |
| Current utility bills | Baseline for savings projection |
| Standard loan docs | Financial assessment |
Common Green Investments by Cost
| Investment | Cost Range | Payback | Green Loan Eligible |
|---|---|---|---|
| LED lighting upgrade | RM5K-30K | 1-2 years | Yes (some schemes) |
| Solar rooftop | RM40K-2M+ | 4-7 years | Yes (GTFS) |
| EV company car | RM100-300K | 5-8 years | Yes (GTFS) |
| Energy-efficient AC | RM10K-100K | 2-4 years | Yes (GTFS) |
| Water recycling | RM50K-500K | 3-6 years | Yes (GTFS) |
Comparing Green vs Standard Financing
| Factor | Standard SME Loan | Green/GTFS Loan |
|---|---|---|
| Interest rate | 6-10% p.a. | 4-8% p.a. |
| Government guarantee | None (unless GGSM2) | 60% GTFS |
| Processing time | 2-4 weeks | 3-6 weeks (technology verification) |
| Collateral | Often required | Reduced (due to guarantee) |
| Tax benefits | Standard | Additional green incentives |
| Use restriction | Flexible | Must be green technology |
Frequently Asked Questions
Frequently Asked Questions
Start Your Green Financing Journey
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Disclaimer: Interest rates, loan amounts, and eligibility requirements shown are indicative and subject to change. Contact the respective bank or institution directly for the latest rates and terms. Last reviewed: January 2026.
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