Sustainability

Phase 1: Foundational Phase (Pre 2023)

Year	Category	Progress
2022	Strategy, Frameworks, Policies	Established Bank Islam’s Sustainability Strategy & Roadmap and 5 Sustainability Commitments
	Sustainable Finance	Reached RM2.9 billion in green financing
		Launched SME Smart ECO Programme with Malaysian Green Technology and Climate Change Corporation (MGTC)
	Climate Commitment	Incorporated “Mitigate Exposure to High-risk Sector” and “Carbon Neutral position by 2030” as part of Bank Islam’s Five Sustainability Commitments
		Opened the first green branch in Temerloh
	Social Impact	Sadaqa House launched Orphan Fund
2021	Sustainability Governance	Established the Board Strategic & Sustainability Committee and Management Sustainability Committee
	Sustainable Finance	Launched LEAP25 strategy, targeting RM4 billion ESG rated assets by 2025
	Climate Commitment	Committed to phase out financing of coal-related activities by 2030
	Social Impact	Sadaqa House gains recognition award:   •  Excellence Award for Islamic Social Finance 2021 (IRBA)   •  Company of the Year for Outstanding Community Support 2021 (CSR Malaysia)
2020	Social Impact	Launched iTEKAD BangKIT and iTekad Maju microfinance programmes
	Sustainability Disclosure	Published the first Sustainability Statement in accordance with Bursa requirements and GRI Standards
		Became constituent of FTSE4Good Index², demonstrating strong ESG practices and disclosures
2019	Social Impact	Sadaqa House, a social finance initiative of Bank Islam was launched
		Sadaqa House won Best Social Finance Initiative Award
2018	Sustainable Finance	Mobilised over RM700 million under the Group’s Responsible Financing strategy
		Introduced the world’s first ESG Sukuk Fund
2017	Strategy, Frameworks, Policies	Aligned material matters with the UN SDGs
	Sustainable Finance	Recognised for Best Sustainability at the Islamic Business & Finance South East Asia Awards 2017
2016	Sustainability Governance	Formalised the Sustainability Steering Committee
	Strategy, Frameworks, Policies	Developed BIMB Holdings Berhad Sustainability Framework

Independent assessments provide valuable insights into our sustainability performance. We continuously benchmark ourselves against recognised sustainability frameworks and rating agencies to strengthen transparency, accountability and long-term value creation.

Group	Rating	Where we have improved
FTSE4GOOD	3.7 (2024: 3.5)	• Enhanced governance oversight • Strengthened policies and disclosures • Improved social practices consistently
S&P CSA Public Assessment	37 (2024: 34)	• Enhanced corporate governance disclosures • Strengthened Board oversight structures • Formalised Board diversity and accountability practices

Creating a sustainable future requires collaboration. Bank Islam actively works with regulators, industry bodies, government agencies, academic institutions and community organisations to accelerate sustainable development and create shared value.

Membership/ Association	Description
United Nations Global Compact Malaysia and Brunei (UNGCMYB)	As a member since 2023, this membership reinforces our commitment to align our strategies and operations with universal principles on human rights, labour, environment, and anti-corruption, while advancing the UN SDGs.
Joint Committee on Climate Change (JC3)	Bank Islam has been an active member of BNM’s Joint Committee on Climate Change (JC3) since 2022 and has over time increased its level of participation by contributing across four sub-committee: SC1: Risk Management SC2: Governance and Disclosure SC4: Engagement and Capacity-building SC5: Bridging Data Gaps SFG: SME Focus Group
United Nations Principles for Responsible Investment (UNPRI)	Through our association with UN PRI, Bank Islam reinforces its commitment to responsible investment practices that align fiduciary responsibility with Shariah principles and sustainability considerations.
Association of Islamic Banking and Financial Institutions Malaysia (AIBIM)	A member of AIBIM since 1995, we support stakeholder engagement, industry collaboration, and the advancement of Islamic banking standards and best practices in Malaysia.
Malaysian Green Technology and Climate Change Corporation (MGTC)	Bank Islam contributed to strengthening Malaysia’s green ecosystem by supporting SMEs and non-SMEs in adopting low carbon practices through advisory services, green technology training, green procurement, and GHG emissions reduction.

Introducing Our New Sustainability Strategy 2030

With the conclusion of the SSR in 2025, the Group has delivered meaningful progress and gained critical insights that have strengthened how sustainability and climate is embedded across the organisation. This provides a strong foundation for the next phase of our sustainability journey, enabling a more deliberate focus on multiplying long-term value creation.

Building on this foundation, Bank Islam is rolling out its Sustainability Strategy 2030 as an integral component of the Group’s new corporate strategy. The strategy reflects a clear progression in maturity, strengthening alignment between ESG priorities and long-term strategic direction, and positioning Bank Islam as the preferred universal Islamic financial institution by 2030.

The Sustainability Strategy 2030 will be anchored by the outcomes of our double materiality assessment, which identifies and prioritises the sustainability matters most relevant to the Group. This ensures the strategy is grounded in a clear understanding of Bank Islam’s impacts on the economy, environment, and society, as well as the sustainability-related risks and opportunities that may influence long-term business performance.

In addition, our approach incorporates feedback from key stakeholder groups, including regulators, industry partners, clients, and the community. Key considerations include:

• Growing demand for climate and transition financing as businesses and economies shift towards low carbon models.
• Net Zero and carbon neutrality remain critical priorities, reflecting expectations from regulators, clients, and the broader financial sector.
• Supporting customers beyond financing to enable a sustainable and low carbon economy, including advisory, capacity building, and innovative solutions.
• Social impact is increasingly shaping standards, highlighting the tangible effect of financial institutions on the real economy and communities.
• Strong governance is a cornerstone for financial institutions, ensuring accountability, transparency, and resilience.
• Emerging expectations around nature related risks and opportunities, emphasising biodiversity, ecosystem preservation, and sustainable resource management.

The strategy is structured around three strategic directions that define our key focus areas and priority outcomes for the decade ahead.

Sustainability Strategy 2030 Key Focus Areas:

1. Embed ethical and responsible business practices

• Upholding ethics and integrity
• Reducing operational (Scope 1 and 2) emissions
• Empowering a resilient and future ready workforce
• Developing a sustainable supply chain

2. Drive the transition to sustainable, nature positive, and low carbon economy

• Growing green, social and transition financing
• Reducing financed emissions
• Strengthening client engagement and customer experience

3. Amplify impact beyond financing

• Driving social impact and community empowerment
• Leading financial inclusion and literacy

The Sustainability Strategy 2030 will be a key driver of how we operate, innovate and engage, influencing business operations, product development and stakeholder relationships by:

• Steering capital towards sustainable, transition and nature-positive sectors
• Embedding sustainability and climate considerations into product design and credit decision-making
• Scaling inclusive and social finance solutions
• Deepening engagement with customers, communities, regulators and other stakeholders through advisory, partnerships and transparent impact reporting

Our Sustainability Strategy 2030 positions Bank Islam to lead with purpose. Through focused climate action, strengthened governance, and meaningful social impact, we are driving sustainable growth and creating value that extends beyond finance, into society and the environment.

Our five SCs are grounded in the SSR and focus on areas where Bank Islam can create the greatest positive impact through our business and operations. They reflect our priority sustainability impacts, align with regulatory and stakeholder expectations, address our most material sustainability matters, and consider relevant peer and industry practices.

SC1: Mitigate exposure to high sustainability risk sectors by 2030

• Continue upholding the Group’s commitment to phase-out coal financing exposure by 2030
• Established Bank Islam’s Climate Transition Plan
• Rolled out strategic engagements to understand client’s decarbonisation strategy for construction sector

SC2: To grow sustainable finance to RM28 billion by 2025

• Reached RM31.4 billion in sustainable finance, achieving 112% of the 2025 target across our financing and investment portfolio
• Developed Climate and Transition Finance Framework to support Bank Islam’s climate commitments
• Developed Bank Islam’s Sustainability Sukuk Framework

2. Drive the transition to sustainable, nature positive, and low carbon economy

• Growing green, social and transition financing
• Reducing financed emissions
• Strengthening client engagement and customer experience

SC3: Achieve carbon neutrality in operational conduct by 2030 and achieve net zero by 2050

• Reduced Scope 1 and 2 emissions by 10% against the 2023 baseline year of 12,099 tCO2e
• Total energy consumption reduced by 10% against the 2023 of 58,517 GJ
• Expanded Scope 3 emission boundary to include waste and employee commuting
• Completed the first Financed Emissions baseline to support the Net Zero by 2050 commitment

SC4: Advocate real economy and nurture community upward mobility

• Reached 3,499 social finance beneficiaries, achieving 175% of our 2025 target with RM28.62 million disbursed
• Supported 3,088 beneficiaries through Sadaqa House community programmes
• Disbursed RM17.6 million through blended finance programmes, iTEKAD Bangkit and iTEKAD Maju, reaching 117% of our 2025 target

SC5: Embody a Value-based Culture in Our People

• 90% of total workforce completed awareness level knowledge on Sustainability against 35%-39% target
• Achieved 78% completion of Foundational level Sustainability programmes for selected target groups, against 11%-13% target
• Conducted over 20 internal sustainability programmes, improving resource use and advancing zero-waste practices

At Bank Islam, sustainability governance ensures accountability and transparency at every level of decision-making.

This governance ensures that sustainability remains central to our mission of creating long-term value for all stakeholders.

Sustainability Governance

At Bank Islam, sound governance is embedded in how we operate and conduct ourselves, shaping decision making, culture, and accountability at every level of the organisation, from our BITIZENs to Management and the Board.

The Board is responsible for the oversight of the Group and its overall governance and performance, supported by six Board Committees that provide effective and responsible decision-making, assisting Bank Islam in delivering on its strategy and purpose. Each Board Committee has its own Terms of Reference (TOR), which sets out its roles and responsibilities, available at Bank Islam’s website.

At the management level, the Group Management Executive Committee comprises Bank Islam’s Senior Management. A delegation of authority framework outlines matters delegated from the Board to our Group Chief Executive Officer (GCEO) and other members of senior management. In addition, several formally established management committees oversee specific areas of ongoing operations, including sustainability and climate matters.

Sustainability governance at Bank Islam is embedded across the Board, management, and operational levels, aligned with the Three Lines of Defence (3LOD) model. The first line, comprising business units and functions, is responsible for integrating sustainability considerations into day-to day operations and decision-making. The second line provides oversight, guidance, and monitoring to ensure compliance with ESG standards, climate related frameworks, and internal policies. The third line, Group Internal Audit, offers independent assurance on the effectiveness of sustainability governance, risk management, and internal controls, ensuring accountability and continuous improvement

Sustainability Governance

Roles	Responsibilities
Board of Directors (BODs)	Provides strategic oversight to our sustainability efforts and ensures that sound, prudent policies, and practices are implemented, thereby integrating sustainability across the bank. It functions as a critical check and balance mechanism in the management of our sustainability agenda, helping to keep us on track towards achieving our long-term value creation goals.
Board Strategic and Sustainability Committee (BSSC)	Oversees the development and implementation of the Group’s sustainability strategy, including climate change, and is provided with regular updates on our initiatives in these areas.
Board Risk Committee (BRC)	Oversees the effective management of all risks impacting the bank, including sustainability and climate-related risks.
Management Sustainability Committee (MSC)	Oversees the execution of the Group’s sustainability and climate strategy, including formulating and monitoring climate strategy, targets, and the transition plan.
Management Risk Control Committee (MRCC)	Oversees and ensures the effective management of key sustainability and climate-related risks.
Group Sustainability	Responsible for coordinating and monitoring the Group’s sustainability initiatives, including climate-related initiatives, against the targets. Other responsibilities include division-wide integration and operationalisation of our strategic frameworks, and enhancing sustainability opportunities and initiatives in collaboration with key divisions
Group Risk Management	Responsible for overseeing climate-related market risk, liquidity risk, operational risk, climate risk stress testing, and ICAAP.
Sustainable Financial Solutions	Responsible for steering the Group’s sustainable finance targets and driving the alignment of our financing portfolio and sustainability goals.
Group Credit Management	Responsible for overseeing climate-related credit risk management for retail and non-retail businesses.