Green Buildings in Malaysia (Part 1): Laws and Policies

Introduction 

In an effort to mitigate climate change, countries around the world have committed to long-term goals for reducing carbon emissions. Buildings have been widely recognized as one of the key sectors that can contribute to carbon reduction strategies, as they account for more than 40 percent of total energy use and 20 to 40 percent of greenhouse gas (GHG) emissions . This has prompted the establishment of “green buildings”, defined as a building which focuses on increasing the efficiency of resource use – energy, water, and materials – while reducing building impact on human health and the environment during the building’s lifecycle, through better siting, design, construction, operation, maintenance, and removal. 

Laws & Policies of Green Buildings in Malaysia

The development of green building policies in Malaysia is built upon history of laws, policies and cultural shifts. In response to these, various initiatives have also been introduced to encourage and promote green building practices in Malaysia. In fact, the Malaysia Green Building Council (MalaysiaGBC) has officially joined World Green Building Council’s (WorldGBC’s) global climate action programme, Advancing Net Zero in working towards net zero carbon buildings by 2050. In working towards Net Zero and the overall development of the green building scene in Malaysia, several building blocks can be seen in the laws, policies, international influences and various NGO and government initiatives put in place to encourage green building practices in Malaysia.

1. Laws

• Energy Efficiency and Conservation Bill 2023 (EECB)

The EECB was passed by the Dewan Rakyat Malaysia (House of Representatives) on the 11th of October 2023 and is pending the approval of the Dewan Negara (Senate). The Act aims to promote demand-side energy management by overseeing conservation and efficient consumption of energy. When enacted, larger commercial and industrial electricity and gas consumers will be mandated to undergo energy audits. Office buildings measuring 8,000 sq m and above must meet at least a two-star rating under the National Building Energy Label requiring building energy intensity of at least below 250 kilowatt-hour/sq m per annum.

2. Policies

• National Green Technology Policy (NGTP)

The NGTP was launched in 2009 and is built on four pillars: Energy, Environment, Economy and Social, focusing on leveraging green technology to achieve economic growth while minimizing environmental impact. The policy underscores the importance of green technologies to achieve progress, guided by the principle stated in the policy statement: “Green Technology shall be a driver to accelerate the national economy and promote sustainable development”. The mission of NGTP is aimed at achieving significant progress and major improvements in various key areas including the building sector. This entails promoting the widespread adoption of Green Technology throughout the lifecycle of buildings, encompassing the construction, management, maintenance, and demolition process.

• Green Technology Master Plan (GTMP)

The TMP (2017-2030) is fundamentally an outcome of the Eleventh Malaysia Plan (2016-2020) which has earmarked green growth as one of six game changers altering the trajectory of the nation’s growth. The GTMP creates a framework which facilitates the mainstreaming of green technology into the planned developments of Malaysia while encompassing the four pillars set in the NGTP i.e. energy, environment, economy and social. 

The GTMP provides actionable strategic directions to support the objectives of the NGTP and represents the country’s first concerted efforts in promoting green technology across six key sectors including the building sector. The initiatives under the GTMP are threefold, and they are geared towards (i) green building design; (ii) sustainable construction practice; and (iii) green building materials. 

Sequentially, there is currently a growing number of green buildings and sustainable development projects in Malaysia, and significant support by the government. This trend aligns with the goals outlined in the GTMP, which aims to increase the total targeted green buildings from 550 in 2020 to 1,750 by 2030, with substantial targeted emission reduction in both government and private buildings. Corollary to this, evaluating the sustainability of projects has become a necessity.

3. Standards (Green Building Rating Tools)

• Green Building Index (GBI)

The GBI was established in 2009 by the Malaysia Institute of Architects or Persatuan Arkitek Malaysia (PAM) and the Association of Consulting Engineers Malaysia (ACEM). The primary objective of developing the GBI rating tool is for the evaluation and certification of environmental design, construction, and performance of buildings in Malaysia. The GBI is Malaysia’s first comprehensive rating system for evaluating the environmental design and performance of Malaysian buildings based on the six (6) main criterias of Energy Efficiency, Indoor Environment Quality, Sustainable Site Planning & Management, Materials & Resources, Water Efficiency, and Innovation.

Being Malaysia’s pioneer comprehensive rating system, the GBI has been instrumental in driving the adoption of green building practices across the country. In fact, several iconic green buildings in Malaysia such as the Tun Razak Exchange (TRX) and the Energy Commission Diamond Building, and even the township of Sunway City Kuala Lumpur are rated based on the GBI system. Incentivizing project teams, building owners, developers, and other interested parties (including contractors, government, and design & build contractors) utilize the GBI to validate environmental initiatives by incorporating energy-efficient designs, sustainable materials, and renewable energy systems into their projects. The level of GBI rating is awarded based on the points obtained, and the rating ranks from certified, silver, gold to platinum. The GBI certification would also have to be renewed every 3 years, which ensures that the green building maintains its substance.

• Green Real Estate (GreenRE)

Besides the GBI, Malaysia also utilises rating tools such as Green Real Estate (GreenRE), which was developed by the Real Estate and Housing Developers Association of Malaysia (REHDA) in 2013 as an alternative green building rating tool for the property development and construction industry by offering more affordable rates and flexible measurement criteria compared to other available tools like the GBI, to encourage more developers in Malaysia to go green. Similar to the GBI, the first non-governmental green rating tool developed for the tropical climate in Malaysia, buildings certified under GreenRE will have to be reassessed every three years to ensure they are sustainable.

• Malaysian Carbon Reduction and Environmental Sustainability Tool (MyCREST)

MyCREST is a tool introduced by the Construction Industry Development Board (CIDB) as a performance-based standard for green building design, construction, and operations. MyCREST aims to guide, assist, quantify and thereby reduce the built environment’s impact regarding carbon emissions and another environmental impact. It essentially combines three basic tools to construct a ‘scoring plan’ which is then used to assess a building for certification which are given separately according to the three basic stages of the building lifecycle (i.e. Design, Construction and Operation & Maintenance).

• Leadership in Energy and Environmental Design (LEED)

The LEED certification, governed by the US Green Building Council (USGBC), is an internationally recognised and globally utilised sustainable building certification and provides a benchmark for sustainable building practices. It offers a comprehensive and flexible rating system that can be applied to projects worldwide, including those in Malaysia.

There is no standardised or international rating system for green buildings due to the fact that every country is unique, and thus requires its own set of tools to measure and suit the country’s needs. Factors such as geographical landscape, energy usage, culture, climate, transportation, resources, and many others are taken into account when developing these tools. For example, the GBI is not internationally recognised because it is designed specifically for the tropical climate (hot and humid) and Malaysia’s current social, infrastructure and economic development.

4. Incentives

• Green Technology Financing Scheme (GTFS)

In demonstrating its ongoing commitment to supporting the development of green businesses, the Malaysian government has reinstated the GTFS 4.0 – a government initiative aimed at promoting the adoption of green technology across various sectors, including the building industry, with a budget of up to RM1.0 billion until 31 December 2025. The scheme offers financing for projects in six key sectors: Energy, Manufacturing, Transport, Building, Waste, and Water.

Under GTFS 4.0, Participating Financial Institutions (PFIs) will receive government guarantees ranging from 60% to 80% on the green cost of the finance amount for sectors like energy, manufacturing, transport, building, water and waste, along with a rebate of 1.5% per annum on interest or profit rates. One notable enhancement of GTFS 4.0 is the inclusion of Housing Developers and Low Carbon Mobility Infrastructure as eligible entities for financing investments related to Building and Transportation projects. Housing Developers can access a maximum financing of RM100 million, while Low Carbon Mobility Infrastructure projects can obtain up to RM50 million in financing. Additionally, the scheme will continue to support other categories such as Producers, Users, and Energy Service Companies (ESCOs), which were introduced in previous iterations of the scheme. The implementation of GTFS 4.0 is important, despite the relatively small budget allocation that the government has set aside compared to the total budget, as it signifies Malaysia’s commitment to ensure green technology-based projects continue to receive support, which will directly contribute to the growth and development of the green technology industry and acts as a catalyst to the Climate Change policy.

• Green Technology Tax Incentive (GTTI)

In tandem with the Malaysian Government’s agenda to drive the growth of Malaysia’s green economy, the GTTI was introduced in 2014 and is currently extended until 31st December 2026. The programme aims to provide the industry with an option of two available incentives. Companies seeking to acquire qualifying green technology assets listed under the MyHIJAU Directory or those undertaking qualifying green technology projects for business or own consumption may apply to the Green Investment Tax Allowance (GITA). 

 

Conclusion

It is observed that government initiatives and policies, have noted to be the key drivers that shape the green building landscape in most countries. Government initiatives, promotions, policies, and regulation tools have noted to be external drivers that represent the top-down approaches. Overall, the conceptualization of green building enhancement in Malaysia, as impacting industry attitudes and motivating behavioural change, may be achieved through three sets of strategic outcomes: building knowledge and capability; enhancing financial and economic value; and credible policies and regulation tools. 

Despite these commendable efforts, it seems that the challenges remain in translating these policies into concrete outcomes. While there are robust policies in place, the absence of comprehensive legislation specifically regulating green buildings limits the effectiveness of these initiatives. Without legal mandates and stringent regulations, the implementation and enforcement of green building standards may lack consistency and effectiveness.