Malaysia will use a newly launched biodiversity instrument to fund reforestation and forest restoration by generating carbon credits, the nation’s environment minister has said.

In a speech at the 2023 Praxis conference Tuesday, Environment Minister Nie Nazmi said the RM1 billion ($210 million) biodiversity sukuk – a sharia-compliant instrument similar to a bond used in Islamic finance, announced by the Malaysian government earlier this month – would go towards accelerating work to protect the nation’s biodiversity.

“The sukuk will be used to fund the reforestation of degraded forests to generate carbon credits,” the minister said.

“This initiative aims to create biodiversity assets in the carbon trading market through conservation and reforestation efforts.”

However, he did not go into detail around how the sukuk will work.

Malaysia’s new biodiversity sukuk was announced as part of the national budget two weeks ago, when the government also increased spending for nature protection to RM200 mln for 2024, up from RM150 mln this year.

It comes as the country’s main stock exchange, Bursa Malaysia, last month launched a trading platform for voluntary carbon credits, even as the government is continuing to hammer out rules to guide what it hopes becomes a vibrant domestic voluntary scheme.

“Entire livelihoods are dependent on our forest. On this, it is also imperative that we ensure that indigenous populations and vulnerable communities are not marginalised when drafting the national carbon market policy,” Nazmi said.

“Their free, prior, and informed consent will be important to ensure that all stakeholders are aligned in this important endeavour.”

The Southeast Asian country is one of 17 worldwide categorised as megadiverse, and regulators hope environmental and carbon markets can help protect and restore its rainforest.

Meanwhile, Nazmi said the number of police and other armed guards and local communities employed to put a dent in poaching, illegal logging, and encroachment will increase by a third next year to around 2,000.

The government is also implementing a series of new initiatives to protect Malaysia’s tigers, and is planning on using artificial insemination as an additional tool to help boost tiger numbers.

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