| Summary: | Over the past few decades, there has been an increase in concerns about climate change in Malaysia and Indonesia. This has put pressure on both public-listed companies and small and medium-sized enterprises to modify the way they conduct their business. Therefore, in order to encourage the adoption of environmentally friendly financing in the country, it is crucial to modify regulatory frameworks, synchronize public financial incentives, promote green financing across various sectors, align public sector financing decisions with the environmental aspect of the Sustainable Development Goals (SDGs), and increase investments in clean and sustainable technologies. This paper examines the challenges of implementing effective green financing in Malaysia to comply with the climate change mitigation requirements of the Paris Agreement. It compares Malaysia's policies and regulatory mechanisms with Indonesia's and presents the challenges faced in implementing green financing. The government is identified as a key player in ensuring the success of the initiatives, but barriers remain that may limit the extent of their effectiveness. As a recommendation, to help nations become high-income nations by 2025 and achieve SDGs, green financing needs to be improved. All industry players, including small and medium-sized businesses, must adopt greener practices. Graphical abstract: (Figure presented.). © The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2024.
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