Balancing Innovation and Coordination: Institutional Solutions for Effective Climate Action in Malaysia’s Borneo States

Malaysia Subnational Climate Change Institutional Assessment

This Malaysia Subnational Climate Change Institutional Assessment (CCIA) offers an analysis of the institutional environment shaping climate action in Malaysia's two most resource-rich and ecologically significant states. By examining their governance structures, fiscal mechanisms, and the roles of key stakeholders, this report identifies critical gaps and strategic opportunities.

The focus extends beyond addressing immediate challenges to building a governance framework that is agile, inclusive, and equipped for the long-term complexities of the climate crisis. The analysis complements the broader National CCIA, which addresses federal and national-level perspectives, by providing the state-specific insights necessary for a truly national climate strategy.

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Key Findings

• The Bornean states' autonomy under the Malaysia Agreement of 1963 (MA63) in climate-related sectors such as land, forestry and agriculture allows them to tailor their climate governance structures to their unique socio-economic and ecological contexts.

• While Sarawak and Sabah have demonstrated strong climate ambition, gaps remain in technical expertise and institutional capacity, undermining their ability to implement effective climate policies. Thus, there is a need to systematically assess capacity gaps, develop targeted capacity building , and to strengthen partnerships with federal agencies and international organizations to help ensure sustained and effective climate delivery.

• Environmental Impact Assessments (EIAs) and climate monitoring systems in Sarawak and Sabah provide important safeguards, but gaps remain in integrating emissions baselines, cumulative land-use impacts, and coordinated monitoring data across sectors. Strengthening climate-aligned EIAs, harmonizing data systems and enhancing technical capacity can help better align development planning with climate and conservation goals.

• Malaysia's federalist system devolves considerable authority to state governments in key climate-relevant sectors and leaves states to pursue its own climate financing mechanisms. Hence, there is significant opportunity to positively monetize their natural resource base through environmental fiscal reforms, payments for ecosystem services, and other innovative financing approaches that align conservation with sustainable development.

• Malaysia's decentralized climate governance model fosters innovation and experimentation, making both Sarawak and Sabah leaders in region-specific climate solutions. Aligning these state-led initiatives with national climate frameworks can help scale their impact and ensure they contribute meaningfully to Malaysia's overall climate targets and development objectives.

• Public access to critical climate information, such as land allocations, timber permits, and EIAs remains insufficient despite the state governments' efforts to improve disclosure through public consultations on development plans. The integration of indigenous rights and co-management practices are essential for Sarawak and Sabah's attainment of climate goals.

• The report concludes with a practical reform roadmap that sets out short-, medium-, and long-term actionable steps tailored to the unique institutional, ecological, and economic contexts of Sarawak and Sabah. The policy recommendations are designed not merely as incremental adjustments but as a pathway towards transformative governance.

• Beyond Sarawak and Sabah, the report offers broader lessons for subnational climate governance - demonstrating how tailored institutional reforms, strategic financing approaches, and strong federal-state alignment can support effective climate action in decentralized climate systems.

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