Through this policy, the Melaka State Government was able to reduce carbon emissions and energy costs by transforming 120,000 streetlights into smart LED streetlights. Subsequently, the federal government has requested ADB to support the development of subsequent GCAPs for 14 selected cities in the country5. Malaysian DFIs can draw inspiration from this collaboration to strengthen capacity and assume a more influential role in shaping government policies. Embracing this opportunity for policy additionality is not only crucial for progress but also aligns perfectly with the expected responsibilities of DFIs. Finally, the role of industry association – ADFIM - cannot be underestimated. As the collective body representing DFIs' interest, ADFIM has traditionally leveraged its influence to champion common interests and resolve industry issues. However, ADFIM is poised to go further by fostering industry collaboration and promote knowledge sharing among its members through exchange of best practices and issuance of technical papers. Through these efforts, ADFIM can become an enabler for a greener Malaysia. 2/3  BIS - Central bankers' speeches  Ladies and gentlemen, the Bank acknowledges that the path ahead may present challenges for DFIs. Therefore, today's forum provides a platform for open dialogues, where we can learn from each other's experiences, discuss emerging trends, and identify relevant opportunities for the DFI industry. We believe DFIs have the potential to become trailblazers in addressing climate change, and we actively seek partnerships with visionary DFIs to introduce innovative sustainability-linked financing initiatives before the JC3 Conference later this year, or at the very least, for Budget 2024.

To put it very simply, incentives drive behavior, and behavior establishes the social norms that drive culture. If the incentives are wrong and accountability is weak, we will get bad behavior and cultures. This implies a role for both firms and supervisors. Firms need to continually assess their incentive regimes so that they are consistent with good conduct and culture. When they are not consistent, the incentives need to be changed. Supervisors should also play a role in assessing firms’ incentive structures. For example, they should evaluate: 1/3  BIS central bankers' speeches  How is compensation determined? In particular, is questionable conduct―such as compliance violations―consistently reflected in decisions about compensation and promotion? Do risk managers have the appropriate authority to challenge frontline revenue producers and prevent activity that is questionable? When that occurs, are there appropriate negative consequences for the frontline revenue producers? When people speak up to point out potential conduct issues, how are they treated? Are they held up as examples to emulate, or are they discouraged or even penalized? The answers to these questions should indicate whether incentives must be changed in order to foster the appropriate behaviors and culture. The primary responsibility for reforming culture—and changing incentives—belongs to the industry. However, the industry does not act alone. The public sector can play an important role as well. I’ll discuss that issue this morning with my colleagues Norman Chan, chief executive of the Hong Kong Monetary Authority, and Minouche Shafik, deputy governor of the Bank of England.