This will encourage the alignment of national taxonomies, building on common principles and a tiering system to cater to differences in financial systems, economic and social structures, and transition paths. Global coordination to improve climate equity Let me close with a final point on global coordination. As countries embark on different national transition paths at varying paces, a global challenge is the disproportionate impact on emerging economies. This makes it more difficult for them to control their own transition path due to economic and financial linkages2. This reality calls for a more coherent global coordination to galvanise collective actions, with stronger link to the NDCs3 under the Paris Agreement, that would help improve climate equity and mitigate risks of disorderly transitions. This would compel countries that generate transition spillovers to provide financing, technology and capacity building support to assist smaller and developing countries to adapt to climate change and take mitigating actions. This, in our view, is a step towards a more equitable and effective global mechanism to respond climate risk at a faster pace. Thank you. 1 A platform to set the direction, to discuss climate change policies and actions, to drive green economic growth,  to catalyse green technology and low-carbon growth at all levels, particularly in the federal and state Governments. 2  For example, measures to cut global GHG emissions (e.g. removing fossil fuel subsidies, emission caps and carbon taxes) could lead to higher risk of stranded assets in emerging and developing countries given their heavy reliance on fossil fuels.

With this goal in sight, first we need to recognise that climate risk is a cross-cutting risk, for which risk management approaches and methodologies are largely still under-developed. Given this, there is much more to be discovered in terms of how it can be managed in an integrated manner with other financial risks. This suggests a need for an iterative process that will enable financial regulators and the industry to converge on supervisory expectations and a common framework for assessing physical and transition risks. As part of this process, we are examining the scope and specific approaches to incorporate climate-related financial risks within the Pillar 2 requirements. Secondly, the nature of climate-related risks calls for central banks and regulators to collaborate at the national level to support alignment of financial industry responses with national climate strategies and priorities. As I mentioned at the start of my remarks, central banks and financial regulators provide an important bridge between the financial sector and the Government to inform national policies, targets and strategies on the one hand, and financial sector responses to climate risk on the other hand. In Malaysia, JC3 serves as a focal point for engagements with the Malaysian Climate Change Action Council (MyCAC)1 on national climate policies. Third, effective coordination with the industry serves to maximise transition benefits and minimise downside risks. For developing and emerging economies in particular, an inclusive strategy is key to avoid macroeconomic and social dislocations as we transition to a low-carbon economy.