And it means making climate considerations an important part of social contracts between financial institutions and the communities that they serve – where financial institutions refocus on the role society needs them to play. That is, helping households and businesses cope with the physical and transition risks of climate change by providing financing and risk protection that will meet their needs. Allow me to elaborate further on the above. The current drive towards digitalisation of financial services presents an immense opportunity for financial institutions to contribute further to the climate change agenda. From a business operations perspective, while financial institutions explore newer applications of technology for cost optimisation and efficiency gains, integration of technology within the value chain may complement the industry’s own carbon footprint reduction measures. For example, Accenture 4estimates that migrations to the public cloud could reduce global carbon emissions by 59 million tons of CO2 per year. From a growth perspective, innovative design of digital financial services can mobilise financial consumers in support of the climate change agenda. In 2017, the UN Environment Programme Finance Initiative5 reported that a major financial institution’s digital finance platform prevented 150,000 tons of carbon emissions in just nine months by influencing its users to adopt and record more environmentally friendly behaviours, for example by walking instead of driving. The financial sector, at its core, has a role to facilitate the allocation and deployment of economic resources.

Given its central role in helping people to save, borrow, invest or make payments, the financial sector is in a unique and powerful position to contribute beyond climate change, towards the broader sustainability agenda, including helping to end poverty and to reduce inequality. Funding remains a key challenge for many sustainability projects. Thus, the financial sector can be more deliberate in funding sustainability initiatives and incentivising investments in low carbon sectors. There are many such opportunities available. For example, projects under the National Investment Aspirations (NIA) framework, the Malaysian Climate Action Council (MyCAC)'s plan for Malaysia to be a hub in green economy, services and technology and the Low Carbon Mobility Development Plan 2021–2030. 3/5  BIS central bankers' speeches  To meet the funding needs, it will not be sufficient for financial institutions to use traditional instruments. They will need to think creatively to develop new and innovative solutions which also takes into account the current challenges faced by businesses and individuals. Blended finance, for example, is a viable option for businesses that struggle with both the impact of climate change and the losses from the pandemic. In combining concessional financing and commercial funding, such as combining philanthropic funds or social finance instruments and traditional lending, blended finance approaches can avoid excessive debt loads that could increase future risks. There are also significant opportunities for financial institutions to support a green recovery from the pandemic through the provision of transition financing linked to sustainable practices. Climate change is not just a scientific issue.