As this happens, some sectors of the economy may face declining demand, big shifts in asset values or higher costs of doing business. For instance, governments’ actions to enforce the Paris 2/5  BIS central bankers' speeches  Agreement could see the vast majority of the world’s proven fossil fuel reserves left in the ground. This has implications on the value of investments in energy companies, particularly those dealing with oil, gas and coal. For many emerging market economies, the transition towards sustainability also invites policy conflicts. For example, national goals for reducing fossil fuel use may entail significant trade-offs with growth and poverty reduction objectives, at least in the short- to medium-term. These challenges are further intensified by broader environmental, social and governance (ESG) considerations. Achieving sustainable growth and development amidst capacity and funding constraints can present significant challenges for political leadership, economic priorities and social outcomes. Under these circumstances, the higher cost of transition is likely to mean that a longer time is needed for the transition towards more sustainable growth policies, while keeping in mind that this may be at the expense of heightened physical risks as a result of delayed action. This remains a difficult balance that requires careful and well-informed assessments, policy coordination, planning and communication. A very real example, close to home, is palm oil. As we all know, many in the global community have expressed concerns about the environmental impact of the palm oil industry, which accounts for 7% of Malaysia’s gross exports.

Several financial institutions are also allocating more capital towards innovation that promotes sustainability – such as in renewable energy sources, and sustainable agro-production and manufacturing. Others are providing incentives to encourage “greener” consumption that is less damaging to the environment. This includes preferential rates for hybrid vehicles and financing projects with a Green Building Index certification which serve to encourage manufacturers and developers to build more sustainable solutions. Climate change will have irreversible consequences for us all. The effects to the planet, and global efforts to transition towards greater sustainability, will certainly have implications for the economy and for financial stability which cannot be ignored. Our window of opportunity to act is narrowing very quickly. In the period ahead, it is crucial that the financial industry faces these changes in a deliberate, informed manner. We must respond strategically, and pre-emptively; and we must act now. We can no longer afford to just react once the worst has already happened. The stakes are simply too high. On our part, the Bank is committed to ensuring that the financial system remains resilient in the face of these risks. To this end, I have set out a broad outline for achieving climate resilience. The task ahead will call for strong leadership in working with authorities, businesses and households to address what may be one of the greatest threats to our generation. Discussions at this conference aim to help us meet this challenge with greater confidence and conviction on what must be done – individually and collectively.