ETFs clearly bring many businessas-usual benefits which market participants value – for example, the convenience of being able to transfer risk at high-frequency via standardised, exchange-traded securities in fast markets. There is a question, however, of how these interlinkages work in stress. During the turbulence of August 2015, for example, equity investors flocked to trade in exchange-traded funds, causing ETFs to appear to be priced at large discounts to the value of their – sometimes less liquid – underlying security (Chart 11). On this occasion, once again, the dislocation was short-lived. But if a future stress in fast markets – such as those for ETFs – were to persist for a longer period, it might spill over to cause stress in other linked markets, including for less liquid underlying instruments, including government or corporate bonds as well as equities, leading to wider implications for financial stability. 17 18  This also caused the firm to default at the CCP, creating a loss that was mutualised among the rest of the CCP’s members. See Greenwich Associates (2016), ‘Long-term investors embrace FX algos’. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  There is therefore a need to ensure that market participants’ risk management frameworks keep pace with the speed at which these markets are capable of moving, taking into account the speed of possible shocks and the potential for propagation, including to slower markets.

The first is advancing the sustainability agenda. As Malaysia charts its path towards net zero, significant investments are required to fund a range of mitigation and adaptation efforts. 1/4  BIS central bankers' speeches  Initiatives such as renewable energy, green buildings and low carbon cities work to reduce Malaysia’s carbon footprint, whereas measures such as safeguards against rising sea levels and extreme weather are needed to improve climate resilience. These add up to an estimated RM350–450 billion of investment needed over the period of 2021–2050 to reach our net zero ambition. From the perspective of businesses including fintech startups, aligning with the nation’s sustainability objectives could require pivoting to new sustainable business models, recalibrating existing practices, adopting new technology, and subscribing to certification and mitigation efforts against possible climate-related disruptions. All of these will create significant demand for green and transition funds in the coming years. Public sector funding is being directed towards these efforts, but the private sector plays a critical role in completing the picture. Institutional investors and large asset managers, through their capital allocation, can directly steer the flow towards climate supportive activities. Institutional investors have the capacity to take on a stewardship or active ownership role, encouraging and influencing investee companies to seriously consider their sustainability impact. By choosing to actively support Malaysia’s sustainability journey, investors not only contribute to the generation of positive impact, but also best position themselves to benefit from green and transition business opportunities in the future. Progress has been promising.