Nor Shamsiah Mohd Yunus: Remarks - Green Swan 2021 Global Virtual Conference Remarks by Ms Nor Shamsiah Mohd Yunus, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Green Swan 2021 Global Virtual Conference, 4 June 2021. * * * I am pleased to be in this panel. If there is anything history, or more recently the pandemic has taught us, it is that, in the face of existential threats, a collective and well-coordinated response is crucial. Central banks and regulators are uniquely placed to mobilise and coordinate climate action with other actors. Given the central role of the financial system in any economy, central banks and regulators have significant influence and a direct interest in actions by financial institutions to manage climate-related risks. The policy and supervisory steer that central banks and financial regulators provide have important consequences for progress by economic agents in strengthening climate risk mitigation and adaptation. Furthermore, as advisors to the Government on economic and financial policies, central banks and regulators often play a key role in helping Governments navigate an orderly transition to a low-carbon economy. I’d like to focus my remarks today on how we are working with the industry and other financial regulators to respond to the climate challenge. JC3 and its evolution In Malaysia, Bank Negara Malaysia and the Securities Commission have established the Joint Committee on Climate Change (or JC3) with the financial industry to promote alignment on climate actions across multiple stakeholders.

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.