Adnan Zaylani Mohamad Zahid: Sustainability and the challenges ahead Speech by Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the IFN Green and Sustainable Finance Forum, Kuala Lumpur, 3 December 2019. * * * It is a pleasure to be here this afternoon. I would like to thank the organisers for once again inviting me to speak at their conference. I hope that I can further add to the valuable discourse that undoubtedly takes place at such events. We must now acknowledge, that the sustainability agenda has gained increasing importance and a momentum of its own. Everywhere, there is a sense of urgency and call for action. Consumers are making their purchasing decisions with the environment in mind. Investors and shareholders are making demands for their companies and corporations to adopt environmental, social and governance or ESG standards. Corporate managers, emboldened with such mandates by their shareholders are reshaping their organisations into new corporate citizens, responsible, responsive and socially aware. Governments are certainly not left behind. Globally, societies are seeking ways to create sustainable solutions for their communities. Achieving the sustainability goals will not be an easy journey. The global environment itself is more challenging than before with increasing volatilities and uncertainties arising from the global trade war, geopolitical developments and a multitude of factors. Many of these could derail or delay our efforts. How do we then stay on course to keep sustainability and responsible finance a prime focus of business in the financial sector?

3 [8]  Among other things, international bodies such as the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO), have issued recommendations and principles to make reference rates more based on actual transactions in the market. This can be achieved by focusing on the shortest maturities at which most transactions occur, and by broadening the base for the reference rate by including more transactions than those between the panel banks. As I shall discuss later, this data can also be used to replace longer-term reference rates. Examples of such fully transaction-based reference rates now published by central banks are the Bank of England's SONIA, the European Central Bank's € New York Fed’s SOFR and Norges Bank’s NOWA. In Denmark, Nationalbanken will soon start publishing DESTR. In some cases, it has also been decided that the new, transaction-based reference rates will replace the traditional interbank rates. For example, the family of reference rates most widely used globally, LIBOR, will be phased out. In the euro area, Switzerland and Norway, interbank rates for the shortest maturities are being phased out.2 This means that enormous contract values need to be migrated, in many different types of contract. This also affects Swedish participants that have entered into contracts with LIBOR as the reference rate. With regard to other currencies, the new and the old reference rates will exist side by side; but in these jurisdictions, too, there is a clear ambition to use the transaction-based reference rates to an increasing extent.