finance or the use of other financing tools depends critically on how our actions are coordinated within the broader policy environment. we not only need to unblock unnecessary regulatory obstacles to new finance instruments but also need to recognise that some of these instruments can pose risks to the financial system. 3 / 4 bis - central bankers'speeches i thank you again for the invitation and encourage you to reflect on these issues in the remaining sessions of the conference. all ngfs material is available on its website, including the paper on blended finance and recently released papers on climate disclosure for central banks, transition plans and recommendations on how central banks'portfolio managers should develop sustainable and responsible investment strategies. 1 https : / / www. climatepolicyinitiative. org / publication / global - landscape - of - climate - finance - 2023 / 4 / 4 bis - central bankers'speeches

2 / 4 bis - central bankers'speeches 1. it is easy to understand the risk profile of some blended instruments such as guaranteed loans. but other blended instruments have more complex structures. it is difficult to create a universal framework for all blended instruments. 2. as i mentioned earlier, the risk does not disappear. it is shifted from one balance sheet to another. this other balance sheet sometimes sits in the domestic financial system and sometimes sits in another jurisdiction. for financial sector supervisors, this creates a significant level of complexity around how we think about the risk profile of blended finance. we need to understand the balance sheets of the institutions that we supervise but also of those institutions that provide risk insurance. many of our tools such as risk ratings and internal capacity adequacy are based on historical data. climate - related risks and those associated with new financial instruments require forward - looking analysis, which is often characterised by high levels of uncertainty. this often leads to a higher pricing of risk. global standard - setting bodies recognise this challenge and have prioritised climaterelated risks in their work plans. now to the last question. how do we mitigate against risks related to blended finance instruments? many efforts to improve climate - related information flows in financial markets and enhance reporting by financial institutions can help with scaling up blended finance by helping central banks to better understand the risks associated with these instruments and mitigate them more effectively. this, however, is impossible without greater international cooperation as risks shift from one jurisdiction to another. blended instruments will increase financial linkages and require a greater exchange of information across different jurisdictions. financial sector regulators need to develop new skills and research capabilities to understand the various implications of the climate transition on the financial system. more importantly, we need to understand how the combination of different structural changes is likely to impact financial stability. for example, the rapid deployment of artificial intelligence ( ai ), in addition to the climate transition, is likely to have profound effects on the financial system and generate significant financial innovation. scenario analysis and transition planning can help financial regulators in understanding future pathways and the associated risks. there have been advances and improvements but data quality and consistency need to be enhanced, particularly in emerging market and developing economies. in conclusion, we need a massive increase in financing for the climate transition but also to adjust to other structural challenges. central banks and financial regulators have an important role in ensuring that the financial system is resilient to shocks and scales up fundings. however, our efforts to increase blended