This week BNY Mellon adopted such an approach motivated in part by the EU’s Directive on Pensions (IORP II).30 Earlier this year UBS launched a pilot project that will allow investors to rate how much weight they want to place on different ESG factors.31 And last month, BlackRock launched six new Exchange Traded Funds (ETFs) that combine an ESG uplift and a 30% reduction in carbon emissions.32 These sustainable building blocks can be substituted into many traditional portfolios, improving ESG scores and reducing greenhouse gas (GHG) intensity without sacrificing performance. In the future, climate and ESG considerations will likely be at the heart of mainstream investing. Investors will tailor their investments and fulfil their fiduciary duties through: better quality and more widely available data on sustainability and performance; superior data analytics through the advent of AI and Machine Learning; and more informed judgements of strategic resilience. Conclusion: a New Horizon Financial policymakers will not drive the transition to a low-carbon economy. Governments will establish the climate policy frameworks, and the private sector will make the necessary investments. Nonetheless, financial policymakers do have a clear interest in ensuring the financial system is resilient to any transition hastened by those decisions. Our role is to develop the frameworks for markets to adjust efficiently. A market in the transition to a two-degree world is being built. It will reveal how the valuations of companies could change over time as climate policies adapt and carbon intensity declines.
ADB should draw on the experience in the aftermath of the global financial crisis and stand ready to provide timely and flexible crisisrelated assistance to its needy members. While macroeconomic policies and prudential measures could help smooth cyclical economic fluctuations, in the longer term, credible structural reforms are needed to sustain the growth of the region and preserve investors’ confidence. The vulnerabilities now faced by some regional economies are in part due to the overheated domestic demand in the past years amid strong capital inflows. However, they also reflect, to a considerable extent, supply-side constraints on potential output and limited capacity of the region’s financial markets. While the situation differs across economies in the region, there are a number of structural reform needs that are common to the region and in which the ADB can play an active role. BIS central bankers’ speeches  1  First, the supply-side constraints in a number of regional economies are linked to weak investments, in particularly infrastructure investments. Many investors have cited that there is no lack of funds or interest in investing in Asian infrastructure projects. The problem, however, is a lack of a pipeline of bankable projects, which in turn is due to fundamental issues such as uncertainties relating to the government’s commitment in supporting a specific sector; lack of a credible PPP framework; political force majeure; and project governance.