Since 2017, Islamic financial institutions have also taken a leadership role in spearheading sustainable finance through the development of sectoral and activity impact-based risk management frameworks. Sectoral Guides focusing on palm oil, renewable energy and energy 1/3  BIS central bankers' speeches  efficiency activities have already been issued, and will be followed by Guides for the manufacturing, construction and infrastructure, as well as oil and gas sectors by the end of this year. Through JC3, these complementary developments are being coordinated and integrated to build a credible foundation for the financial industry to support the transition efforts. Beyond the financial sector, the JC3 also actively engages with various stakeholders on climate and transition initiatives. The formation of a new sub-committee this year, to address data gaps for climate risk analysis is another major collaboration as part of JC3’s efforts to strengthen climate risk management and scale up green finance. The JC3 is also pursuing broader engagements with key businesses to better understand transitioning issues and opportunities along the supply value chain. This will help inform the structuring of customised financial solutions for the different types of players within the entire value chain. Objectives and motivations for collaboration As a financial regulator and supervisor, it is important to be clear on the objectives and motivations for our collaborative efforts with the industry and other stakeholders. The primary goal for us is to support the appropriate consideration of climate risks in promoting resilient financial institutions.
As financial and economic advisors to the Government, we are working with the Government to develop sustainable finance roadmaps that will mitigate risks of stranded assets if disorderly transition occurs. The Bank’s principles-based taxonomy was developed with this in mind. The taxonomy aims to facilitate the direction of financial flows to activities that support the transition to a low-carbon and climate resilient economy. It supports businesses in transition by recognising climate risk mitigation and adaptation efforts over time, while preserving the rigour of assessments by avoiding greenwashing. The taxonomy also encourages financial institutions to nurture and nudge businesses to 2/3  BIS central bankers' speeches  transition to greener practices. It helps improve development outcomes, and builds capacity within businesses themselves to better manage climate-related risks. To further support transition activities, the Bank has also established funds to assist SMEs in pivoting their businesses to be more sustainable in the post-pandemic world. This includes transitioning to greener activities. The Bank is looking to further expand these facilities with a greater focus on green activities that are aligned with the taxonomy going forward. The Bank also sees great value in pursuing a coordinated and regionally coherent financial sector response to the climate challenge. Within ASEAN, the Bank is working closely with central banks in the region through the ASEAN Taxonomy Board in the construction of a regional taxonomy that can provide a common language for sustainable finance in ASEAN and promote efficiency.