With further harmonisation of rules and regulations and increasing capital market linkages, we look forward to the deepening of ASEAN market liquidity. As financial and capital markets in the region become more integrated, there will be seamless flows of investments and capital. ASEAN has also made a strategic decision to strengthen its organisation politically. ASEAN is finalising a Charter that will lay out a bold and visionary future for ASEAN. It will also provide an institutional framework for the grouping and transform it into a more effective and efficient rules-based organisation. The Charter will be signed at the Singapore Summit in November. Singapore – a global city As for developments in Singapore, we have used the last 10 years to remake ourselves, strengthen our competitiveness and expand our economic space. We have also continued with efforts to enhance Singapore’s position as a gateway to Asia by transforming Singapore into a global city. We have enlarged our economic space by aggressively pursuing FTAs. We have concluded 11, including with the US, India, Japan, South Korea and Australia. We are negotiating 11 more FTAs, including one with China. We have progressively restructured and diversified our economy. Manufacturing will continue to play a key role but we are also moving into more technology- and knowledge-intensive manufacturing. Fostering world-class scientific research and strengthening Singapore’s attractiveness as an R&D (Research and Development) hub is a key priority. More of Singapore’s growth will come from innovation and knowledge.
Clearly, more time and analysis will be needed before we have better answers for this important question. Our role in climate policy action Let me now turn to the second theme of my talk, namely what financial supervisors and regulators, and central banks could or should do to assist governments in tackling climate change within our mandates. I will start with an important reminder. The main responsibility for addressing climate change resides with governments – namely, fiscal and environmental authorities– because they have the most effective tools and the legitimacy to do so. There is some consensus in the  3  literature that the most effective measure would be to apply Pigouvian taxes3 to carbon emissions. The latter, if well-designed, would lead agents to internalise the social cost of their carbon emissions, inducing a change in the relative prices of energy inputs and final outputs in favour of less carbon-intensive ones. That said, preventing climate change requires a holistic approach that involves all policies. Careful analysis should be devoted to the interactions of the various policy instruments in the economic sectors affected by transition and physical risks. The final aim should be to define an adequate “climate policy mix” that ensures the optimal achievement of environmental targets. In this context, and as part of our main responsibility to guarantee the stability of the financial system, we - regulatory and supervisory authorities - must ensure that the materialisation of climate risks does not endanger financial stability.