PETALING JAYA: The World Bank and Bank Negara Malaysia (BNM) are collaborating on a study to assess actions to mitigate nature-related financial risks, as part of efforts to raise awareness of environmental concerns in the financial sector. Ndiame Diop, the World Bank country director for the Philippines, Malaysia, Thailand and Brunei, said the bank is supporting the Malaysian government in strengthening its capacity in several areas. "This includes a public expenditure review and a project that addresses climate and environmentalrelated issues as well as data gaps," he said during the second day of the Global Green Finance Leadership Programme, organised by the World Bank and Beijing Institute of Finance and Sustainability. Governments need to review policies incompatible with sustainability goals to ensure their sustainability endeavours are done right, he said, adding this includes fuel subsidies towards ensuring the efficient use of limited resources. "Incentives are also critical for the financial sector players to direct and reallocate financing to support the transition, "' he added. Diop revealed the World Bank is working with its partners in over 50 countries on "greening" their domestic financial sector regulatory frameworks. He said governments can also take a more coordinated approach that takes environmental concerns into account in their decision-making process across different sectors. He also highlighted some efforts taken by governments to establish economic responses to environmental crises across East Asia and the Pacific region. For example, Indonesia is developing a regulatory framework to respond to the increased demand for climate-friendly solutions through carbon pricing instruments. Diop was also pleased to see Malaysia at the forefront of this with a number of promising initiatives. "This includes BNM's low carbon transition facility to support small and medium-sized enterprises (SMEs) in adopting sustainable practices, incentives to instal solar panels and increase biomass capacity, and the recent initiative by Malaysia's stock exchange to introduce the voluntary carbon market exchange by the end of the year," he said. He noted there are many opportunities to catalyse private financing towards achieving climate ambitions, ergo, governments, central banks and the financial sector can work together to increase access to transition finance. Transition finance is a new financing approach that aims to support companies that are trying to steadily reduce greenhouse gas (GHG) emissions in accordance with a long-term strategy to achieve a decarbonised society. "It (transition financing) can be an important tool to help traditionally GHG-emitting sectors to tum to low-carbon production processes. "These are companies which are at risk of being left behind, and as financing is required to decarbonise and to move from 'brown' to 'green', it will be important to increase their access to transition finance," he noted. Diop said the sustainable financial markets are a fraction of conventional markets, adding the required investments for low-carbon, climate-resilient infrastructure in emerging markets are estimated to reach at least US\$1.55 trillion (RM6.9 trillion) annually between now and 2030. Full article: https://www.freemalaysiatoday.com/category/business/2022/11/30/world-bankcollaborates-with-bnm-on-nature-related-financial-risks/ Based on the above case study you are REQUIRED to answer the following questions: - a. Demonstrate TWO (2) possible scenarios to financial institutions in facing climate change. [10 marks] b. Debate THREE (3) aspects of the financial market's daily operations has been affected by climate change. [30 marks] c. Identify the banks operational risk that might be arise from the climate change. Explain THREE (3) risk management techniques used by the banks in managing the operational risk. [60 marks]